Will Direct Booking win the distribution battle against OTA in 2019?

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Will Direct Booking win the distribution battle against OTA in 2019?

Karim Filali

CEO at Wikhotel 360
CEO of Wikhotel Technologies, Karim brings you the latest trends and his analysis of the latest news of the hospitality industry.
Karim Filali

At the beginning of the year 2019, all the indicators suggest that the hotel industry could know the outcome of a fight that the hotel distributors have been fighting for several years: to know who will definitely take the lead of the hotel distribution between OTAs and the institutions themselves via their official website. Today, it is undeniable that the OTAs are the champions of the online sale of nights with a market share of nearly 80% in Europe for the two leaders, Booking.com and Expedia. The two behemoths in the distribution can also boast double-digit annual growth rates over the last decade. However, some events in 2018 suggest a reversal of this trend.

OTA: End of the dictatorship?

First of all, there is the feeling of being fed up by both large hotel groups and independent establishments, who feel that they no longer have control over their distribution. The prices offered by the OTAs are often lower than they should be, which creates increasing tensions between OTA and hoteliers. Then there are the rates of a commission charged by OTA which impose on the institutions, depending on their status, higher or lower rates. These abuses have prompted governments to stand up for their hotel industry, which is putting its profitability at risk. This is the case of the Swiss Parliament, which has censored the clause imposed by Booking.com to hoteliers preventing them from marketing their nights at prices lower than those on the platform. Many European countries, such as France, Germany or Italy should follow the path of the Helvetian Parliament to protect their industry. Knowing that the nerve of war remains pricing, this new situation could limit the growth of OTA in these markets.

In the same way, the major hotel groups of reference focus their strategy more and more around Direct Booking. Marriott International, the world’s leading group in 2018 with more than 1,200,000 rooms, launched its It pays to book direct campaign in 2016, with the essential aim of restoring consumer confidence as to who has the best price. According to Arne Sorenson, Marriott’s CEO, this is ‘an absolute war about who will win the customer’. The same goes for its outsider Hilton Worldwide which has nearly 900,000 rooms, which with its campaign Stop clicking around claims to regain control of the marketing of its products. For this, the American group did not skimp on the means, and to this day this campaign remains the most important communication operation ever undertaken in 100 years of existence by the group. Mark Weinstein, VP of the group, said in 2016 at its launch: ‘There is a common misconception that third-party distributors always offer lower prices for our hotel rooms, which is simply not true’ . For large international groups, it is, therefore, to convince consumers to change their mode of consumption by offering better rates, but not only. Because hoteliers have weapons that do not have OTAs: possibility to offer gifts or discounts on services for a particular stay (airport transfer, meals, spa, late-check out …), offers on local attractions … These small gestures towards the customers, in combination with an improvement of their official web site at the level of its ergonomics (setting up of a Book now button in particular) and its design, constitute significant arguments to improve their Direct Booking. Mostly launched two or three years ago, these campaigns are expected to mature in 2019 and begin to bring tangible results to hotel groups.

In addition, the development of new technologies by major technology players in the industry, but also innovative startups should put a strain on the position of OTAs. The price comparison widget IQ SCAN developed by Wikhotel Technologies and intended for official websites of hotels with the main purpose of promoting Direct Booking, makes it possible to inform the consumer in a transparent manner and during his reservation process of the prices applied by the hotels. OTA, screenshot to support. This ultimate proof definitely puts to rest the dogma set up by the OTAs over the last ten years, which claims that they have the best rates.

OTAs will play the game until the end

However, OTAs will not let themselves go unanswered. And the proof is their new strategies are increasingly aggressive. First, there are the increasingly bellicose coercive measures vis-à-vis the establishments marketing their rooms at a more competitive price, which find themselves relegated at the end of the ranking in terms of the display of consumer research, although that having positive ratings from customers. For smaller establishments, this is a distressing warning shot that jeopardizes their financial equilibrium, and in some cases obliges them to agree to increase the rates offered on their official website in order to continue to generate bookings via their platform. On the other hand, OTAs are now starting to market third-party offers (usually wholesalers) at unbeatable rates. Booking.com, with its program launched in 2018 Booking Basic, is transformed into a market place marketing products at negotiated prices for B to B distributors. This new strategy demonstrates the unlimited will of domination of the giant of the industry, who vehemently attacks any challenge to his leadership.

The year 2019 should, therefore, see a resurgence of the fight between hoteliers and OTA. The debate that has been shaking the industry for a few years has turned into a veritable trade war where all blows will be allowed. With the entry of new players in the fight such as the giant rental of Airbnb housing, which should be on the side of hoteliers, a reversal of trend is not excluded. Nevertheless, the year 2019 will be just one episode of the long battle that hotel professionals expect to resume control of their distribution and recover the ground lost in the last ten years. In this situation we can no longer tense, only one stakeholder should pull out of the game: THE CONSUMER, which will see the prices undoubtedly be drawn down structurally.