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Tue 5 Feb 2019 09:14 AM

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Online travel agencies' commission 'too high', says UAE hotel CEO

Khalid Anib said hotel operators should attempt to reduce commission rates by OTAs, which can be as high as 22%

Online travel agencies' commission 'too high', says UAE hotel CEO
Abu Dhabi National Hotels, which agreed in December to buy five hotels of Emaar Properties' hotels in Dubai, owns a number of properties across the UAE including the Ritz-Carlton Abu Dhabi Grand Canal (pictured) and Park Hyatt Abu Dhabi Hotel & Villas.

Commission paid by hotel operators to online travel agencies (OTAs) is still too high, according to the CEO of Abu Dhabi National Hotels, a company that has seven UAE properties in its portfolio and is currently in the process of adding five more.

Speaking to Arabian Business at the Gulf and Indian Ocean Hotel Investors’ Summit (GIOHIS), Khalid Anib said hotel operators should attempt to reduce commission rates by OTAs.

“Of course it is still too high, and I think that these operators, especially after the merger of certain big clients, need to fight a little bit more and negotiate these commissions further,” he said.

Abu Dhabi National Hotels, which agreed in December to buy five hotels of Emaar Properties' hotels in Dubai, owns a number of properties across the UAE including the Ritz-Carlton Abu Dhabi Grand Canal and Park Hyatt Abu Dhabi Hotel & Villas.

High commissions

Anib revealed that standalone or small branded hotels pay between 18-22% commissions to OTAs, while larger brands pay between 13-15%.

However, the CEO said OTAs are filling a market gap that was created by hotel operators who lost focus on certain aspects of the business, such as direct bookings.

“The OTAs fill the gap and that gap was created by the operators themselves. When operators get bigger and bigger, they lose focus on certain areas. One of them is the aspect of getting business. So at a certain time, they were very confident that with their own reservation system, they would be able to continue to get [business]. They didn’t see the importance of [OTAs], which came in and brought a solution,” he said.

“They took the content and made it look very attractive and easy for the guest to book. And of course they invested in the right technology that allowed them to position themselves,” he added.

Moreover, Anib said OTAs play a positive role in creating market transparency for consumers.

“Is it a bad thing? I don’t think so. I think it’s a good thing, because from a customer’s perspective, [OTAs] create visibility and transparency, so I think it’s healthy. I think operators had been struggling in the beginning, but you know what they say, if you can’t win the war, join them,” he said.

Too late, too big

The chief executive also said it is “too late” for hotel operators to compete with OTAs via direct bookings and their own reservation systems, as the travel agencies have already established themselves as the best in the area. However, he said hotel operators need to invest in certain areas such as search engine optimisation and brand visibility.

A report released today by guest acquisition platform SiteMinder revealed that the top channels in 2018 for highest total booking revenue in the Middle East were Booking.com, Expedia and Hotelbeds.

In January, Dubai-based direct hotel bookings platform BookedHappy said OTAs are taking advantage of hotels. Co-founder Charlotte Gossage said agencies’ powerful marketing tools have “intimidated” hotels and prevented them from lowering rates on their own websites.

“Some hotels are slowly realising that even in an OTA contract, a hotel brand can give a lower rate. I think OTAs are taking advantage of their powerful position and intimidating hotels by preventing them from giving lower rates than them, when in fact, hotels can give lower rates through direct bookings,” Gossage said.

BookedHappy will include hotel deals, but refer customers to hotel websites to enable direct bookings.

Arabian Business asked both Booking.com and Expedia.com, who are participating at GIOHIS, for comment, but both declined. 

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