OTAs will attempt to raise commission rates. OTAs are experiencing a declining growth in demand along with increased competition. Fickle consumer behavior is necessitating an increase in the ratio of staffing levels per transaction. For OTAs to remain visible, increasing investment in marketing is required (Google is the big winner here) and the cost of new and improved technology is increasing. While traditional agents operating from bricks and mortar on high streets have been able to maintain commission levels for many years, there seems to be an irony that web based agencies may not be able to sustain the same levels.A leading OTA for many New Zealand accommodation businesses, Wotif.com have announced to suppliers today a progressive rise in commission rate from 10 to 12 percent.
Have Kiwi accommodation providers become too reliant upon Wotif to sell rooms to consider pulling inventory from this popular site?
A further prediction is that Wotif's CEO, Robbie Cooke's inbox is going to quickly fill with angry comments from accommodation providers (see email address below;-))
At Wotif.com we take a lot of pride in being the leader in online accommodation in Australia. With 5 million plus customers visiting our website monthly we are able to drive bookings to you at the lowest commission level in the market. Our success comes from the trusted partnership we have developed with you and, and like partners, over the last 13 years. We live and breathe partnership and are always striving to do the best we can to drive more bookings.
It is a reality of life, however, that we operate in a truly global marketplace today, where the much higher commission levels of some of our competitors allow them to market themselves more aggressively.
With this in mind, we are taking a number of steps to ensure that we have the financial firepower to ensure that we can deliver more for our accommodation partners over the coming years. One of these steps is making the very difficult decision to increase our low 10% commission model by one percentage point with effect from 1st January 2013. This will be followed by one further lift of the same amount on 1st January 2014.
This will still see Wotif.com remain as one of the world’s lowest cost online travel agencies but it will also allow us to increase the reinvestment in our business to drive sales performance for you.
We have not made this decision lightly and we understand that this will also have an impact on your business. I want to take this opportunity to reassure you that we will be reinvesting this extra commission into activities that will allow us to drive an even better sales outcome.
I would welcome you to contact your product manager if you wish to discuss this and we will be reaching out to you over the coming weeks to answer any questions and concerns that you may have.
As always I am available to discuss any aspect of our business if I can be of any assistance.
Robbie Cooke (firstname.lastname@example.org)