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The role of OTAs in the distribution of hotels and the revenue model

Like all other industries, the tourism industry is not an income-generating experience. With the growing leap and bounds of the travel industry, it has become a science to learn, explore and innovate to make a profit. As online bookings replace conventional bookings, the role of OTAs and online distribution in revenue generation has gained unprecedented importance. Recently, hotels have begun to apply profitable management rules to sharpen and focus on revenue generation processes. Hotels use advanced travel technology tools to manage hotel revenue.

OTAs have emerged as one of the most popular online distribution channels among various sales channels to generate revenue, although hotels have had to pay a portion of their money to OTAs in the form of commissions. About 60% of travelers are comparison-shop rooms before booking, which makes OTAs a popular place to do business. In fact, the industry has realized that OTAs and hotels are in a symbiotic relationship, nurturing and supporting each other for mutual growth. Factors such as OTA have a larger advertising budget, more access to traveler information, and greater success in drawing on online traffic, which are the main reasons why hotels choose OTAs as their online distribution partner.

OTAs and Online Distribution are contributions to many hotels:

OTA and online distribution provide global exposure – OTAs present each hotel in a new or old, large or small way, to have a fair share in online distributions and to receive orders from relevant audiences around the world due to the exponential growth trends of online bookings. As World Travel and Tourism Council, travel and tourism spending growth in 2016 exceeded overall economic growth During the same period, overall economic growth was about 3.1% compared to only 2.1%.

A new hotel that is just starting out may have to spend a lot of money on marketing and advertising to sell its inventory, and it is a high task for a new entrant to make footprints. Finally you can draw a hotel to create brand value and earn the name to be able to sell with the brand website and customers on the go. However, an OTA can help a new hotel make a profit from the first day listed on the OTA sites.

The global online travel booking market has shrunk by 25% from 2014 to 2017 and is expected to grow to $ 818 billion by 2020, an increase of 74% in just 6 years.

Summer on a popular platform set up before the start of operations OTAs provide the opportunity to rapidly expand their business through a reputable online platform that lists a hotel’s name and inventory for distribution only, and the remaining efforts will be provided by OTAs. OTAs bring both ends together to sell their customers’ inventory instead of fine commissions. It is for this reason that hotels have reduced inertia and have begun to flex their muscles to increase direct bookings, but efforts are too weak to test the benefits of OTAs. On the plus side, OTAs save on a hotel’s marketing costs and run ads throughout the year that can be spent on depleting inventory. It is impossible for every new hotel to pay such large expenses before earning any income. OTAs are an open savior at the moment, as they start booking immediately and empower each hotel to compete equally in the online marketplace.

OTAs; a diversification strategy – Distributing rooms through OTAs helps to diversify the inventory of hotels spread across geographies and the associated risks. Thus, OTAs are part of a hotel’s diversification strategy to increase profits and reduce risks. Hotels can redistribute their rooms to different OTAs according to regional demand and profit margins. Thus, such planning helps to increase revenues by appropriately distributing inventory.

Get customer demographic information for targeted marketing – In most cases, OTAs provide customer contact information, etc. Does not provide. However, once the customer arrives at your hotel, you can get valuable information about the customer’s demographics and the preferences of your property. It would be nice if you look at OTA in terms of getting a client and paying a one-time commission for further education. Gathering this information can simply change the goal of hotels to generate revenue. Revenue managers can use this information to adjust promotions and packages according to the customer’s needs, time and duration of stay. In this way, OTAs will not only help hotels become more competitive in the market, but will also encourage managers to target customers and find innovative ways to generate revenue.

However, there are many headlines that OTAs have to face, but their position in the industry cannot be overturned. The cards may not be too exciting, but the role of OTAs in the travel industry remains the same and will continue to play a crucial role in online channel distribution and overall hotel revenue in the future. In fact, when working smart, OTAs are a hotel’s best companion for making money.