Flat Fee Initiative – Market Views

Last week, the RATA-news website posted an appeal from the Russian Hotel Association with the initiative to establish a fixed commission for online booking systems (OTA) for hotel services. According to representatives of the association, with the departure of Booking.com from Russia, many similar domestic services began to overestimate their own commission. The editors of TRN-news turned to market experts to find out their opinion on this issue.

According to Sergey Skorbenko, the founder of the resource Welcome. Times and the head of the marketing agency Digital Will, the introduction of a flat commission will hit the agency market first of all, which will ultimately be unprofitable for either side.

«Travel agents and OTAs bear the cost of doing business from the commission they receive. Most likely, it includes marketing and advertising costs. According to various sources, booking.com spent about 30% of its income on marketing and advertising. What does it mean? This means that capping commissions can change the balance of power in the travel agency market: those who do not have the opportunity to invest large budgets in developing their market share may leave the market. If a travel agent is not engaged in its promotion, it does not have sales either, which means that sooner or later it will leave the market. Which in turn will lead to the emergence of a significant market player, as was the case with booking.com.

When hoteliers go the direct selling route, without the involvement of travel agents, their marketing costs vary greatly by property. For the most part, these costs are about 10-15%, for large objects the amount is much less. And here is the most interesting. It seems that the 10% limit for travel agents is beneficial, but considering the first and second points, we get the following picture: hoteliers do not receive bookings from the travel agent, because it doesn't have the resources for its advertising and marketing. The hotelier has no applications, it makes no sense to further develop your hotel. Will we get a withdrawal from the market of small accommodation facilities after some time, because sales costs are rising, but they cannot raise the price?”.

Andrey Mikhailets, chairman of the Independent Hotel Alliance (NGA), believes that the published proposal at least underdeveloped and does not take into account a number of important factors that affect the current pricing.

“The suspension of booking com has alarmed the market: many hotels are left without a main channel for bookings. At the same time, hotels faced another problem – increasing tariffs for the use of advertising tools, such as targeted and contextual advertising. Such difficulties were faced by those placements that did not have marketing campaigns and direct sales tools built.

This combination of factors has led to increased competition between local OTAs both for a place in organic search results and for promotional placements, including for hotel brand queries. This policy was shared by the Booking.com service, which hotels opposed earlier, but could not refuse the main source of traffic.

The initiative to limit the agency commission and the legal minimum threshold is understandable, but may come from those market players who do not understand that in addition to maintaining the website, booking systems are faced with the need to maintain a serious infrastructure: server maintenance, compensation for damage to guests (as airbnb did ), strengthening direct contracting, increasing the support load, shooting a large amount of photo content, developing the sub-agency and partner base, and much more.

The introduction of these restrictions will be like being shot in the foot: on empty market will be legally “suppressed” by OTAs, who are trying to take market share and provide quality service.

Before setting a “fair” commission, it is necessary to realistically assess the costs of OTAs, which are now taking on the role of Booking.com not only in ensuring uninterrupted online booking, but also in promoting Russian accommodation facilities.”

< p> Marina Goncharenko, head of the hotel department of Bronevik.com, presented the position of her company

“On behalf of Bronevik.com (the national booking system), we would like to contact the RGA and disagree with the facts presented in the OTA commission statement, which allegedly used to be at the Booking.com commission level, namely 15% without VAT. And that it was the departure of Booking.com that provoked their increase to 25% excluding VAT is also not entirely true.

Enough players have been represented on the market before, offering various models and terms of interaction, and interest rates have always been a matter of discussion. Hotels are not forced to sign OTA terms. It seems to us that the task of any OTA is to correctly substantiate and explain the terms of cooperation, promotion features, and the right of the accommodation facility to agree with them or reject them.

And also we do not agree with the statement “now, in the absence of the main competitor, Russian companies get this market share”. According to the data of such major channel managers as TravelLine (62%-78%) and Bnovo (70%), after the departure of Booking.com, a large proportion of bookings are made by direct sales of properties made on their websites or in other ways. , and not through OTA.

We are also convinced that the attempt to regulate OTA interest rates is tantamount to an attempt to regulate hotel prices, which the hoteliers themselves actively oppose. Both that, and another contradicts principles of free market relations. The statement of the RGA does not help the industry, but “push foreheads” all interested parties at a time when unity is needed more than ever.

Also, the RGA statement does not say anything about OTA types on the basis of B2B/B2C, which is also incorrect. These differences exist, both models are successfully used in the Russian market, “bringing” thousands and thousands of guests to hotels. And it can't be ignored by reducing everything to 10% rates.”

Also, one of the important market experts, who wished to remain anonymous, spoke on the issue of introducing the initiative. Due to the importance of his assessment and reporting all aspects of the problem, our editors decided to publish his opinion.

“This initiative is the result of a misunderstanding of pricing in the hotel services content distribution market. Firstly, the statement about raising the commission by online booking systems is not true. Most services left the commission level unchanged, and some companies even reduced it. It should be noted that in the European market there is no similar regulation of the agency commission and the establishment of such a low level (10%). The ability to regulate the commission allows you to build more flexible working conditions with each specific accommodation facility, depriving OTA of this opportunity will hit all market participants. In addition, in addition to the standard commission, services may introduce other forms of markups, similar to the “fuel surcharge” in airlines. Therefore, the introduction of this initiative will only lead to additional fuss in the market, at a time when we all need to actively restore it.”

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