By 2020 it’s estimated that 94 percent of online hotel bookings will be controlled by Priceline Group (owner of bookings.com) and Expedia. In the face of such oligopoly, what can hospitality brands—especially within the luxury sector—do to not just protect themselves, but thrive.
The OTA debate.
As a digital agency dedicated to the pursuit of Exceptional Craftsmanship, we tend to work with a lot of luxury hospitality brands; and as such often find ourselves advising them on how to deal with the growing dominance of online travel agents (OTAs).
To say OTAs are a divisive bunch would be somewhat of an understatement. Whilst hospitality organisations rue their pervasive power and dilutive effects on brand, margin and relationships, they cannot deny that without them their businesses would be in jeopardy and stuck in the digital stone age. Furthermore, if you look hard enough, you may even find certain, more enterprising sections of the community extolling the virtues of working with them, if managed correctly.
“I likely fall into that smaller group of people that see the benefits of OTAs and not [them] as public
enemy number one. Because of the seasonality and remoteness of our portfolio, we rely on
the OTAs to help fill the necessary gaps; however, this is far from handing them the keys to the
kingdom, and it’s fairly easy to determine where we don’t need their support and manage them
Unfortunately, the problem for most luxury hospitality brands is that they don’t have a long-term strategic plan for how they deal with OTAs, and subsequently are forced into predictable, ad-hoc, tactical manoeuvres that inevitably reinforce a relationship defined by subservience and/or conflict.
So how can the tide be turned?
Of course, it’s beyond the constraints of this post to provide a one-size-fits-all panacea for those brands who do find themselves in this unfortunate position. However, what we can share with you is a set of basic fundamental principles that we believe sit at the heart of a well constructed, long- term OTA strategy.
1. Find your Brand Purpose.
This won’t be the first time you’ve read about the benefit of having a brand purpose or mission. However, in our experience most luxury hospitality brands do not have one; instead opting for more traditional ‘brand essences’, which lack the forward-facing business direction of their more modern counterpart, and make it more difficult to turn into a truly pervasive long-term strategic foundation.
2. Be Selective and Exclusive.
Once you’ve defined your brand purpose (or mission) use this as the core criteria by which you select your critical long-term OTA partners. You can’t and shouldn’t work with everyone; so make sure the organisations you choose to invest in align with the values and direction of your brand.
After selecting such partners, work hard with them to put together exclusive packages that leverage the unique qualities of your proposition in a way that only they can sell. In exchange, try to negotiate more exposure throughout their ecosystem, and more commercially agreeable terms – once you’ve proven the value of being a selected partner.
3. Show Genuine Respect.
The way current hospitality brands—and their people—currently think about OTAs can be toxic and highly detrimental to productivity. However, if you can reframe the perception of OTAs throughout your organisation—from necessary evil to huge opportunity—the results can be staggering. Unfortunately, or perhaps fortunately, the reality is that OTAs are a necessary part of the hospitality landscape now, and one can either choose to resent this fact or work with them to increase mutual value. Moreover, you’d be surprised by how something as simple as an attitude change can lead to more ideas, opportunity and commercial success.
4. Be Transparent & Reciprocal.
It’s no secret that hospitality brands try to leverage their bricks and mortar experience to capture customer data and instigate a more direct, more profitable relationship with the consumer post- stay. However, so many brands we’ve worked with get themselves into a fairly confused state, by simultaneously trying to hide this from OTAs whilst attempting to minimise the level to which they benefit from the opportunity – which only serves to exacerbate already strained relations, and fundamentally paralyse the marketing team.
Our recommendation to such organisations is to be transparent with OTAs, and work with them to develop a model of reciprocal value that best leverages each business’s capabilities for the mutual betterment of both parties. More innovative remuneration models can be part of this discussion, but again you’d be surprised by how many ideas are generated when both sides work together to develop more sophisticated working relationships and routes to market.
5. Invest in Digital Infrastructure & Customer Experience.
When it comes to digital capability the OTAs moved early, disrupted the industry, and got the upper hand. However, it’s now time for hospitality businesses to wake up and start doing something about it. Whilst it’s perfectly acceptable to spend a few years reviewing the landscape and planning for the future, many brands seem resigned to their new, downstream position: consigned to a world of reduced margins and diminished customer loyalty for the foreseeable future.
For those brands that do want to get out of their current predicament and start to establish a more equal footing with OTAs, we recommend a deep review of every facet of your customer experience – with a particular focus on data, technology and content capability. In our experience, too many organisations are dealing with ageing, legacy systems and an underinvestment in what has now become hygiene factor proficiency – which if left unaddressed will only compound the distance between OTA and hospitality brand over time.
A final note.
Hopefully, the principles outlined above have at least inspired a small amount of self-reflection, and perhaps got you thinking of new ways in which you might improve your OTA strategy. If this is the case then please do let us know, we’d love to hear how the principles have helped you and your
business. Furthermore, If you’re feeling particularly inspired and want to know how Matter Of Form might help your hospitality brand, then contact us at [email protected], and we’d be happy to chat further.