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In order to determine if revenue should be recognized on a “gross” or “net” basis, one needs to understand what flexibility the OTA has to discount the room rate, charge additional fees to a guest, or combine the room night in a package with other goods or services (e.g. flight, rental car) under the Merchant Model.

One of the changes to the accounting standards is on revenue recognition, specifically how revenues from Online Travel Agents (“OTA”) should be recognized. Currently, there are two models for the treatment of OTA revenues in the hotel industry:

Retail ModelGuest makes the reservation via the OTA but pays the hotel upon stay. Hotel remits commission to the OTA. Currently, the hotel recognizes revenue at the gross amount of cash collected (i.e. the total room rate), offset by a commission expense to the OTA. Revenue recognized through this model is typically recorded on a “gross” basis.

GDS, OTA and Meta: What’s the difference?

how can they help your hotel gain more online visibility and sell more rooms?

Hotels usually sell their rooms for 30% cheaper on GDS

airlines have decreased capacities, withdrawn from routes, issued free cancellations and refunds to travelers, enacted flexible amendment policies to accommodate itinerary changes. However, these initiatives have also had negative impact on airlines’ operations and the balance sheets.

Historically, OTAs would offer alternate destinations or flight options to its travelers in times of crisis – hoping to still put a sale on its books. This time around, it is different. With several travel advisories, quarantine measures, and lockdowns in effect, people are least likely to spend their disposable incomes on travel just as yet.

Trip.com also guided towards a 45-50% year-over-year decrease in company-wide net revenues for the first quarter of 2020.

properties that work with Online Travel Agents (OTAs) perform significantly better financially than those that do not, with commissions being more than compensated for by the increased revenues, resulting in higher bottom-line profits

However, in reality, many hotels still have a (perhaps historic) negative opinion of OTAs

the commission levels reaching 25%, sometimes even 30%, that was steep. The current situation is more within the 15-20% range

HeBS digital Blog Archive for the ‘Online Travel Agencies (OTAs)’ Category The OTA Billboard Effect or the Lazy Man’s Approach to Hotel DistributionMonday, August 1st, 2011 The following article is Max Starkov’s latest contribution to the “Successful eMarketing” blog on HOTELS magazine’s website The existence of the so-called billboard effect is not a new marketing phenomenon. It has existed long before the online channel became a reality. As confirmed by many studies, any marketing exposure by a hotel produces a billboard effect:  when you launch a banner advertising campaign; when you purchase a full-page ad in the New York Times travel section; when you launch a paid search campaign on Google, etc. The OTA Billboard Effect Lately Expedia reps have been aggressively using a new Cornell Hospitality Report, namely “Search, OTAs and Online Booking: An Expanded Analysis of the Billboard Effect” to convince hoteliers that they should use Expedia in order to generate more bookings from the hotel’s own website due to the so-called “Billboard Effect.” The Cornell Report, based on data from Expedia and InterContinental Hotel Group (IHG) from 2008-2010, is a continuation of a previous report on the subject, heavily supported by Expedia. The report’s analysis determined that when an IHG property was listed on the first results page of Expedia, this created an increase of between 7.5% and 14.1% in bookings for the same property on IHG’s own brand website. In other words, this is a confirmation for Expedia’s billboard effect, which hoteliers should take into consideration when griping against the 25% plus merchant OTA commission. When these “billboard effect bookings” are taken into consideration, Expedia’s commission “would effectively be reduced to single digits,” states the Cornell Report. Hoteliers, rejoice! We have found the perfect recipe for success: we do nothing as far as marketing the property website is concerned. Instead, we plaster Expedia with our sales promotions and wait for the travel consumers to come to our own website and book. As discussed, the billboard effect is not strictly an OTA territory. In my view, the Cornell Hospitality Report is a one-sided research project, very proactively supported by Expedia, similar to the first report on the billboard effect published in 2009. Cornell, the finest hospitality institution in the U.S., should know better than to come up with this half-baked “scientific” research, which does not account for the complexities of hotel distribution as well as the “digital information cloud” we all live in and the resulting marketing and distribution channel convergence which directly affects the purchasing habits of today’s hyper-interactive travel consumers. This report makes conclusions that do not take into account, among many other things, the following: Complex Travel Planning Patterns in Hospitality Many surveys show that people are shopping around on a number of hotel and travel websites before narrowing down their search. Typically in hospitality, these sites include a hotel search on a search engine e.g. Google (65% market share), an OTA website, TripAdvisor, the hotel’s own website, etc. Therefore jumping from an OTA website to a hotel branded website and vice versa is at least partially due to particular travel research patterns unique to the users and not due to the so-called billboard effect: Step 1: “I always search on Google first where I identify a property I like” Step 2: “I go to Expedia and see what the rate for this property is” Step 3: “I visit TripAdvisor to read my peer reviews for this hotel” Step 4: “I visit the hotel website and book if I like the location, rate and what I have read and seen about this hotel”

Here is a summary of the trends in three online distribution channels used in the hospitality industry: websites, Global Distribution Systems (GDS), and online travel agents (OTAs).

