In the past few weeks, hoteliers have been voicing their dissent against few online travel agencies (OTAs), questioning their almost monopolistic practices and policies. They fear that with more travellers opting for OTAs than brand websites, the digital platforms will have a stronger say in the online distribution of their products.
Ritesh Raj, Co- Founder and COO, CuddlyNest
However, CuddlyNest’s Co-Founder and COO, Ritesh Raj and its Chief Growth Officer, Nitin Manchanda, dismiss this fear. They point out to Vinita Bhatia that hoteliers are backbone of OTA platforms and both entities share a symbiotic relationship. Hence, while the latter offer convenience and ease to users, most travelers will always opt for hotel brands they recognise and trust.
Will travellers increasingly prefer to book trips and stays on an OTA platform rather than directly with hotels?
Ritesh Raj (RR): A hotels-only OTA can help travellers find the right accommodation for one of their trips. However, it might not necessarily be able to find the ideal accommodation for their next trip because preferences change often. Booking platforms that offer a wide overview of all the options available based on user’s preferences, therefore, will be a preferred choice for a large chunk of users versus direct bookings.
Of course, a certain percentage of travellers is attached to loyalty programmes of specific hotel groups or credit card companies. They tend to book directly to reap the most points. However, that chunk is decreasing as loyalty becomes sparser in favour of the lowest price.
What is the origin of the longstanding tug-of-war between OTAs and hotels, whether it is heavily funded platforms or startups?
RR: OTA have always been an integral revenue stream for hotels; the dependency is clearly exhibited by the current market share of OTAs. From our end, we see ourselves as a helping hand to the properties that list with us since our commission rate is one of the lowest on the market.
Considering the pandemic, are OTAs poised to dominate the online distribution of hotel inventory more strongly, further impacting this sentiment in India?
RR: If anything, the property-OTA relationship strengthened as the entire sector was affected altogether. Looking back at the synergy in the travel industry starting in March 2020, we can all agree that the entire response was very collaborative.
What are some major concerns that hotel inventory suppliers have about OTAs?
RR: Commissions, without a doubt, and that can be said about all property types — though single property owners tend to suffer most. It is no secret that some OTAs have incredibly high commission rates, which seemingly continue to rise year by year.
Do you think the high commissions, ranging 15%-20%, charged by OTAs is a justified cost?
RR: It is surely a justified cost. It is when the commission rate starts creeping into larger numbers that it is no longer fair. Let’s talk about what OTAs bring to the table, starting with global reach. While smaller properties were only reaching local potential customers, they now have access to a global market. Then there is customer service. OTAs offer 24-hour support, seven days a week, including holidays, some with multilingual support.
Nitin Manchanda, Chief Growth Officer, CuddlyNest
Do you think most OTAs are fundamentally digital marketing agencies operating on commission basis that use economies of scale to lower costs of campaign management, credit card fees and customer service?
Nitin Manchanda (NM): Definitely, you nailed it. Think sponsored listings, landing pages that match the exact search intent of the customer, social media, newsletters, complex retargeting, and much, much more.
Most properties are unable to execute those operations on their own, and as you mentioned, don’t have
access to economies of scale to get the best price and end up paying single-use licensing fees for most of
the tools that they would need to excel.
Targeting and matching search intent accurately continues to exponentially improve year by year. Most OTAs have huge SEO and SEM budgets, which smaller hotels lack.
How can these smaller hotels work with OTAs to be a part of the cutthroat online advertising game without burning their cash?
NM: It is not just about marketing budgets. OTAs carry a lot more data to understand the user needs to help them find their ideal stay. A smaller hotel would struggle with this. Moreover,
they grant all properties, big and small, access to global reach.
Here is where we see that the commission rate goes a long way. Unlike other industries where the intermediary may not bring much value, the commission rate is absolutely cost-effective in the travel booking accommodation market.
How can the Indian hospitality industry, which is going through its worst crisis, change the narrative with OTAs to make business more productive for everyone?
RR: Instead of calculating costs lost with commissions purely based on the nightly rate, properties need to calculate how much costs they invest into their digital marketing spend, data analysis, customer service, and more to get an understanding of why that commission cut goes a long way.
It is until properties take an exhaustive look into their accounting that they will begin to embrace what OTAs do. The relationship has increasingly been illustrated as a battle of properties versus travel tech when in reality, it is a collaboration, and quite a pleasant one too.
In the current scenario, should smaller hotels focus on optimising their costs, automating their operations and cross-selling, rather than trying to beat OTAs?
RR: Property owners should always focus on optimising costs, regardless of their scale. OTAs need to be part of the formula, without a doubt.
Knowing which OTA to partner with is important as not all are created equal. For instance, our business model is based on our studies of this age-old relationship dynamic, as well as our own experiences while working on the other side. It is a traveller-based approach derived from what we have gone through ourselves.
How can hoteliers collaborate with OTAs and leverage their technology to propel their online distribution and technology to boost revenue and investment?
RR: Properties can continue to do what they do best — offering the best stay possible. The more amenities, facilities and perks that they add to improve the guest experience, the more they stand out. This could include touchless technology, in-room entertainment services or ancillary services like seasonal on-site tours. As the OTA, we ensure that all the hard work and resources invested are reflected to the right audience with our global reach.
How can hotels streamline their reservation technology with that of OTAs to manage their overall operations, reduce costs and automate their businesses? Can this allow them to focus more on guest experience and less on supervision work?
RR: For the most part, accommodations use property management systems that have already been very efficient in synchronising these. I have to say, the travel tech industry is one of the most innovative and
impressive ones out there, and great tools and resources are plenty. With those tools in hand, properties can reliably count on OTAs for integration and a seamless guest booking experience.
