29 Aug, 2013
Global hotels group chief blasts OTAs for raking in US$25 billion in commissions
Victoria Falls, Zambia/Zimbabwe – The International Hotels & Restaurants Association has blasted the US$25 billion in commissions that it says are being raked in by the Online Travel Agencies and called for closer action in cooperation with the global national tourism organisations to do something about it.
The comment by IH&RA President Casimir Platzer at the UN World Tourism Organisation General Assembly reflected the growing frustration amongst the hotel industry about the influence and impact of the OTAs on the booking and distribution systems. The fact that the world’s umbrella body for the hotel industry is raising this in public is also significant, especially as many other travel industry sectors are also feeling the pinch on their revenue streams.
| Travel Impact Newswire Executive Editor Imtiaz Muqbil was the only Asia-based travel journalist invited to cover the UNWTO’s 20th General Assembly. |
Asked later for the source of the figure, he said it was based on a calculation of the roughly 20% to 25% commissions that the OTAs charge hotels even while driving rates downwards. He said the hospitality sector alone generates about US$650 billion worth of revenue, or about 2/3rd of the global tourism earnings. This figure can be multiplied by a factor of three if domestic tourism is included, he said.
In his speech, Mr. Platzer said, “Approximate 20% of all hotel bookings are nowadays generated through the Online Travel Agencies. Of course they bring a lot of customers but the amount of commission they take from the industry is estimated at approximately US$25 billion. Ladies and gentlemen, 25 billion dollars annually that could be used for investments and renewals. This is one of the biggest challenges to the industry. We are looking forward to a closer cooperation and action on a global level and we hope to also your support.”
Asked later what kind of support, Mr. Platzer did not clearly specify what he had in mind. However, he said the OTAs had taken advantage of the fragmentation of the hotel industry. “We are a large industry but we are very fragmented,” he said. “With chains, small hotels, many associations. We need to work together to find ways to deal with this. If we were united, it would be easier.”
The theme of the UNWTO plenary sessions is airline connectivity, and how to boost it in order to grow the travel & tourism industry. But Mr. Platzer pointed out that airlines will never start flights to any place where there is no hotel infrastructure.
“A destination with no or bad hotels will not provide any jobs and no economic growth. And this is why we count on you to support our industry and to offer the best possible economic conditions.”
He added, “IH&RA is going to take action to enhance relations with UNWTO and to discuss issues in key areas such as taxation, visa facilitation, data collection, sustainable development and distribution channels in order to increase air-connectivity.”
Elaborating on these key points, Mr. Platzer said he could not understand the need for onerous visa requirements when most airlines already have the technology to introduce Advanced Passenger information. “I don’t understand the countries where you still have to go to go to an embassy and leave your passport for several days in order to get a visa.”
On taxes, he said these are legitimate but if they cross a certain line and become too high, they will “hinder the successful development of a destination and eventually contradict the possibility of building a wider tax base.” He sought the tourism ministers’ help for reducing VAT rates for the tourism and hospitality sector at large.
On sustainability, he said, “I reckon there is no other area where there are so many tools and labels as in the field of sustainability. It seems like every country, every tourism ministry, every organisation or association has to re-invent the wheel. I am convinced that there is a need for the industry to fix common guidelines or standards and the IH&RA is ready to do this together with UNWTO and all the other important players of the industry.”
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