OTA vs Direct bookings, Preferred Hotels & Resorts tells us who's the winner

OTA vs direct booking, the long-lived battle of the hospitality industry. The former drives booking by bringing more visibility and a further reach, even during low seasons. The latter allows for better guests’ relationships to be built, and an increase in revenue. The question is, is one better than the other, and is there an answer to this?

We spoke with Jonathan Newbury, Executive Vice President – Asia Pacific at Preferred Hotels & Resorts. With more than 30 years in the global hospitality industry (of which 15 years was at Preferred Hotels & Resorts), he speaks about the reformation of their website and loyalty programme to drive direct sales and increase revenue, the top 3 trends driving the demand of independent hotels, the impact of OTA on independent hotels, and many more.

Preferred Hotels & Resorts represents the finest and most diverse global portfolio of independent hotels and independent hotel experiences, where every memory made by every 5 million I Prefer Hotel Rewardsmembers a lasting one.

Check out what else Jonathan had to say!

What’s going on in the current hospitality revenue channel mix?

From my perspective, really just two things. Firstly, during the pandemic, we saw an acceleration of the trend towards online bookings for hotels to the point that many hotels now have an overreliance on bookings from OTAs. We are working with savvy hoteliers to make sure that they are now refining that strategy and making sure that they are reducing the proportion of that business coming into the hotels whilst still remaining visible to travellers that have business for them.

The second trend is that we are seeing a real push now for direct business for our hotels through their own websites, and we encourage this mostly because it really helps with the profitability of any revenue coming into the hotel and reduces the amount of commission paid to the OTAs. It has another beneficial effect of allowing the hotel to have a direct relationship with the guest and to promote loyalty through our loyalty program.

How will AI impact and transform bookings and the travel experience?

We will soon see companies that will offer personalized recommendations, detailed itineraries tailored to the individual user, making the booking process more efficient and enjoyable. This has the potential to disrupt this space. That was copied and pasted from ChatGPT.

In all seriousness, the reality is that it's not difficult to imagine a future in which AI is all pervasive in the travel industry, from the booking process to the recommendations on property, to the revenue management for the hotels. With the power that AI brings, we will see a change, and I'm quite excited about it for the future. I think we need to balance this and recognize that in the luxury industry, hospitality is a people business and that that will never be replaced. AI can't come and serve you in your room, serve you breakfast, welcome you to the hotel.

I think that we have still have a very big job to do in the luxury market to make sure we are enhancing the user experience with AI, but not taking away from it with not investing in the people to look after the guests.

As an independent hotel company, how do you leverage the different tools and channels available to your advantage?

We have over 275 associates around the world, and they are all travel professionals. It's very easy for our hotels to be in contact with them and leverage on them to improve their own businesses. Due of our size, we are also able to work with industry leading vendors and leverage that technology on behalf of our hotels to drive business.

Overall, we integrate all these services with our distribution, our loyalty program, our marketing, our branding, and our sales efforts to maximize potential for our properties.

It is indeed a competitive market, how do you ensure you can compete with large chains of hotels?

By staying true to ourselves. At our core, we are the champions of the independent hotel. It's what we've done for many, many years, and it's what we will continue to do. The services we have provide the systems and support to independent hotels that help them compete on a global scale with the international brands that they compete with locally in their markets.

In your opinion, are OTAs a positive or negative development for independent hotels?

It's both. Firstly, I would give credit to the OTAs in levelling the playing field 20 years ago when they first appeared, and helping independent hotels get bookings that ordinarily would have gone maybe to a chain hotel. It gave people and hotels the options. Now, we are seeing an overreliance by the hotels on OTAs and they come with quite a high cost for independent hotels.

Independent hotels are not able to negotiate down the commissions with the large OTAs out there and as a result, it has two effects. Firstly, it reduces the profitability of any booking coming to a hotel from an OTA.

Secondly, it also pushes hotel owners and hotel investors to actually try to franchise their properties in order to capture the lower OTA fees that chain hotels are getting. Overall, I see them as frenemies. We see the necessity of them. We think they have their place, but we really work to make sure that hotels are not over reliant on OTAs in this marketplace.

Catch Jonathan Newbury at Digital Travel APAC 2023, happening at Equarius Hotel, Singapore, 15th August, 9:05AM on "Keynote Panel: Returning with resilience - How can you respond to China’s reopening and the challenges brought by uncertain markets and workforce shortages to maintain a growing and competitive industry?". Find out more!