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Hotels become heavily reliant on online travel agencies to sell rooms

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All hotels have to cooperate with online travel agents (OTA) to sell hotel reservations. However, many of them are seeking ways to find guests directly and escape heavy reliance on the sites.

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The Rex Hotel is one of the luxury hotels in the central area of HCMC, where the room rate is over $100 per night. 

The hotel will pocket the $100 if travelers book rooms directly on its official website. But it would lose 20 percent of the money as commission it has to pay to OTAs. 

Analysts say 20 percent is relatively small and Rex can set the low commission level thanks to its advantageous position, good brand and high room rate. The average level is 30 percent.

Ngo Minh Duc, the owner of a travel boat fleet in Ha Long Bay, confirmed that the commission that hotels have to pay to OTAs, especially foreign OTAs, is very high.

“Sometimes our Au Co Boat has to pay 45 percent in commission to appear on the first page of foreign OTAs,” he said.

In fact, many Vietnamese OTAs charge a small commission of 10-15 percent only. However, the revenue they bring is low and not many hotels use them. It is foreign OTAs such as Booking.com, Agoda and Expedia which have great advantages.

A hotelier revealed that in order to appear in the top position of OTA’s pages, his hotel has to pay 50 cent, or VND12,000 for every click.

Though having high fees, hotels still have to use OTAs because of high revenue they can bring. A hotel in Hanoi said the room sales in summer via OTAs account for 50-60 percent.

Pham Cong Dung from Rex Hotel said 35 percent of room sales are from online channels and 30-45 percent of revenue from online channels is from OTAs. The hotel is seeking to reduce the figure.

He said hotels would face high risks if they rely too much on OTAs. Troubles will occur if OTAs change the policies for cooperation or their websites have to stop operation because of technical problems.

An analyst said the OTAs with good brands always increase their pressure on hotels, demanding higher brokerage fees to compete with rivals. 

A hotelier in Hanoi said he has refused to cooperate with a very well-known OTA because the OTA set ‘unacceptable requirements’.

The OTAs’ policies on reducing commissions to offer better conditions to clients would also ‘kill’ hotels’ websites because they would set lower hotel room rates.

However, the analyst commented that it is nearly impossible for hotels to not use OTAs. It would be better to continue cooperating with OTAs and try to reduce the proportion of rooms sold via OTAs. 

 

Source: VietNamNet

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