Sunday, June 10, 2012

Are Motels Being Exploited By Offshore OTAs?

I see that the Motel Association of New Zealand (MANZ) have been sucked into believing the alarmist protectionist chants from local travel media companies that are feeling the heat from successful overseas Online Travel Agencies (OTAs).

Under the dramatic banner of: Tourism dollars heading offshore MANZ chief executive, Michael Baines utilizes some fuzzy economic logic as he ponders the consequences of overseas competition from OTAs: 
"When tourists book accommodation here through domestic providers, it ensures the commission stays within New Zealand and is reinvested into our economy, Baines said.

But Baines said he is worried about the international booking providers.

"When a tourist from Europe, Asia or America books accommodation through one of the big international booking agencies, that is commission that is lost to our tourism sector."

That means New Zealand is missing out on up to 10 per cent of the booking cost and accommodation providers here cannot reclaim GST paid on that commission because it is zero-rated for GST.
"These companies have no vested interest in New Zealand and our tourism sector; they are only there to clip the ticket," Baines said.

"They charge a commission which is not reinvested into our economy, and does not contribute to the wages or taxes which keep our economy afloat."

Baines argues that international booking agencies are squeezing local accommodation providers by forcing them to push down prices in order to drive sales.

The Government and tourism sector need to join forces to look at ways to stop cash flowing offshore, he said.

"Perhaps it's timely to consider introducing a Commissioner for Small Businesses that can go in to bat for these companies that employ locally, pay taxes and make sure profits remain within New Zealand."
So MANZ is promoting the meme of big bad foreign-owned OTAs preying upon New Zealand's tourism sector and apparently the government needs to do something about it... 

Overseas OTAs appear to be widening the gap ahead of local businesses that resell accommodation inventory. Kiwi accommodation providers that want to be where the bulk customers are, willingly provide room inventory across numerous OTAs - all of the popular ones happen to be domiciled offshore.

To be successful, OTAs commoditise and display accommodation options into a logical order so that customers can intuitively compare and make selections. They enable accommodation operators to easily access their platform to place their rooms alongside others to gain the benefits of being exposed to a world market. They operate on a highly motivational and accepted pay-on-success formula (commission) ie: the more rooms OTAs sell - the more money they make. They have developed trusted brands known world-wide by investing millions in their infrastructure and advertising. And most importantly, they make it easy for customers to part with their credit cards to book accommodation with confidence - that's kind if a good thing. 

I have a nostalgic liking for our Kiwi based travel media companies and OTAs. I am happy to support them, however if they wish to remain relevant to my business they need to compete in a world market by innovation, appealing to the end user and improving productivity. Sadly, some have a way to go...

A cloth-capped closed market mentality and xenophobia has no place in a modern open economy. Heads of travel related industries should be leading the charge to break down barriers, not running to the government for protectionist measures.

Opposing overseas based providers is naive and just plain silly. Open world markets allow accommodation providers the freedom to compare local providers with overseas providers of merchant services, VoIP, Property Management Software, channel management, movie streaming, booking widgets, website design, web hosting and many more innovative, cost-effective services.

What is disappointing about MANZ,s apparent protectionist stance is that this will entrench the blinkered-silly-old-man-syndrome that is already inflicting the motel industry.

Sadly MANZ will be widely applauded for standing up against those evil foreign-owned OTAs by a motel industry that is struggling to adapt in a rapidly evolving digital world.

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