In the past couple of years, I was able to meet with hotel managers, hotel owners and regular guests in Thailand and Phuket at different conferences and seminars organized by/for the hospitality industry. And they all seem to have one major problem. Online travel agencies have become a big threat to hotel owners and managers.

Online travel agencies have eaten far into the profit margin of the real hotel managers and owners. This has reached a critical level and it now raises concerns. Something has to be done to shore up the profits of the main hospitality players without reducing that of the agencies.

 

This has become a pressing issue in Thailand and Phuket and various hotel associations are now beaming their searchlights on it. A fast solution is being sought to create a win-win situation for hotel owners and online travel agencies. This anomaly is also prevalent is Quebec, France and many countries across Europe and North America.

Just like in Thailand and Phuket and several parts of the world, hospitality managers are really losing sleep over how to regain control of their inventory and distribution without encroaching into profitability boundaries of online travel agencies. Truth be told, online travel agencies have a major role to play in the distribution arrangement within the hospitality industry but they don’t have to take total control. But what is the demarcation between their fair share and “disturbing control”?

OTA Commission on the rise

What is the profitability threshold for online agencies above which they could be seen to have gotten more than their fair share? These are the mind boggling questions begging for answers. Suffice to say the solution to this abnormal phenomenon lies in these answers.

A recent study has shown that this problem is worse in Europe where intermediaries within the travel and hospitality industries covered almost three quarters of independent hotel bookings last year. This is because initiating transactions through big players in the industry fetch about 20 percent commission on each transaction. And the commissions may even be more based on the volume of transactions. This is one of the problems hoteliers have to contend with.

This anomaly reached its peak last year as industrial giants leverage on their financial strength and popularity to make in road into online traveling business further reducing the profit margin of all other sub-sectors within the industry. Not only that, several business mergers and acquisitions have also taken place. This reduces the chances of hotelier gaining back full control over their inventory and distribution. On the other hand, it also spells doom for small OTAs as they may be run completely out of business. So, what is the future of online travel agencies in Thailand and Phuket? Would they continue to dominate the industry or will hotel managers find a way to turn the table? Only time will tell.

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