Frequently I state that the commission an online travel agency (OTA) like Expedia and Travelocity takes in a hotel booking is about 20 to 25% of the room rate charged to the consumer. Hotels pay the OTA for their room bookings. The consumer rarely gets a cheaper room through the OTA compared to the hotel chain’s website.
This is the reason why most chain hotels do not offer loyalty program points or promotion credit for bookings through OTAs. And this is why the hotel chain can afford to run high-value points bonus promotions to drive bookings through the chain’s website. The consumer receives hotel loyalty program benefits rather than the OTA taking profits from the hotel for hotel rooms. OTAs generally do not give the loyalty program member the rebate value available through direct bookings with the hotel chain.
An article from HotelNewsNow.com states the OTA commission has gotten smaller with brand hotels paying about 15% of room rate and independent hotels about 20%. Online travel agencies do not have the bargaining power in 2012 as the global hotel industry has picked up and room rates have climbed higher.
Another potential change for 2013 is rate parity between OTAs and hotel brand websites may be ending due to “price-fixing” lawsuits in Europe.
All the hotel chains offer Best Rate Guarantees and so do the online travel agencies. The fixed hotel rates make Best Rate Guarantee claims a valuable discount for my travels since most chains discount a valid rate discrepancy by taking 10% to 25% off the lower rate.
What will be the effect on hotel loyalty programs if online travel agencies can undercut the hotel chain’s own room rates?
Seems to me like the hotel loyalty promotions would have to get better to keep consumers booking directly with the hotel chain rather than booking lower rates through online travel agencies.