The Value of Online Travel Agencies to Hotels

Most consumers are aware of the benefits that online travel agencies, OTAs, provide in assisting them in making their travel arrangements.

OTAs:

• empower consumers in researching travel destinations;
• provide increased inventory and choices, transparency and comparison shopping between flights, hotels, other amenities;
• offer lower prices and travel specials;
• provide consumer reviews and other intel on destinations and hotels; and
• give consumers the ability to quickly and easily make travel arrangements.

While the OTAs and other travel intermediaries may have “cut their teeth” on airline reservations, they also play a significant role in the hotel space, providing consumers with a wide array of choices based on price, location, amenities and other factors, and are rapidly becoming the preferred choice for consumers to make hotel reservations.

Experts agree:

• Terry Whitney, a board member of the Utah Hotel & Lodging Association, says, “online travel agencies have really blossomed [in the hotel space].”
• “OTAs have all of the inventory under one roof and are clearly the preferred shopping channel, especially for the leisure travelers,” said Douglas Quinby, senior director of research at PhoCusWright, a major travel industry research company.
•  “OTAs… are… providing a better shopping experience for consumers,” said Chris Anderson, associate professor at the Cornell School of Hotel Administration.

In fact, the hotel industry recently conducted a major, statistical study on the role of OTAs in the hotel industry, and the author concluded by saying that:

“If there was no such thing as OTAs, [hotel] room rates would be considerably higher.”

Benefits to Hotels:

Aside from consumers, however, OTAs also provide significant benefits to hotels and the hotel industry, from large chains to small business independent hotels.  In fact, the online travel companies have inventories of more than 250,000 hotels around the world, and promote and advertise those properties to leisure and business travellers world-wide, helping hotels “reach customers that [hotels] otherwise would not reach by themselves,” said the Vice President of Revenue Management for Wyndham Hotels.

The ultimate goal of this partnership between hotels and OTAs, from a hotel’s perspective, is to drive up occupancy rates. Nationally, hotel occupancy rates hover around 60% so each additional room that a hotel books represents additional revenue for the hotel, and OTAs help hotels fill those otherwise empty rooms. For instance, the same author of the hotel industry study mentioned above also found that without OTAs, hotel industry occupancy rates would be lower.

According to a study by PhoCusWright, “some hotels have as much as 90% of their total rooms booked through OTA channels.”

In many cases, OTAs work with hotels to generate promotions and other marketing opportunities, ultimately helping hotels and travel locations reach new potential customers and boost occupancy rates.  “[Online] travel agencies can be great assets for hotels — allowing them to sell more rooms and to sell those rooms at a lower price without diminishing the hotel’s brand image,” said Glenn Withiam, a spokesman for Cornell’s School of Hotel Administration.

Online travel agencies also help support small business hotel owners throughout the world by providing marketing services to help hotels advertise their availability and features, giving them an international advertising platform, connecting them to a world of potential customers. This enables these hotels to compete head-to-head with larger chains, spending less resources to enhance their room demand.  Bobbie Singh-Allen, executive director of the Independent Lodging Industry Association, says “OTAs such as Expedia and Orbitz support independent hotels on their respective sites.”

OTAs not only promote individual hotels, they also promote travel destinations and ancillary services, such as museum and winery tours, and other local tourist attractions. This helps to drive job creation, tourism dollars and tax revenues.  Ancillary services not only benefit the hotels, but also provide an economic impact that spreads across communities. The OTAs also highlight these ancillary services in their promotion of the hotels and local communities.

Finally, one of the benefits that OTAs provide for hotels is known as the “billboard effect” – studies have also shown that OTAs may help drive consumer traffic to the hotels’ own web sites for bookings.

Hotels, consumers, local communities, governments and OTAs have a very symbiotic and beneficial partnership – a win-win-win for all involved.  OTAs are proud of the role we play in promoting hotels and communities to travelers around the globe, and how we are able to provide transparency and lower prices for consumers, increased occupancy rates and revenues for our hotel partners, and more tourism, tax dollars and jobs to local communities.

Airline Fees

Posted by Joseph Rubin, President of the Interactive Travel Services Association (ITSA)

January 25, 2012

Introduction:

The U.S. Department of Transportation (DOT) implemented rules yesterday that require airlines to display their baggage fees on their web sites.  While this is a step in the right direction to provide consumers with adequate information about the true cost of flying, these disclosures do not go far enough to protect consumers.

Instead, airlines should be required to give consumers access to their fees for bags and seats in real time, as consumers are searching for airfares, with the ability to purchase those services at the same time. This will empower consumers to make real-time, apples-to-apples comparisons of the cost of flying with all relevant information, and enable them to purchase the tickets and services that they want, when and how they choose.

Airlines have an economic disincentive to provide that information, because they want to appear to be the low-cost provider, and only action by the Department of Transportation can make these disclosures happen.

Here is how the new rules fall short:

• Most fees, such as seat fees, are not disclosed;
• The 60% of passengers who purchase their tickets online are excluded, because they will have to leave their search results and go to each of the airlines’ web sites to compare the baggage fees;
• Consumers will not be able to pay for their bag fees at the time the purchase tickets; and
• Many fees are disclosed only AFTER a consumer makes a purchase.

Yesterday marked a noteworthy day for airline passengers – for the first time, they will now have improved disclosure of some fees that airlines charge before they get to the airport. This is a step in the right direction.

However, while this day has been a long time coming, we anticipate that this rule will still leave consumers frustrated because it falls short of their requirements and expectations:

• This new rule ONLY requires airlines to disclose the fees they charge for baggage – fees for seats are not included. Therefore, consumers will still not have an ability to compare all-in, apples-to-apples prices for flights among carriers;

• Further, the rule only requires airline to disclose the fees on their own web sites; it does not require them to make these fees available to online travel companies (OTCs) or other travel providers. Therefore, consumers who book airline tickets through OTCs and traditional travel agents – some 60% of all airline tickets sold –will still have to click back and forth among airline sites and their OTC search results to accurately determine what the cost of their bags is going to be, adding significantly to the time, frustration and burden of their travel search;

• Perhaps worst of all, consumers are STILL not going to be told what the full price of their ticket is going to be until AFTER they book their flights, because airlines do not have to disclose seat and other fees until AFTER consumers make a purchase. This is not only unfair to consumers, but makes it virtually impossible to accurately compare prices of air travel options among carriers; and

• Even if consumers take the time to conduct searches and purchase tickets, they will not be able to pay for all airline fees at the time they purchase their tickets. This creates additional frustration on the part of consumers and risks having those fees changed by airlines between the time they book and the time they fly.

A bipartisan group of Senators and Congressmen recently wrote to DOT, urging it to require airlines to not only disclose all ancillary fees to OTCs and other travel providers, so that consumers can make real-time, apples-to-apples comparisons of flights, but to also enable consumers to purchase these services at the time they purchase their tickets.  DOT has announced plans to examine that question, but they do not expect to issue any changes until at least 2013.

The Interactive Travel Services Association, which represents OTCs and the technology providers to the travel industry, stands with consumers in this important public policy debate, and urges DOT to enable consumers to compare all-in, apples-to-apples airfares with no surprises and no strings attached, and to do so quickly, before the luster of yesterday’s requirement wears off.