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Deep Discounting By OTAs Harming Biz Of Hoteliers: CCI

Deep Discounting By OTAs Harming Biz Of Hoteliers: CCI

OTA market is expected to reach at $39.09 by 2021

OTA segment is growing at an average annual rate of 16%

Non-participation of hoteliers in online promotions of OTAs affects their sales

The recent digital growth of India has helped many sectors to come and earn online. One such industry that jumped onto to bandwagon of this digitisation ride was travel and tourism, which is now expected to reach $39.09 Bn by 2021.

According to a recent report by the Competition Commission of India called ‘Market Study On Ecommerce In India’, the country’s online travel agency (OTA) market is growing at an average annual rate of 16% between 2015 and 2021.

The report, which was published on Wednesday (December 8), highlighted that with the usage of price comparison platforms, users are able to get the best deals on their online travel bookings. Some of these platforms are Trivago, Booking.com, Agoda, Paytm, among others.

Highlighting that ecommerce has changed the fortunes of large franchise chains in the budget hotel segment, the report cited that these chains gain online customers through their own websites and mobile applications while also listing their properties on other OTAs. Some of the examples of these chains are hospitality unicorn Oyo, FabHotels, Treebo, among others.

Moreover, the report, hinting towards OTAs such as MakeMyTrip, Goibibo, etc, it said that these platforms have launched assurance programs, wherein they lend their brand names to hotels which are listed on their platforms.

On how technology is working in the OTA segment, the report said that it is facilitating customisation of services to guests. The report also noted that the travel package feature is also helping OTAs to increase the customer base of hotels.

According to the report, hoteliers keep mostly two things in mind before listing on an OTA — conversion rate and transparency in payments. On the other hand, for an OTA, factors such as customer visits, the commission charged, cancellation policy, and advertising emerged to be the most important points before partnering with a hotel.

What Are The Problems Associated With OTAs

One of the major problems, which is common across major OTA platforms, is deep discounting. As the discount schemes and the extent of discounts to be offered to customers are unilaterally decided by the large platforms, the hoteliers sometimes face losses because of this, the report noted.

On their part, the OTA platforms said that they give the option to hoteliers to either participate in the deals or not. However, the report added that non-participation in these deals affects hoteliers rankings and client base on these platforms, affecting the capability to compete fairly.

Interestingly, the report stated that the discounts were earlier funded by these platforms, however, now the burden of funding discounts has shifted to the pockets of hoteliers. “Deep discounts are offered to drive consumer traffic on to the platform and are thus a major parameter of competition between platforms on the consumer side,” the report added.

However, the study also found that OTAs typically include wide parity provisions in their contracts with hotels and it is only the discounting practice that is harming the business of hoteliers.