Any new OTA player is a blessing and a curse for hotel. Each new channel can greatly increase exposure, but at the same time can be very expensive. Amazon has recently taken their first steps into the travel industry by approaching several hotels in select US markets about listing their inventories and rates on Amazon. This service is expected to launch in January 2015 and is likely to expand into other markets quickly. Like any other OTA, Amazon is reported to be taking a 15% commision from each reservation they process. So with Amazon’s success in the online retail space, what impact might this have on the hotel industry as a whole?
With an estimated 80,000 daily transactions, Amazon has a huge advantage over their OTA competition. They already have established trust with their customers and have built a reputation for offering massive savings over traditional sales channels. With each transaction Amazon processes, they collect more data from their customers, and can use this information to match guests and hotels based on spending habits and quality expectations. This will help hotels gain exposure to a wider pool of potential guests that are better suited for specific hotels.
The biggest issue that hoteliers will face could potentially come from the Amazon Prime subscription service. Prime is a paid feature on Amazon that gives users access to discounts on merchandise and reduced shipping rates, and currently has over 20 million members. Extending the benefits of Prime to include discounts on room rates is the biggest advantage Amazon will have over other OTA partners. If they go this route it will disrupt Rate Parity strategies for participating hoteliers. Hotels will not be able to match this rate on their own website without running into issues with their other OTA partners. With the increased popularity of Metasearch sites, Amazon will be consistently seen as the cheapest option.
If Amazon does offer their Prime members discounts, expect other OTA channels to expand their loyalty programs to stay competitive. The best way for a hotel to combat this is to mix Price Matching into their promotional messages. Let guests know that you want them to book direct and will beat any advertised price. What ever the difference between your rate and an OTA sale or promotion will be less than paying the commission for room nights. This will also go a long way to securing the relationship with the guests and keeping them away from OTAs all together.