The Purpose of Using OTA Distribution Channels by the Hoteliers

Travel is an activity that remounts far back in time. When booking a trip, travelers may involve directly with any of the tourism providers, but eventually they will need professional services offered by tourism promoters such as travel agencies or tour operators. Travel agencies help travelers by sorting through vast amounts of information to help their clients make the best possible travel arrangements.

The importance of Online Travel Agencies (OTAs) has increased dramatically over the last couple of years. The internet is having continuously growing influence on various tourism markets and consumer information and booking behavior has changed dramatically since online information and booking services have been introduced.

Many small-sized and medium-sized enterprises in the hotel industry are challenged by the huge number of opportunities and the variety of alternative distribution systems. They also struggle with aspects, such as learning and adopting new technology, globalization and increasing competition.

The reason hoteliers use multiple online and offline channels is to maximal exposure and market share and reduce costs.

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Hotels that make use of OTAs reckon that their empty rooms can be sold more efficiently. Furthermore, it is a great marketing method to advertise the hotel and to increase brand awareness. Yet the use of OTAs or third-party web sites comes with considerable costs. One of the most important reasons why hotels decide to operate without an OTA is the commission that has to be paid, which can be as high as 20 % of the total room price. However, OTAs gained dominance since the very early stages of the development of online distribution in part because they offered a superior product choice to the traveler (OTAs offer multiple options for hotels and room prices).

Hotels were slower and less efficient in using the opportunity offered by the online distribution, thereby losing control over this channel, for instance, in terms of price integrity and brand equity, and losing profit margins significantly as direct bookings went from the hotel web sites to the OTA. Hotels would prefer to sell rooms directly through their own web sites, and they perceive OTAs as competitors in terms of distribution. The combination of the higher booking volumes passing through intermediaries, the costs related to intermediation, the increasing lack of transparency in the hotel distribution landscape and the pressure on rates challenges hotel managers by seeming to make it harder to maintain profit levels and bargaining power.

The main purpose of this research paper is to understand why travelers using online booking by using OTAs in order to help hoteliers in decision making if they should use OTA as one of a distribution channel.

In 2004, travel and tourism was recognized as the dominant industry in terms of the volume of online transactions. Within the industry, online hotel booking is the second biggest sales item after air travel (in terms of revenue generated through online channels). Despite the fact, hoteliers have been unwilling in adopting new technologies. The advantages of Information and Communication Technology (ICT) developments have enormously affected the hospitality domain, both in terms of marketing possibilities and sales opportunities. According to Buhalis and Law (2008), the modern traveller is more conscious of the opportunities offered by the internet and therefore is more demanding. In addition, recent developments in research into online information searches has also demonstrated that travellers spend time to locate accurate information on the internet, checking and comparing different information providers before choosing the appropriate tourism product and eventually making their online reservations.

Although reluctant to adopt new technologies, hoteliers have needed to acknowledge and embrace the industry shift towards technology-driven management and promotion of their facilities. As a matter of fact, in the last decade, hospitality organizations have increased usage of the new technology systems as they understood that these tools could increase interaction with prospective guests for marketing and selling purposes. Thus, technological innovations have become a prerequisite in the hospitality field to compete and succeed in the market.

The importance of consumer trust and rate parity as crucial factors of online distribution was highlighted in another study by Gazzoli et al. (2008). The research conducted by TravelCLICK (2009) was based on 30 international major brands and chains, 48% of reservations were made via internet, 27% were made from brick-and-mortar travel agents and 25% were made by telephone and/or walk-ins. Most of the reservation via internet was made through OTAs and just few of the 48% were made on the hotel web site.

OTAs, in comparison with hotels‘ website, have advantage of offering to consumers a one-stop-shop for book hotel rooms even buying the entire holiday, mostly at a convenient price. Furthermore, OTAs have built their success on economies of scope, aggregating products and reducing costs to provide the final consumers with cheaper solutions. Finally, the use of different business models (Lee et al., 2013) and smarter business practices related to pricing enables OTAs to provide cheaper room rates than those offered by hotel brand web sites.

Previous studies have applied the cognitive-affective-conative approach to examine how consumers respond to sales promotions. First, cognition refers to consumer’s perceptions, attitudes and judgments during evaluating relevant information. As an example, consumers determine the attractiveness of sales promotion by evaluating market-related information. That means, during a cognitive process, consumers develop information internally and weigh all the costs and benefits to maximize the acquisition. Secondly, the emotional constituent, which is part of enduring positive and negative feeling about a purchase, is a substantial factor for predicting consumers’ purchasing behavior. Finally, conation as the final constituent represents the likelihood of each person’s tendency to respond and react on a certain action toward their intent to purchase.

The conative state refers to the likelihood of personal intention and motivation. It motivates consumers’ intent to purchase, continuously provokes voluntary behavior and ultimately leads to purchase. In other studies, the composition of conation was sketched as a behavioral outcome, which was tested its relations with brand awareness, purchase loyalty, and involvement. In the hospitality and tourism research, online purchase intention has been studied as being a conative outcome, which is influenced by information search, channel selection and product evaluation. Thus, consumers’ booking intention was proposed as a behavioral outcome in this study.