Expedia eager to extend dialogue about impact of OTAs

In response to what it considers “somewhat biased” research about the impact and cost of OTA bookings, Expedia Inc. has put out a press release stating that greater dialogue about the costs and benefits of all hotel distribution channels will help unearth strategies for maximizing profitability in marketing and distribution. This statement comes in advance of an anticipated Hotel Distribution Channel Analysis from the AH&LA and STR, which will soon be published by the HSMAI Foundation.

Melissa Maher, vice president of lodging strategic accounts and industry relations at Expedia, Inc., said some of the preliminary findings of the research to be enlightening, and others to be somewhat biased. In particular, she said, it has been asserted that OTAs cost the U.S. hotel industry approximately US$2.5 billion during 2010. “The study authors concede that the number assumes all of the rooms sold via OTAs during 2010 would instead have been sold on or property direct – a highly dubious if not entirely impossible alternative to the reality – and that the number does not include the costs associated with booking on the or property-direct channels,” Maher said.

The flip side of that number, Maher wants to point out, is the more than US$7 billion in revenue that OTAs drove for the hotel industry in that same year, on top of the investment OTAs make in promoting travel, destinations and hotel brands.

“We are keenly interested to see the methodology and variables the study authors used to make a balanced assessment of the true costs to hotels of every marketing and distribution channel, such as online and offline advertising and loyalty program costs; franchise fees; IT and e-commerce infrastructure for; and credit card transaction fees and related costs,” Maher added.

Maher continued, “It is no easy task to deliver an apples-to-apples comparison of distribution channels that vary so greatly in terms of the demand levers and marketing value they provide. In addition, given the great diversity of property types and business objectives within the hospitality industry, we’re hoping that this study will provide some meaningful guidance despite cutting a broad swath.”

Maher also cited Tourism Economics’ founder Adam Sacks recent quote, which points to economic theory that states intermediation improves transparency, efficiency and is better for the consumer—and therefore better for the economy as a whole.

“With travelers as the lifeblood of our industry, this is certainly a discussion we hope to see fleshed out further in the report,” Maher said. “It is likely that the study will raise additional questions and point to the need for further research to expand on the baseline information of this pioneering effort. We look forward to subsequent studies that will seek out data from the vast population of hotels that were not invited to participate or that do not currently have the capabilities to submit data to the study.”