The Evolving Relationship Between OTAs & Independents

Press enter to search
Close search
Open Menu

The Evolving Relationship Between OTAs & Independents

By Michal Christine Escobar - 01/07/2021

OTAs might put heads in beds, but it comes at a cost: sometimes up to 30% in commission fees. Before the pandemic, revenue managers were being asked to lessen their brand’s dependence on OTAs, and now the pandemic has made that commission fee a sore spot for independent hotels. However, it doesn’t have to stay that way, says Johnathan Capps, VP of Revenue for Charlestowne Hotels. Here, HT speaks with Capps to learn more about the OTA relationship between independents and hotels and where he sees it heading in the near future.

Prior to the pandemic, what was the relationship between hotels and OTAs like?

I’d like to rewind this back to 2008 when hotels gave up too much to OTAs in the last downturn in terms of commission (25% to 30%). It’s been super difficult to work that back over the years, as that money is what really helped the OTAs grow. Since then, hotels have tried to publicly show that they are less dependent on these OTA sites in the hopes that OTA popularity will decrease. 

How specifically have independent hotels' relationship with OTAs changed during the pandemic?

My current opinion of the OTA/hotel relationship is that it’s status quo. With both parties operating with limited resources and staff, OTAs and hoteliers are in survival mode, just fighting to make it through the pandemic. If anything, there’s the potential for the dynamic to worsen with a lack of service response or general contact while both parties are focusing on rebounding as fast as possible.

How do you think the OTA/independent hotel relationship will evolve as the industry begins its slow recovery in the year ahead?

It would be my goal to see the relationship evolve into one that is more mutually beneficial for both parties.. Ultimately, a healthy hotel/OTA relationship should prioritize the type of partnership which brings about the most success for the hotel. 

Right now, most hoteliers have a “surface level” relationship with OTAs, the way one would with a mechanic or mailperson – it’s cordial, at best, with minimal interactions that occur on a need-to-know basis. While I’m not looking to have a cocktail and watch “This Is Us” with my OTA counterparts, in order to help this relationship evolve into what I describe above, what I am looking for is more of a personal relationship with OTAs – a relationship with a focus on transparency, honesty, and the success of its hotel partners.  

What changes need to be made to better support independent hotels?

Hoteliers need to get their footing back and a new contract from the OTAs. As an industry, we conceded too much long ago, and we haven’t demanded any type of change or better controls of governance since. While OTAs aren’t going to agree to sign individual contracts with every hotel, hoteliers should ask for more of what can and can’t be done on their side, and work that into addendums. This includes how their commission can be manipulated in relation to rate, how the sort order can be affected, and how they can act and buy certain things within the naming/marketing of the hotel. 

A suggested change could be a penalty model in which the OTAs are monetarily penalized for proven parity violations. Parity issues from a hotel side are responded to with rate adjustments and/or commission adjustment from the OTAs. OTA violations are often filed under caching and/or a response to another OTAs parity issue; ultimately this creates an unfair playing ground for the hotel, especially as there’s potential for the hotel to lose a full-rate booking. This type of change may require our longstanding industry organizations to form a task force to sort this out, or a technology partner to provide transparency proofing of where the issues are stemming from. 

How can hotels - independents especially - prevent an overdependence on OTAs? Why do they want to do this?

Great tracking and reporting are necessary to avoid an overreliance on OTAs. Hoteliers must have a firm grasp of how much business each OTA is producing down to the rate type on each OTA by day, understand the year-round impact of that business, and the demand levels behind the overall hotel. There could be opportunities to scale back specific rate plans or opaque rates year round, turn off promotions, decrease advertising spend, turn off a particular OTA partner that may not produce business via “creative parity,” or turn them all off for particular time periods. 

For independent hotels, there needs to be a balance in marketing/brand spend. You can’t execute strong tracking and reporting without having the foundation of a good website, booking engine, and rate distribution strategy in which the hotel is equal or better than what is being distributed to OTAs.