In a study entitled OTA - A Hotel's Friend or Foe?, HVS said the booking market was becoming a duopoly in which rate parity agreements and commission rates as high as 30 per cent were squeezing hotel profits.
OTA Priceline now controls 62 per cent of the European market, with brands including Booking.com, OpenTable, Agoda.com, Kayak, Ctrip and Rentalcars.com
Expedia holds around 70 per cent of the US market following its acquisition of Travelocity and Orbitz.
“Increasingly dependent hotels might be forced to work with these two major players with limited negotiation room in terms of commission payable, whilst at the same time having a reduced number of OTA’s to turn to,” said the report.
The study warned that the growing trend of OTAs offering loyalty programmes, such as Booking.com’s Genius Discount Programme, meant hotels were at risk of losing their unique selling points.
“A few years ago loyalty programmes rewarded guests for booking directly with the hotel…[now] some OTA’s are rewarding their clients with points for any booking completed via their channels, irrespective of the brand or type of property booked,” the report stated.
HVS warned that rate parity agreements set by OTAs would remain a barrier to hotels driving direct bookings.
“Another limitation imposed by OTAs is their insistence on best price guarantee and rate parity amongst all channels, leaving limited maneuverability for hotels to make their offer more attractive,” commented Jill Barthel, analyst at HVS London.
Expedia has recently joined Booking.com in removing agreements which restricted hoteliers from offering lower prices or better booking conditions through other OTAs.
However, hotels advertising rooms on the OTAs are prevented from offering cheaper rates or services through their own site.
Recommendations for action
HVS encouraged hotels to ensure their websites were up-to-date, attractive and easy to use in order to maximise direct bookings and draw traffic from OTAs.
“It might come down to the small details that make guests decide which channel to book through,” commented HVS director Sophie Perret.
“Search engine optimization is worth exploring and while not cost-free, is comparatively cheaper than the cost of rooms sold via OTAs.
“While limiting your exposure to OTAs as much as possible might reduce your distribution cost, this could be at the expense of overall occupancy and ultimately ancillary revenues generated through restaurants and bars.”