08 Apr Are OTC’s Really the Enemy?
Just refilled my coffee cup and read Glenn Haussman’s latest column in Hotel Interactive, “Lodging Industry Must Wake Up to OTA Threat.” I’m still confused about the “threat” that OTC’s pose to our industry. Certainly, they do occasionally throw their weight around and, most definitely, they wield a lot of power. And, I must admit, their arrogance has irritated me on occasion. But the idea that OTC’s are the enemy seems a little short-sighted to me.
For years, we lived in an opaque world that allowed us to price our product however we pleased. Consumers had very little choice but to pay what we asked them to pay. Then, about ten years ago, the internet (and Hotels .com) changed all that. Because of the fear surrounding 9/11, our industry was suffering and we welcomed the OTC’s with open arms. Following textbook capitalism, Hotels.com saw an opportunity and took advantage of it. They ran funny TV and print ads that appealed to leisure travelers. And then the business travelers (and the business travel managers) took notice. Where is the difference today? Our industry is again suffering and disposable income is being directed into savings accounts instead of travel accounts. People need an incentive to travel again. The OTC’s have distribution muscle and a marketing budget that far exceeds that of most small chains and independent hotels. Why wouldn’t we want to be their partner instead of their foe?
For those hotels with strong pricing models and a strategic plan that encompasses all distribution channels, the OTC’s provide a valuable revenue stream for optimal profitability. A proactive team has a strategic plan in place that balances its inventory between all segments, both transient and group. The OTC’s have a role in the transient market as does each property’s proprietary website, traditional wholesalers, travel clubs and others. It’s how you leverage the demand that determines your profitability. And this is reflected in your rate strategy.
Mr. Haussman takes issue with the comical new ad produced by Priceline (watch). Apparently, Priceline has the audacity to expose our pricing secrets to the average traveling Joe. How dare them! Frankly, most people had this figured out a long time ago. A smart hotelier has pricing models for all segments, including OTC’s. And haven’t we been playing around with that “walk-in rate” since the Nativity. Just like the characters selling aluminum siding encountered in “Tin Men,” strategies evolve. With the proper tools and market knowledge, pricing your inventory fairly and in synch with market demand is easier than ever. Deliver the service level that this pricing represents and success will be yours. As well as the loyalty and trust of satisfied guests.