The huge financial burden placed on the travel industry by the pandemic, which the World Travel and Tourism Council estimates lost $ 5.5 trillion last year, is fueling renewed complaints from hotels, airlines and travel providers about the largely invisible percentages of their revenue being paid Contact online travel agents or OTAs, including the giants Expedia and Booking.com and its subsidiary brands: Priceline, Kayak, Hotels.com, Hotwire, Orbitz, Travelocity and many more.
“I don’t think most consumers understand how much hotels are paying to buy their business,” said Cindy Estis Green, CEO and co-founder of hospitality data company Kalibri Labs.
The crisis has particularly encouraged independent hotels and small hotel groups to speak publicly about OTA commissions of up to 25 percent. The big chains can bargain for lower fees, but even they have doubled their loyalty programs and offered points and other perks to encourage direct booking and avoid paying OTA commissions. Some airlines have also pushed back.
“The hospitality industry has suffered a pretty severe body blow from COVID,” said Green. “Anything they have to pay off will be a topic of interest.”
All of this coincides with increased consumer awareness of commissions collected by middlemen, especially third party food suppliers. Early problems processing refunds have hurt OTA approval rates, which have plummeted to an all-time low according to the American Customer Satisfaction Index. Independent hotels and small hotel groups are joining forces to gain additional clout in networks such as Preferred Hotels and the new Curator Hotels, which were launched in November. Travel reporting sites, including Needham-based Tripadvisor, are taking the moment to promote subscription programs that they say bypass OTAs and save money for both travelers and travel companies.
Still, the preeminent role OTAs play in travel is unlikely to wane. With almost no group and business trips, OTAs provide an even larger proportion of the few bookings that are still made. $ 250 million in marketing credits and a temporary reduction in commissions from Expedia as part of a recovery plan to participating hotels came with terms that make the hotels even closer to that relationship.
OTAs made their move in the recent recession when hotel companies, suffering from a sharp drop in business travel, filled empty spaces. “They have relied on these powerful channels to help,” said Brian Hoyt, Tripadvisor spokesman, who previously held the same job at Orbitz. “That was a great argument for 2008. Then the commissions started pushing more into profit margins.”
Some of these hotel managers seem, in hindsight, surprised at how big the OTAs have gotten since then. Kalibri Labs reports that more than 40 percent of hotel bookings are now made through OTAs. Commission payments have become the second largest spend on the lodging side of the hospitality industry, according to the American Hotel and Lodging Association.
“It’s got out of hand too quickly,” said Johnathan Capps, vice president of revenue for the management company Charlestowne Hotels.
But hotels also benefit from a channel that makes it easier for consumers to book with them and significantly expand their market, and from the nearly $ 11 billion a year that Expedia and Exp Booking.com.
“We’re delivering greater reach in terms of customers,” said Zuhairah Washington, senior vice president and general manager of global strategic partnerships for Expedia.
The biggest players, however, have scrambled to share so much revenue with OTAs. Airlines, which reportedly cut their commissions to around 2 percent, have nonetheless started banning some OTAs from listing their fares in order to drive more flyers to their own websites. Several offer bonus frequent flyer miles for travelers who book direct.
Delta and JetBlue have pulled out of several smaller OTAs, and Southwest is preventing third-party sites from selling their flights. United threatened to cut ties with Expedia in 2019, and the two went to court before finally agreeing to a new deal.
Hotels have also resisted. Marriott negotiated a new deal with Expedia in 2019, which reportedly cut its commission to 10 percent.
Tripadvisor, which is not an OTA but gets paid when users click OTAs from its website to book it, launched a service called Tripadvisor Plus in January that allows consumers to purchase $ 99 per year memberships with which they offer discounts at participating hotels, tours and attractions and amenities such as welcome gifts and meal credits.
Members reserve their stays directly and save the providers paying a commission. Tripadvisor’s Hoyt said what they save on discounts should more than make up for the fee.
“The consumer wins, the supplier wins and Tripadvisor wins too,” he said.
Expedia will not reveal its commissions and its contract prohibits its partners from disclosing them. By mentioning the subject, the receptionist in Maine violated the hotel’s agreement with Expedia. But tour operators say there is no question that they make less money from customers who come through OTAs than from those who book directly with them, even if the guest’s price is exactly the same.
For this reason, hotel companies and airlines alike have made a major focus on getting more guests booking direct, promoting loyalty programs and adding perks. For example, Marriott launched its Bonvoy program in 2019. That year, Hilton ran an advertising campaign called “Stop Clicking Around”. These progress slowly; According to Kalibri Labs, loyal bookings rose to 56 percent of all reservations this year, outperforming OTA growth.
“We have close relationships with many online travel agencies,” said Hilton spokeswoman Meg Ryan. “However, we encourage our guests to book direct to get the most benefits and lowest prices.”
Independent hotels and small hotel groups are also trying to do this now.
“What the pandemic did was get people involved,” Capps said. “The guests had to call the hotels directly for information. We have a lot of direct access to consumers. We are trying to win this customer over, to receive this contact information and to inform him that we are sending offers in connection with the booking directly from us. It may be a long stretch, but it’s starting to work. “
Expedia’s Washington said direct booking and loyalty programs “have no significant impact on its business,” despite adding a clause to its contract last year banning partners from downgrading the company or telling guests that Expedia bookings ” You are not entitled to the same benefits, amenities, and services as booking through your own channels. “
She said the company has ongoing communication with partners. “The conversation about commissions is not new,” said Washington. “We are very confident about the agreements we have made. We believe they reflect the value of the role we play. “
Independent hotels are now signing up to networks like Preferred, which have their own loyalty program that offers points that can be redeemed for stays.
“When the smaller independent businesses network and have the extra leverage, they can put more pressure on the OTAs to lower commission,” said Deborah Friedland, practice manager, hospitality advisory services at accounting and advisory firm EisnerAmper.
So far, OTAs have resisted it, said Michelle Woodley, president of Preferred, who has been discussing commissions with the major OTAs for years.
“We just don’t seem to be getting anywhere,” said Woodley. “It’s unfortunate that it takes a serious situation like this for the covers to really withdraw to this reality.”
Jon Marcus can be reached at jonmarcusboston@gmail.com.
