Posted by Kerry Ranson
It’s been called the hotelier’s heroin. It’s addictive and destructive—and breaking free will require resolution from franchisees and franchisors alike.
It’s the online travel agency—OTAs.
Our collective addiction to this revenue source began innocuously. We were willing to deeply discount extra inventory on a highly selective basis. Just after 9/11 and again when this current recession hit, we relied more heavily on these programs, often doubling the number of rooms we made available. Now we find ourselves in a cycle that is difficult to break.
The OTAs spend more than $100 million dollars on advertising each year. Even brand budgets couldn’t approach this level. Where do the OTAs find that kind of money for advertising? From our hotels. We are, in essence, funding advertising that works against our own interests.
As the economy gains steam, however, I see the tide beginning to turn. Cash-strapped states and municipalities are recognizing that the OTAs do not pay the tax revenue on their bookings like hotels do, and steps are being taken to correct this. Franchisees are increasingly pressuring the brands to take the difficult stance against the OTAs, accepting short-term pain for long-term gain.
Up to this point, the OTAs have run the show. They’ve used our own assets to cripple profitability, all the while bypassing the taxes that support the communities in which we do business.
Regardless of the brand, as franchisees of the thousands of hotels worldwide, we can regain our power if we band together. We must encourage our local governments to level the taxation playing field. We must ensure our customers look to us for the best rates and service. We must continue to tell our franchisors that the time to break the cycle is now.
And, most importantly, we must remember that we are in this together. The OTAs have changed our industry, but not irrevocably if we speak in one voice.