Amid Marriott-Expedia talks, industry wonders about the future with OTA’s

Hotel News Now reports that as Marriott negotiates with Expedia, the industry awaits the future of OTA’s continued impact.
Published date: January 2019

This could be the year in which the newly enlarged mega-hotel companies push back against online travel agencies to secure lower commissions and greater margins, according to sources.

Sources at OTAs suggest current commission structures are fair for what they bring to hotel firms’ top lines and that hotel companies would be better off working more closely with them to identify operational efficiencies and improve content.

One of the stated reasons Marriott International bought Starwood Hotels & Resorts Worldwide, a deal completed in September 2016, was to have more negotiating strength from volume against OTAs.

Negotiations between Expedia and Marriott supposedly are taking place at the moment, while Marriott’s deal with Booking Holdings is due to be discussed later this year.

As Marriott is the world’s largest hotel company by hotel count and market capitalization, any reduced commissions the company negotiates for itself are likely to have a ripple effect for the industry.

Speaking last week at a conference hosted by The Tourism Society and held at its own London offices, Expedia’s VP of Platform Services Christopher Michau said the OTA has been very open over the last couple of years in how it has reset its margins with the industry.

“We are happy. And we do not see the need to drop levels (of commissions),” he said. “We do not see Marriott as a competitor. We bring something else (to the table). We must help efficiencies across the hotel industry and not send profits to Google and Facebook.”

Ralph Merten, EVP at Düsseldorf-based business and technology advisory H2c GmbH, said the OTAs currently have the advantage of entering into any negotiation with the strongest hand.

“In general, we believe that OTAs set margins that are not negotiable, or only to an extremely small extent. Other issues like cancellation policies are probably negotiable in some cases and to some extent,” Merten told Hotel News Now.

Some hoteliers still regard the mega-OTAs as having two distinct sides but admit there have been major changes lately in how they behave.

“Yes, they are partners in distribution in one part, but on the second part, commissions are too high,” said Jan Lundberg, VP of revenue management and distribution at Scandic Hotels.

“(Scandic) has a fairly OK contract with Expedia, and Expedia has changed. … Now, yes, they are more of a partner,” he said.

Michau said now one-third of all hotel bookings are done on mobile, and in some markets, that percentage is larger, dramatically so in some cases.

“Twenty-four hours per week, and of non-sleeping time, is spent on mobile. Ten percent of households in the United Kingdom own a smart speaker, and that is expected to rise to 50% by 2022,” he said.

Michau said he sees this all as an opportunity for Expedia.

The OTAs continue to outspend hotel companies on technology and marketing.

“People always love to shop and compare, so for us all of this allows us to better provide a total experience for consumers. We will bring it all to our platform,” Michau said.

Click to read the entire article at Hotel News Now

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