Analysis: The direct booking challenge
It is becoming clear that the global hotel chains are getting serious in their approach to the OTAs. Not only are they baulking at the commissions the OTAs charge them, but they also fear that their expensively established brands are being devalued by the OTAs’ price-orientated approach.
Chain hotels, which account for about 60% of the UK market (70% in the US) according to hotels data provider STR, now focus on being brand managers rather than property owners. Their strategy, therefore, is based on persuading travellers that a Holiday Inn Express from IHG , for example, is better than a Hampton by Hilton (or vice versa).
Moreover, persuading them to book through direct channels such as a hotel website or call centre enables the hotelier to establish a future relationship with the traveller. And capturing guest data is the new name of the game in the hospitality world, something that selling rooms through third parties such as OTAs limits.
But the hotels faced a snag in their direct booking campaign: rate parity. This is a legal agreement between hoteliers and OTAs that guarantees the hotel will maintain the same publicly available room-only rate across all its channels of distribution – either direct or via OTAs and other third-parties such as traditional travel agents. This, in effect, protects both the hotel and the OTAs from under-cutting by either side.
Over the past year, however, it is understood that the major chains have been quietly renegotiating some elements of their rate parity agreements with the OTAs which has now given them the scope to offer discounts to their loyalty scheme members, although not the public at large.
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