Why Are The Regulatory Bodies Stepping Up To Curb The Growing Influence Of OTAs And What Might Be The Implications?

by Trefis Team
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In a recent analysis, we showed how hotels are getting increasingly agitated with the rising commissions posed to them by online booking agencies like Priceline and Expedia. In an attempt to cut out the OTA middlemen, many large hotel chains had also started offering incentives to lure customers to directly book from their websites. Even then, we discussed, how the power of online travel agencies with their vast offerings and their widespread presence seem to be a formidable force to reckon with. However, it seems now regulatory boards are stepping forward to check the growing power of OTAs. Recently, the American Hotel & Lodging Association (AHLA) introduced a “Search Smarter” campaign to raise consumers’ awareness about the deceptive marketing practices pursued by the OTAs in the U.S.

What Are Some Of The Issues Raised By AHLA?

  • False Sense Of Choices

The Association addresses the threats posed by Priceline and Expedia because they seem to offer “false choices.” It claims that almost three-fourths of the consumers in the U.S. are unaware of the fact that they are essentially comparing travel booking options between two companies which own numerous affiliates. While Expedia currently owns around 75% of the U.S. online travel market through sites such as Trivago, Travelocity, Hotwire, Hotels.com, Egencia, CarRentals.com, Classic Vacations, etc., Priceline owns most of the remaining market through its websites like  Kayak, Booking.com, Agoda, Rentalcars.com, etc. The Association claims that together these two OTAs own around 95% of the online travel market in the U.S.

  • False Sense Of Better Deals

AHLA found almost 79% of these consumers use the online travel agents because they feel that these websites offer better deals. However, according to the association, this is not entirely true. The belief seems to be based on misleading marketing practices whereby these OTAs show how they are deeply discounting the original prices. This is not based on the actual room rates set by the hotels. Also, these sites feature false messages like ‘Only 2 rooms left!’ that propel bookers to make their bookings faster and this information, too, is not based on the actual inventory of the hotel.

In order to counter these moves, consumers are being asked to book directly through the secure booking option of the hotels’ own websites, which provide booking transparency and provides guests with loyalty programs. The AHLA’s campaign wishes to raise the awareness among the consumers so that they clearly understand the options available in front of them and make a decision that is best suitable for them.

Is It Possible To Curb The Growth And Influence Of The OTAs?

PhocusWright claims that the OTA accommodations bookings in the U.S. overtook the gross booking through hotels for the first time in 2016. Not only do Priceline and Expedia own 95% of the U.S. online travel market, in more fragmented markets like Europe and Asia, OTAs are growing even further, thus demonstrating the sheer bargaining power that both these leading OTAs command.

So, given this scenario, it might not be possible to stop the growth of the OTAs. However, awareness campaigns such as the one raised by the AHLA might help consumer make better decisions rather than be blinded by the allegedly deceptive marketing campaigns of the OTAs. This in turn might also help hotels to get a significant rise in their direct bookings. Since it is coming from a regulatory body and not from a seller, consumers are prone to put more credibility in the campaign, and in case this is a success, such campaigns can be undertaken by regulatory bodies in other countries as well.

Though these initiatives might not decrease the popularity of the OTAs overnight, they might be able to impact them in a positive way by forcing them to take accountability for the claims they make on their websites and for transparently revealing all the terms and conditions attached to booking through their platforms. OTAs are increasingly growing notorious in raising the commissions that they earn from hotel providers forcing the latter to face dampened profit margins and sometimes even losses. Initiatives like “Search Smarter” might curb this advantage that OTAs face and provide a fairer playing field for hotel suppliers, as well. The biggest gainer from such initiatives will be the consumers who will become more informed to make educated choices rather than be misled by OTAs or fraudulent websites.

Editor’s Note: We care deeply about your inputs, and want to ensure our content is increasingly more useful to you. Please let us know what/why you liked or disliked in this article, and importantly, alternative analyses you want to see. Drop us a line at content@trefis.com

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Priceline

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