That the fault lines were all too visible, with OTAs rolling out the red carpet for the prospective buyer, armed with heavy discounts, was a given. Hotels, partly owing to their own limited outreach and partly because of the convenience factor, have for long dished out heavy commissions to OTAs; major OTAs have been making hotels cough up a commission upwards of 25-30 per cent. Add to that, the pangs of discounting, are bleeding the hotels heavy.
Subdued for long, hotels are now lobbying against OTAs, demanding a cap on discounting, and lowering of commission rates. Only a few days ago, hotels in Ahmedabad have joined hands to bar any booking from the two main OTAs. Hoteliers in Maharashtra have voiced similar concerns.
In response to grievances expressed by its members, the Federation of Hotel & Restaurant Associations of India (FHRAI), too, has put Online Travel Aggregators (OTA) MakeMyTrip and GoIbibo on notice. A number of its members had brought to the Association’s notice that the OTAs’ business practices which were exploitative, unethical and divisive led to predatory pricing and other market distortions that had the potential to harm both hoteliers and consumers in the long term.
The FHRAI has written a letter to the OTAs outlining the most critical concerns of the hotel industry which includes the issue of distortion of market price, the demand for exorbitant commissions and the hosting of illegal and unlicensed Bed & Breakfast accommodations.
“One of the biggest concerns is that after securing discounted rates from a hotel, the OTAs further discount it on their online platforms without the hotel’s consent. This damages the hotel’s reputation, and also simultaneously distorts the market scenario. Ironically, the OTAs have a clause in their agreement that forbids hotels from discounting their own rates but are themselves free to do so. This disparity is not just unfair but is clearly intentional and is done with the objective of market cannibalization,” says Gurbaxish Singh Kohli, Vice President – FHRAI & President – Hotel and Restaurant Association of Western India (HRAWI).
Hotels have alleged that the OTAs charge commission that ranges anywhere between 18 and 40 per cent. The exorbitant commissions have been adversely impacting revenues, business and the livelihood of hoteliers.
The FHRAI has also pointed out to the illegal and unlicensed Bed & Breakfast (B&B), motels or accommodations hosted by the OTAs on their platforms. The Federation has alleged that such OTAs are legitimising the unlicensed businesses by promoting them on their sites and apps whilst disrupting the business of the organised hotels.
While it may be too early to suggest that the development would have a lasting impact on the business model of OTAs in India, it certainly has brought to fore the angst of the hotel community – which is finding its sustenance an increasingly difficult proposition. Especially against online players plush with funds, backed by global giants.