Online Travel Agencies (OTAs) have become increasingly popular in recent years, allowing travelers to book hotels, flights, and other travel arrangements through a single platform. While OTAs like Expedia and Hotels.com ay seem like a convenient option for travelers, they can be detrimental to small businesses in the hospitality industry. In this blog, I argue that OTAs are bad for small businesses in the hospitality industry, citing the reasons why they can negatively impact the financial success and autonomy of these businesses.
OTAs Charge High Commission Rates
One of the main reasons why OTAs are bad for small businesses in the hospitality industry is the high commissions that they charge. OTAs often charge small businesses a commission of up to 30% per booking, which can significantly cut into the profits of small hotels and bed and breakfasts. This high commission rate leaves small businesses with little room for negotiation on room rates and may lead to price wars between businesses to remain competitive. In turn, this process can have a negative impact on the financial stability of small businesses, making it difficult for them to sustain their operations.
OTAs Control Pricing and Inventory
Another problem with OTAs is the lack of control that small businesses have over their pricing and inventory. Small businesses often rely on OTAs to generate bookings and revenue, which can result in a loss of control over pricing and inventory. OTAs may dictate what rooms are available and at what price, which can result in a lack of autonomy for small businesses. A common results is a lack of flexibility in terms of setting rates, which can even result in a loss of brand identity.
OTAs Complicate Reputation Management
Furthermore, small businesses often struggle to maintain their reputation on OTAs. Because OTAs rely heavily on reviews, small businesses may be at a disadvantage when competing against larger hotel chains that have more resources to manage their online reputation. Negative reviews can significantly impact the business of small hotels and bed and breakfasts, which rely heavily on word of mouth and positive reviews to attract new customers.
OTAs Discourage Customer Loyalty
Lastly, OTAs can also be bad for small businesses in terms of customer loyalty. When customers book through an OTA platform, they are subject to considering what that OTA shows them, which might not include the accommodation they stayed in last time. That means they are less likely to return to the same hotel or bed and breakfast for future stays. This process can have a negative impact on the long-term sustainability of small businesses, as repeat customers are essential for their success.
Concluding Thoughts on OTAs and Small Businesses in Hospitality
While OTAs may seem like a convenient option for travelers, they can be detrimental to small businesses in the hospitality industry. The high commissions, lack of control over pricing and inventory, reputation management challenges, and loss of customer loyalty can all negatively impact the financial success and autonomy of small businesses. Therefore, it is important for small businesses to consider alternative marketing and booking strategies to maintain their independence and success in the hospitality industry.
