Direct booking happens when the guest books a room directly to the hotel with a platform provided by the hotel. If the guest books a room at the hotel through the third party and using the platform of the third party then it is considered a booking from Online Travel Agent(OTA). The booking process seems similar for travellers but the presence of an agent in process of booking make an impact to the hospitality industries.
How OTA threatening the operations of Hotels.
In the past, OTA and Hotels are able to maintain a good relationship, hotels give some rooms to OTA since they are unable to sell it while OTA earns from reselling the room at their online platform. Overall hotels able to get extra sales while OTA able to get commissions from Hotels. A win-win situation between hotels and OTA during that time. But as time gone, hotels started to see OTA as a competitor instead of a partner. Here's the Reason why.
1. Commission
Compare to the past, commision charged by OTA had increased, in order to cover for the commision, there are only 2 methods, either the hotel willing to reduce their profit and use it to cover for the commision or else increase their room price so that the profit of a room is enough to cover for the commision but since OTA are protected by the contract, hotels are unable to sell rooms with a higher price at OTA without increasing their direct booking price as well. As a result, higher room price for all the hotel who using OTA. It is possible that OTA commision will increase again if they gain more market share in future.
2. The increase of OTA Market Share
Almost 50% of the hotels guest are from the generations Y and Z but 52% of them prefer to book through OTA instead of direct booking. With the increased usage of digital media for booking, it is expected for OTA to get a bigger portion of market share since they are able to provide a convenient platform for hotel guest to book room.
3. Branding
As a third party booking platform, OTA does increase the exposure rate of a hotel to the public but the presence of hotel brand is getting lower compared to the OTA. Since OTA promoting their own brand instead of the hotel they are selling, people no longer have loyalty toward the hotel but loyal toward the OTA. You might saw a phenomenal where guest complain to OTA instead of the Hotel when they have a bad experience at the hotel they stayed in. The sign simply shows that your guest trusted the OTA more than your hotel.
Unfortunately, with the dominating of market share, many hotels depend on OTA to bring them sales, hotels no longer able to terminate the relationship with OTA and if hotels do not develop a strategy to gain direct booking soon, most probably they will be forced to accept unequal term from OTA in future.
Visit our FB @Ipaotravel to find out how IPAO Travellers Club can help Malaysia hotel to gain more direct booking.
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