NEW YORK — The number of prospective hotel guests who switch
over to book on hoteliers’ websites after shopping for rooms on OTAs will
continue to fall, leading to higher hotel distribution costs and a greater
potential for incomplete bookings from scamming websites, researcher Cindy
Estis Green predicted.
Addressing attendees of the Hotel Experience trade show at
the Javits Center here earlier this month, Estis Green, CEO of the hotel
consulting firm Kalibri Labs, described findings from the Distribution Channel
Analysis Report that she co-authored and is to be released in early 2016.
The so-called “billboard effect,” a term OTAs use to
describe their ability to provide free exposure to hotels and hotel brands to
consumers who then make their booking at the hotel’s website, is on the
decline, the researchers found.
“Consumers stay on the OTA sites,” Estis Green said. “The
incidence of consumers going back to the brand site has diminished
dramatically. The billboard effect is dead.”
The subject has become more topical as online spending for
hotel bookings in the U.S. continues a steady increase while the OTA sector
Between 2012 and 2016, annual online hotel bookings will
have advanced 55%, to $58.1 billion, according to a study Phocuswright released
last year. By comparison, the total U.S. online travel market will have
expanded 37% during the same period.
Meanwhile, the OTA sector has consolidated in recent years
as Expedia and the Priceline Group have snapped up smaller competitors, leading
hotel lobbyists to decry mergers that they say will result in less competition,
declining service and higher distribution costs. With Expedia acquiring both
Orbitz Worldwide and Travelocity this year, Expedia and Priceline account for
about 95% of all spending by Americans on OTAs.
In the meantime, those fewer OTAs continue to take a larger
chunk of total hotel bookings. Next year, OTAs will account for 48% of U.S.
online hotel bookings, up from 46% in 2012, according to Phocuswright. That
represents an annual swing of about $1.1
billion in bookings toward the OTAs.
Estis Green said that the continuing dominance and growing
sales by OTAs would mean “a loss of control of content by hotels, third-party
domination of sales and rising distribution costs that put pressure on hotels
that should be spending the money on improving their product.”
Granted, hoteliers, especially the larger ones, have been
able to absorb these costs as both occupancy and room rates approach
Last year, U.S. hoteliers’ revenue per available room
(RevPAR) advanced 8.3% from a year earlier, primarily as a result of room rate
increases, which tend to boost earnings faster than occupancy-rate increases,
according to STR. Through September, U.S. RevPAR was up another 6.7% this year.
Once demand growth flattens, though, OTA distribution costs,
which can total between 15% and 25% of the room revenue collected (in the form
of the wholesale prices hotels charge OTAs to secure the rooms), can
substantially reduce earnings, said Kalibri Labs partner Mark Lomanno.
“We are now in a strong environment, so hotels are not
paying enough attention, but when times are not as good, these costs will be
more noticeable,” Lomanno said at the trade show. He added that independent
hotels and smaller brands pay as much as five times more in distribution
expenses as a percentage of sales than larger hoteliers do.
Estis Green also said the 2016 report would offer data on
the emerging explosion of apps that serve as “intermediaries” between the hotel
and the consumer relating to every aspect of a hotel stay: the booking,
check-in, on-property requests and other services. However, she said last week
that it was too early to discuss that research.
Danny King contributed to this report.