The Role of OTAs in Hotel Distribution And A Revenue Generation Model

Like all other industries, Revenue generation in the travel industry is not an alienable practice. With travel industry growing leaps and bounds, revenue generation has become a science to study, explore and innovate. As online bookings have replaced the conventional bookings, the role of OTAs and online distribution in revenue maximization has gained unprecedented importance. Of lately, hotels have started implementing formal revenue management guidelines, roping in committed professionals to sharpen and focus their revenue generation processes and augmenting their profitability. Hotels are using advanced travel technology tools for handling their hotel revenue management.

OTAs have emerged as one of the most prominent online distribution channels among different sales channels for revenue generation, although hotels have to shell out chunks of their money to OTAs in the form of commissions. Approximately 60% of travelers comparison-shop rooms before booking, which makes OTAs a popular place to do business. In fact, the industry has realized that OTAs and hotels exist in a symbiotic relationship, nurturing and supporting each other for mutual growth. Factors like OTAs have a much bigger advertising budget, access to more traveler data and more success in drawing in online traffic are the main reasons hotels are choosing OTAs as online distribution partners.

OTAs and Online Distribution is a boon to the hotel in a myriad of ways:

OTAs and Online Distribution Provides Global Exposure – OTAs provide every hotel new or old, big or small to have their fair share of online distribution presence and attract bookings from relevant audience across the globe because of exponential growth trends in online bookings. As per the World Travel and Tourism Council, expenditure growth in travel and tourism in 2016 exceeded the general economic growth during the same period of around 3.1% compared to overall economic growth of just 2.1%.

A new hotel starting its operations may have to spend heavily on marketing and advertising to sell their inventory, and it seems an uphill task for a new entrant to establish its footprints. It may take ages for the hotel to eventually build brand value and earn its name to be able to sell major inventory through its brand website and walk-in customers. However, an OTA can help a new hotel start earning revenue from the very first day it is listed on the OTA websites.

The online travel booking market worldwide has taken off by 25% since 2014 to 2017 and is anticipated to increase to almost 818 billion dollars by 2020, suggesting an increase of 74% in just 6 years.

Distribute on an established and popular platform even before your operations begin – OTAs provide an ability to scale quickly the business through a reputable online platform where a hotel has to just list its name and inventory for distribution and the rest of the effort will be put by the OTAs. OTAs make both their ends meet to sell their client’s inventory in lieu of handsome commissions. This is precisely the reason why hotels have shed their inertia and started flexing their muscles to increase direct bookings but the effort is too feeble to challenge the dominance of OTAs. There is also a positive side to it, OTAs save a hotel’s expenditure in marketing and round the year advertisements dollars that may have to be spent to exhaust the inventory. It is not feasible for every new hotel to afford such huge expenses even before they have started earning any revenues. OTAs are a clear savior in this regard, as they start giving bookings instantly and provide strength to every hotel to compete equally in the online market.

OTAs; a diversification strategy – Distributing rooms through OTAs spread across geographies help hotels diversify their inventory and thus risk associated. Thus, OTAs are part of a hotel’s diversification strategy for increasing profits and reducing menaces. Hotels can divide and re-distribute their rooms on different OTAs according to the regional demand and profit margins. Thus, such planning helps in revenue maximization through appropriate distribution of inventory.

Get customer demographic data for targeted marketing – In most cases OTAs do not provide customer contact details, etc. However, you can get valuable insights into customer demography and preferences at your property, once the customer gets in your hotel. Which is not bad if you look at it from the perspective of paying OTAs a one-time commission for acquiring a customer and further nurturing them. Gathering this information will can simply change the way hotels target to achieve revenues. Revenue Managers can use this data to customize promotions and packages according to the needs, time and period of stay of the customer. In this way, OTAs not only help hotels be competitive in the market but will also encourage managers to find innovative ways of targeting customers and revenue generation.

However, there are many headwinds OTAs have to face but their position in the industry cannot be disdained. There might not be something very exciting on the cards but the role of OTAs in the travel industry is unchallenged as of now and they will continue to play a crucial role in online channel distribution and overall hotel revenue generation in times to come. In fact, when worked wisely, OTAs are a hotel’s best companion for revenue generation.

Source by Sudhir Kumar Singh

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