At this year’s EHMA AGM in the Netherlands, Madigan Pratt, CEO & Founder – MP&A Digital & Advertising spoke about his company’s CRM initiatives. We asked him how he sees the current scenario for luxury hotels in Europe with regard to the OTAs.
Small independent luxury hoteliers in Europe are the most dependent upon the OTAs. A recent PhocusWright study showed that 75% of all online bookings to these properties are going to the OTAs. If you take into account the fact that 50% of business is done online, it becomes evident that around 35%-40% of all the business for these hotels is coming through the OTAs. When you are paying 25% commission on top of that, it’s a great drain on the revenue for all these hotels.
THE OTAs GET NET RATES, SO YOU DON’T SEE HOW MUCH MONEY YOU’RE PAYING.
We actually created an “OTA cost calculator” and put it on our site “MarketingLuxuryHotels.com. With this, a hotel can input its daily rate and occupancy, and estimate exactly how much money they are paying the OTAs. Unlike travel agents, where hotels pay a commission, the OTAs get net rates, so you don’t see how much money you’re paying. I did an example of a hotel that had a 60% occupancy with a nightly rate of 400 Euros, and it calculated that €1.5m was being paid to the OTAs. Multiply that by 450 – the number of EHMA members – and you get close to a billion Euros a year in commissions paid to OTAs!