The question is not whether or not to use OTAs - that question has been settled for a long time. Even in 1995 - before the advent of OTAs - 25% of hotel nights were generated by intermediaries: Travel agents, wholesalers, tour operators. The real question is: How much dependence on OTAs is still healthy for a supplier: 10%? 30%? 50%+?
So what should be considered a healthy distribution ratio between direct bookings and room nights booked through OTAs? Is the negative ratio of 1:4 in favor of OTAs at independent hotels healthy? Definitely not!
What does this mean for the service providers and also the destinations?
It means the value chain is broken. It urgently needs to be repaired. Why?
The whole world is talking more and more about sustainability, Responsible Travel, Sustainable Tourism, etc. Unfortunately, however, this usually refers only to either climate change or plastic. So the topic is mainly reduced to ecological aspects. Of course, travelers have been sensitized to these issues for years. This is also referred to as the "Greta Thunberg" effect.
That's all right and important, all well and good. But there is an important component missing here in the visions for sustainable tourism.
We need to restore economic sustainability to enable sustainable Tourism development.
Because of the broken value chain, the total cost of distribution, and the ever-increasing dependence of suppliers on platforms have lost an essential component of the hotel enterprise. Economic sustainability. And the pandemic measures and the current poly crisis have added to it.
Economic sustainability, however, is the cornerstone and foundation for all other sustainability aspects - ecological, cultural and social - of businesses and, of course, destinations. If this is no longer present, no single aspect of sustainability can be thought of or implemented at all. There is simply no foundation.
And so the main task is to restore the economic sustainability of the hospitality & tourism providers and destinations. To take back control of their own visibility, digital presence, reputation, communication and, above all, distribution.
Due to the fact that guests have become almost 100% digital in the last 10 years and they naturally expect corresponding digital offers from providers, but unfortunately the industry has so far digitized itself in a barely perceptible way, the guest does not get what he demands. In this way, the industry itself has driven its once "own" guests into the arms of the platforms about which they are now complaining.
Suppliers and destinations need to take back control.
I realize that independent hotels don't have brand recognition, marketing and technology expertise, and the loyalty membership of the big hotel brands. But small, medium and independent hotels are systematically underinvesting in digital marketing and technology, and therefore have brought their increasing dependence on OTAs on themselves.
In 2019, independent hotels collectively invested less than 5% of room revenue in marketing and IT. By comparison, Expedia invests 42% and Booking 33% of revenue in marketing alone. Add to that the sad fact that independents have cut their marketing and IT budgets by another 50% since the pandemic began, so only about 2.5% is invested in marketing and IT. (Source:STR).
Why sustainable travel starts with booking directly with the supplier in the destination.
Distribution costs are the only cost that hoteliers still have some control over, unlike the other cost factors such as labor costs, bank loans, property taxes, utilities, etc.
Average all-inclusive direct costs (website design + development, amortized over 36 months, website maintenance, hosting, analytics, digital marketing - SEO, content marketing, SEM, metasearch, online display, retargeting, social media, CRM, consulting fees, etc.) fluctuate with the ups and downs of the market, but have always been in the 4.25% - 4.5% range. Internationally, the marketing budget benchmark is thought to be between 4% and 6%.
Digital transformation of destinations and their suppliers.
Through the creation of an integrated ecosystem in the destination and especially through the democratization of technology as well as the inclusive provision of this to all hospitality and tourism providers in the destination, we as a social enterprise can achieve very respectable results for the destination and its providers with the rainmaker Tourism Cloud platform - the first vertical industry cloud -, our destination ecosystem and the multiple worldwide award-winning 5 Steps to Success through economies of scale alone with less than 2% marketing & IT investment.
Together with the destination and its providers, we jointly repair the broken value chain. Together, we reclaim control for the providers and the destination, ensuring that economic sustainability is regained and the providers and destinations are more resilient for the future.
In this way, as a sustainable company, we lay the foundation for sustainable tourism development.