Why your 10 anti-OTA complaints are wrong.

One of the most common discussions in the Travel industry revolves around the role played by OTAs. I’ve been a party to many of these discussions, and I’m always surprised by the fact that OTA executives do such a poor job of defending themselves against all the criticism. Of course I understand why: as a company becomes bigger – and especially if it’s a public company –  executives need to be more diplomatic and careful in their statements. But the effect of that is that many Operators are left with a negative impression of the OTAs, and choose to minimize their participation in the OTA channel, which is I think a big mistake.

Here’s what I’d say in response to the Top 10 most avoided questions asked to OTAs (if I was running an OTA, and my PR department was on vacation). This is using the example of the experiences vertical, but the same arguments are almost identical for other sectors.

Complaint 1: You take too much commission - I can’t afford to lose 25% of my revenue

• First, fix your mindset and stop being so negative. We GIVE you 75%, rather than TAKE 25%. See how much better that feels?
• If you can’t pay 25% commission, your pricing is wrong. Once you’ve built it in, you can work with concierges, travel agents, ticket hawkers, Google, marketing agencies, cruise ships, anyone. OK, not cruise ships.
• 25% for marketing is a very reasonable cost for customer acquisition. On Amazon, the average is 19%. In retail it’s 50%. Apple charges 30%.
• The billboard effect. For every product we sell of yours on our OTA, you get [x] impressions and [y] sales - because the customer discovered your product on our site and decided to book direct. Let’s assume this counterweights ¼ to ½ of the commission. You’re welcome.

Complaint 2: This OTA model is out of control. It's not a sustainable model.

• You don't need to be concerned about how sustainable OUR model is. If we've spent $1B and can't make a profit, that's our problem. Uber and Airbnb spent 100x and are hugely successful companies today.
• Your goal needs to be increase yield. Direct or indirect are both ways to do that. That's an important concept to understand.
• The world runs on platforms / marketplaces - Google, Facebook, Apple, Amazon… they are very efficient. Almost everything you buy is through a 3rd party. It's very sustainable vs the previous model, and we are not going to go back. It's no different to a supermarket which is where you buy almost all of your food. Do you complain about your supermarket?
• When you’re trying to reach more customers to increase yield, direct sales is often just not an efficient way of selling. Companies reach more customers by working with partners, especially in the travel industry, which is more complicated for distribution because your customer almost always lives in a different location, and has to travel to consume the product. There are hordes of people that you can’t reach on your own - you don’t know how to market to them. If you only work direct, these people will buy an experience in your market from your competitor.
• There's a phone company called Apple. Quite a well known brand. Worth around $3.4 trillion. They sell phones direct, and they also sell phones through BestBuy, Walmart, Target etc. They do this because by partnering on distribution, and paying out some commission, they make more money. They have enough cash to do anything they want, and they do this by choice. If it’s good enough for Apple, it’s good enough for you.

Complaint 3: Why won’t you display my brand on my listing?

We do now. Ok fine, the EU forced us to. But previously: 

• We tested it and it doesn't generally improve conversion. That’s what we care about and so should you.
• Like every website and app on the planet, we want the customer to remain on our website. When they leave, we don’t make any money, which is bad. We pay a lot to get these customers onto our site.
• With the exception of Disney and a handful of others, you don't have a globally recognizable brand. I know this because we have really good people, spending hundreds of millions of $ each year on marketing, yet we are still struggling to build a global brand.
• People also read about this similar debate in the hotel sector. They get confused and point to Hilton and Marriott marketing their brand directly. You are NOT Hilton or Marriott. It’s different.
• Many of you have terrible websites. If you’re one of those, we’re improving your image. You’re welcome.
• It's our website. We don't ask you to put our brand on your website.

Complaint 4: You don’t add any value - you are just re-listing other peoples products, and competing against me on things like Google Ads

• This is nonsense. People shop in a single place to get lots of choices and buy multiple types of goods at a time. It’s a marketplace. It's a supermarket.
• Whether we list your specific product or not, we’ll still be there selling everything else around you. It’s what we do.
• In any distribution structure, there’s a degree of overlap. As I said earlier, the travel industry is unique. Customers are from different countries and cultures, speak different languages. and they are often visiting your area only once.  Realistically, whatever you do to engage directly, you’ll only be speaking to a small percentage of potential customers.
• Bid against you on Google? Yes and no. Most of the time when we get accused of this, we are just bidding on general terms. Google also helps optimize our ads - to display them in more places, and increase our spend. Google is good like that. Most of the time, whether we list your specific product or not, we’ll still be in the same positions, selling your competitors (which includes direct competitors and any other experience that exists in your area). Because we sell a wide selection of products, we can afford to bid a lot more for keywords. That's our advantage as a platform and there’s not much you can do about it. Sorry. You have advantages elsewhere, where we can’t compete.

Complaint 5: It’s my customer, not yours, and you don’t give me customer data.

• They’re not your customer. When they arrive, and you talk to them, you can collect all the information you like - if you offer them a good reason for doing so. We can’t stop you from doing that. Do you think Heinz demands customer data for everybody who buys tomato ketchup at Walmart?
• We don’t trust some operators with that data. Some will send illegal marketing emails, others may communicate in a way that doesn’t reflect well on our brand. Some even contact customers to ask them to book direct. We value our brand, so controlling customer communication is important. We work with tens of thousands of operators. Believe me, we’ve seen it all.

Complaint 6: My marketing agency told me to focus on direct business, to keep the commission.

That’s nice of them. It’s what they do, so you’d expect them to say that. It’s not wrong, but you need to be diversified and do both. Again, it's ONLY about yield.

Complaint 7: Your customers always create the most customer service problems

If your product information is up to date, I don’t think there is any merit to this argument. Some sites with deep discounts might attract a different type of customer. For 90% of OTAs, that’s not the case.

Complaint 8: You don’t understand or care about the industry - its only about making money

• I challenge you to meet up with our staff and/or owners and speak to them about the travel industry. The vast majority are very passionate about the industry - just like you. Many are previous operators.
• We do understand your needs. We don’t ‘force’ many rules, but we do have recommendations. A good example is long cut-off times. Those products don’t sell well. Most of our customers are buying on mobile, with very short booking windows. When they choose your product and it's not available, nobody wins. It's annoying for the customer, and it's taking up our valuable shelf space. We spend a lot of money getting customers to those shelves.

Complaint 9: Why would I work with you, when you might take my competitor, call it your own ‘branded’ tour - and feature it in preference to my products

This one is tricky. Let's move on

Complaint 10: We are your customer, not the other way around. You should treat us with more respect.

• You are a supplier, not a customer. Our customer, the traveler, gives money to us. We give money to you. We are YOUR customer.
• Now, that doesn't mean we should not treat you with the utmost respect.  Some companies put customers as top priority. Others say employees, suppliers, shareholders. There is no right answer. I like to think we have the right mix.

Did I miss any?

Part 2 (coming soon), is of course how AI is going to affect this whole ecosystem.

Spoiler alert: It's going to get shaken violently and thrown upside down.