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Top 6 direct booking problem faced by hotel - Solved

Today's consumer choices largely depend on price transparency & comparison shopping. To meet the same demand of the time in travel industry, Online Travel Agents (OTAs) has come up with very smart business model in the industry. The core competency they bring on the table is sophisticated technology platform blended with strong marketing capabilities. With the expansion of internet based businesses these intermediaries are actually booming in the travel industry and not the hotels or similar businesses.

What comes as a challenge is the extent of negative impact caused to the multi-billion dollar global travel industry in the attempt to grow a business market of mediators. Where mediators with technology capabilities and marketing competence are encashing the gap between travellers and hotels, redirecting traffic to their websites and minimizing number of direct hotel bookings. Considering the number of problems, brought up by these intermediaries, faced by hotels and guests, in real terms the technology/internet growth is not helping the online hotel booking industry to the extent it helps to all other industries.

Few of the concerns we hear from hotels are actually created by OTAs and their regulations, which otherwise should have been used as enablers for the hotels and the industry. With increasing dependencies over online market and digitalization, multiple intermediaries are chipping in and efficiently started driving the businesses in their favour. The hotel industry is seriously sceptical about their future and trying hard to keep their businesses in their hand. But things those are standing against the hotels and direct hotel bookings are so complex that none of the hotels in global market could resist to depend on OTAs. We'll look at few of these factors working against the hotels and understand how can help the industry to enable direct hotel bookings.

1. Cost Competition

With OTAs started competing on cost and pressurising hotels to agree to competitive price points, hotels are left with minimal revenues to focus on their growth and quality improvement. OTAs with strong capabilities of taking up control in the market and have reached to a stage of thrusting strong bargaining capacity. So much, that if any hotel is not in good terms with them then online market access would effectively stand closed for them to a great extent.

2.Online Reach

The core of all problems and dependency on OTAs is one and only problem, that is the lack of online reachability that hotels have over online networks. This is termed as the fundamental problem for hotels, because irrespective of any investment they make to their website and tech-capabilities, the problem of directly going to a hotel's website for a 'direct hotel booking' will always remain there as its much easy for travellers to go to a known website that has multiple options to select from. Hence, with all efforts and massive marketing investment, situation are never going to turn into hoteliers favour.

3. Technology Superiority

A different ball game is the technology capabilities, where local & chained hotels are facing huge set of problems to keep up to the competition on technology front. It is almost impossible for them to chip out serious sum of money in an ongoing manner to keep up with ever changing technology ecosystem. Budget hotels are not even in position to think of these kind of competitions on technology front and are completely submissive to OTAs and dyeing slowly.

4. Internet Penetration

Hotelier in the markets with strong internet penetrations are already seeing the challenge and burnings. Europe and the US markets with very high internet penetrations has caused the biggest harm to the hotel industry. Europe with 70% hotel booking through OTAs or meta-searches and US with 30% to 50%, has created tremendous pressure on hotel business, causing thousands of small and boutique hotels to die. In markets like India's, with current internet penetration around 35% and speedy growth, the landscape for hoteliers is also expected to change rapidly causing many quits from the industry.

5. Revenue Sharing

OTAs are predominantly holding the major market share of hoteliers. OTA revenues typically come from the commission they charge on the room they intermediate. This commission could be anything from 5% to 40%, which is normally far higher than other commission based businesses in any industry. OTAs have also increased their influence over a period of time and of late they have shaped up as 'partners', graduating from so called agents, taking out even bigger chunk of profits in the industry. The entire model is directly hitting hoteliers, who are leaking out substantial part of their revenues to OTAs against the online presence that they need to target for rapidly growing online travel bookings.

6. Rate Parity

This is an another master piece, originally devised by hotels for business benefits, but are often found to trap back hotelier themselves. The clause often stand out as a hurdle for hotels in their business growth rather than solving problems for them. With rate-parity agreements, hotels are neither able to increase the competition for OTAs nor able to reduce dependency on them. Rather, have restricted themselves to attract direct hotel bookings via their own websites by locking their capability to sell at a lower price points ultimately reduce their occupancy rate.

Looking at the overall picture, the industry has become good intermediaries and bad for hotels. From a holistic point of view, the overall hospitality industry has got transform into a much favourable business model for online travel agents, where they are taking out a major piece of cash from the industry. At the outset, this translates to an 'ONLY WIN' situation for OTAs. It is the guests and hotels, who are the ultimate sufferer and find themselves into a difficult situation arising out of an inappropriate and non-transparent business ecosystem.

How does help?

To move forward it is imperative that we leverage technology without hurting the basics of hotel businesses and industry. The need of time is to have a solution for all these problems that may bring in stability and standardization in the hotel distribution and booking practice, at the same time allow hotels to continue to have direct hotel bookings.

We at, are solving exactly this set of problems by implementing a hotel booking platform which can be used by hotels as a SaaS model. This enables hotels to get the OTA like capability completely under their control by simply paying a subscription fee for the access. The sales are 'COMMISSION FREE' and hence they get extra capability to provide discount to their guests directly and able to drive business independently.

On the other hand just work well for travellers as they can directly connect and chat with multiple hotels on a single platform, book rooms online and even get private prices directly by using BID function. This being a private platform, defies 'RATE PARITY' clause, which is an another enabler for hotels to utilize and freely distribute their rooms at any preferred price point, irrespective of their prices shared with any public websites.

In a nutshell, hotels are able to enjoy 'direct hotel booking' at 'ZERO COMMISSION' and can extend additional discount or benefits to travellers directly. Travellers can negotiate and personalize well, directly with end services provider and can pay easily on a secured platform.

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