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Three Reasons OTA Rates Aren't Evil

Rates charged by online travel agents have sparked plenty of controversy, especially as GST registration requirements have increased the rates some companies charge. OTA agreements can also limit the deals hotel and motel owners can offer.

Parity clauses in OTA agreements from brands such as Expedia and don't allow businesses that utilise the online services to advertise separate direct rates without passing the same discounts on through the booking agencies. That means guests only get the financial benefit of booking direct with the hotel or motel — thus saving the OTA rate cut — if they phone directly in or walk in to the hotel for immediate services.

Think of any OTA as your offshore or domestic sales person who is rewarded on a confirmed sale – no cost to provide car, salary, computer or phone – only a commission on achieving a sale. By comparison against a full time staff member, a reasonably inexpensive sales person

While OTA agreements do have some disadvantages for accommodation businesses, they aren't evil and do offer benefits. Here are three ways OTA agreements are good for hotel and motel owners.

Online Travel Agents Have Existing Market Share

Booking sites let you access a global audience that would be extremely expensive — if not impossible — to curate on your own. The commission rates charged by online travel agents are much less compared to matching marketing spend required to achieve the type of engagement and exposure these companies can deliver. While hotels and motels are listed alongside their competitors, it can still be a good deal for accommodation businesses able to impress guests and get good reviews and ratings.

Showing Up in OTA Listings Provides Some Credibility

Having your hotel or motel listed on well-known OTA sites can lend credibility to your brand. International guests — and even those from other areas of New Zealand — don't always have access to regional information. It's easy to find a list of accommodation businesses in any town or city, but without local knowledge, guests don't know which establishments are reputable. Seeing a business on an OTA site helps potential guests feel more comfortable with booking. This is particularly true for smaller businesses that aren't part of chains with a known brand.

Payment Is Made on the Business Generated

Finally, some hotel and motel owners might not realise they pay the OTA based on business generated, which increases overall return on investment. That means any of the general advertising benefits, which can included increased brand recognition for the business, are not services which are charged to the hotel or motel. The entire process works more like pay-per-view or pay-per-click advertising works: your business name is put out there, but you only pay when a consumer takes action.

While hotel and motel owners certainly get something out of the deal, OTA arrangements aren't always perfect. The Commerce Commission recently investigated parity clauses, and the online companies did agree to make some alterations that created slightly more favourable terms for businesses. The new agreements offer a bit more leeway for businesses to offer deals, though you still have to be careful when advertising to avoid breaching terms of service and losing your listings on specific booking sites.

Hospitality NZ representatives have said the changes don't go far enough, and industry professionals continue to seek better agreements. In the meantime, working with OTA sites lets accommodations businesses access opportunities that wouldn't otherwise materialise.


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