Graphic of hotel bed for blog titledThe Downsides of OTAs: How Online Travel Agencies Hurt Small Businesses in the Hospitality Industry

How Online Travel Agencies (OTAs) Hurt Small Businesses

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 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

Island Acres Resort Motel and how online travel agencies hurt small business

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.

Learn more about one of our favorite small hospitality business in Colorado, Island Acres Resort Motel at the link below!

Island Acres Resort Motel is Full of Colorado History

Frequently Asked Questions About Online Travel Agencies

What is an Online Travel Agency (OTA)?

An Online Travel Agency (OTA) is a digital platform that allows users to book various travel-related services online, including flights, hotels, car rentals, and vacation packages.

How do Online Travel Agencies operate?

OTAs aggregate travel-related services from various suppliers, such as airlines and hotels, and present them on a single platform. Users can browse, compare prices, and make bookings directly through the OTA’s website or app.

What are the advantages of using Online Travel Agencies?

Advantages include the convenience of one-stop booking, the ability to compare prices from multiple providers, access to user reviews, and often special deals or discounts offered by the OTA.

Can travelers trust the information and reviews on Online Travel Agency websites?

While OTA reviews can be helpful, it’s advisable for travelers to consider multiple sources of information. Reviews may be subjective, and it’s essential to cross-reference them with other platforms for a more comprehensive understanding.

Do Online Travel Agencies offer customer support services?

Yes, reputable OTAs typically offer customer support services. This can include assistance with bookings, handling issues or changes, and providing information to enhance the overall customer experience.

Are there specific Online Travel Agencies that specialize in certain types of travel bookings?

Yes, some OTAs specialize in specific types of travel, such as flights, hotels, or vacation packages. Others may cater to niche markets, such as luxury travel or budget-conscious travelers.

What should travelers consider when using Online Travel Agencies?

Travelers should consider factors such as the reputation of the OTA, user reviews, transparency in pricing, cancellation policies, and the range of services offered. It’s also crucial to check for any additional fees.

Are there risks associated with booking through Online Travel Agencies?

While many people successfully use OTAs for booking travel, there are some risks. These can include misunderstandings about terms and conditions, potential hidden fees, and, in rare cases, complications with reservations. Reading terms carefully and booking through reputable OTAs can help mitigate these risks.

Luke Hanna

Luke Hanna is a sociologist, entrepreneur, and a veteran of the US Navy. He was born and raised in the beautiful state of Colorado where he gained a deep appreciation for nature and all the outdoor activities that come along with it. Luke is co-founder and CEO of Applied Worldwide, a digital content production and consulting company based in the US.