The Internet has made marketing more measurable and accountable with different metrics and analytics that show the contribution of marketing to the bottom line. The most critical measures of marketing are the customer acquisition cost (CAC) and the customer lifetime value (CLV), which at times can be difficult to understand and quantify.

The CAC is the price a hotel pays to acquire a new customer, which can have a significant impact on RevPAR performance and asset value growth. The CLV is a prediction of the value a business will derive from its entire relationship with a customer.

For all the talk of their ultimate demise, global distribution systems process growing volumes of travel transactions

Each of the three primary players continues to provide an array of services to travel management companies, corporate buyers and travelers, and their parent companies are pushing IT services to airlines, hotel companies and others.

So, what’s the issue? For one, the whopping commissions the massive web-based entities take, routinely in the 20- to 30-per-cent range

Hotels won’t give them any parameters at all, he points out, and a different pricing model will have to emerge. “They won’t necessarily take commission or such, but they might charge you just to drive people to your site. It’s a scary idea.

The net result, says Estis Green, whose company conducts hotel data analytics, is that hotels can’t really compete on price alone anymore. It’s why, in today’s new reality, competition is a game played with other factors, including value-added services, rates based on multiple nights’ occupancy or other inspired — even desperate — offers devised by hoteliers.

First there was Google search then Google maps, Google flights now Google's hotel search product is aiming to take on other hotel booking sites and disrupt the online travel agency model.  With flights and core search Google is already a travel industry leader.

As Google takes on the OTAs head-to-head, hotels benefit from a significant new distribution channel which (alongside Airbnb) is a major shift in industry dynamics.

Rather than hotels distributing to OTAs, who charge commissions for capturing demand from Google (almost like advertising arbitrage), hotels can advertise directly on Google. This shortens the value chain and somewhat balances the  distribution power dynamic in hotels’ favor.

Will the Hospitality Industry Tango with Tingo?

This new OTA site is an affiliate of Expedia.com

It further proclaimed that “In 2011 alone, Americans could have saved nearly $314 million if they had had access to a site like Tingo.com

by focusing primarily on increasing their direct bookings

Today, hoteliers

GDS

hotel property management system is not an integrated one. This means, as a standalone application, the Hotel PMS you have adopted is doing a great job by bringing in the much-needed higher degree of automation. But it lacks integration capabilities with a host of operationally imperative third-party hospitality technology solutions like channel manager, online reputation management solutions and many more.

The two-way integration between the Hotel PMS System and the channel manager software helps you update all the OTAs with your rates and inventory in real-time. reservations made on any OTA will reflect in your Hotel PMS in real-time, making sure that there is no discrepancy on the availability of rooms on various channels. Similarly, this integration updates reservation cancellations/modifications on all the sales channels.

Small accommodation providers have two options when it comes to distributing their online inventory. They can either do it via a global distribution system (GDS) or via a channel manager.

Option 1: Global distribution system (GDS)

GDS acts as a middle-man that connects your small hotel to a network of travel agency professionals, including corporate travel bookers. You connect to the GDS, giving you access to all of the travel agents your GDS is connected with. Those travel agents then sell your rooms to their customers (a mix of corporates and leisure travelers), and any bookings made are automatic.

Room Key is designed to give the benefits of booking your room directly with the hotel and enough choice from these hotel chains and their partners that you won't be tempted to plunk your money down on an online travel agency site instead.

On Room Key

you can then view an overview of each property, along with photos, a map and ratings and review snippets from TripAdvisor.

By focusing on new methods of selling and engaging consumers or creating demand for hotels, several of these new channels are creating interesting segmentation opportunities.

These evolving channels can be categorized into three major types: new search models, mobile/last-minute models and new discount channels, dissecting the broader impact of social media when it comes to online bookings

Roomkey.com, which is similar to the TravelWeb portal of the past, represents the attempt of the brands to launch their own version of an OTA. While suppliers remain optimistic about Roomkey.com, it has yet to really catch the eye of consumers and still needs considerable improvements before it starts to offer a viable alternative in the eyes of the consumer.

has a history of taking a service people used to pay good money for, and simply offering it up for free.

online travel agency (OTA) business. Investors in traditional OTAs should be worried.

Cutting out the middleman

These four GDS vendors controlled the marketing and distribution channel for the entire industry. They had market power and could impose higher fees at a whim on both the agent and airline. At the same time airlines sought ways to lower their distribution costs.

For the most part the hotel industry did not have the coordination or the moxie to fight like the airlines and simply paid the higher distribution fees and travel agent commissions.

But the larger effect was that the travel agency industry was shrinking; in a short period of time hotels saw their traditional distribution channels dry up. No longer were agents sending customers to the hotels.

With the explosion of the “digital way of life”, the customer journey has become increasingly complex, forcing hoteliers overhaul not only their corporate and marketing strategies, but also their technology stack in order to engage, acquire, service and retain these digitally-enabled travel consumers across multiple digital touch points and across all digital channels and devices.

Today’s hospitality is being transformed into a 100% digital technology-enabled industry powered by online, mobile, cloud, IoT, AI and blockchain tools and applications.

there are two categories of guest-facing digital technology: