[Travel Daily] China’s three leading hotel chain groups: Huazhu Hotels Group, Home Inns, and JinJiang Inn have jointly urged major OTA’s to stop offering cash rebates on their respective websites. From the 27th of September Ctrip, eLong, and Qunar have stopped cash rebates for the above three hotel chains.
For the past few years a fierce pricing war has being waged amongst the OTAs which has caused a rapid growth in sales for major OTAs like Ctrip, eLong, and Qunar. The situation was brought about by each company seeking to attract more customers and capture a larger share of the market from their rivals.
This has caused a dilemma for the hotel chains because if they don’t participate in the cash rebate offers than they will surrender their share of the business to the OTAs. But if they get involved then their business will be further controlled by of the OTAs. These OTAs have been using various forms of products and sales methods to get the hotels involved in a pricing war and lure more price-sensitive customers to their websites. The hotels have found that in the long term this situation will be very damaging to them because price rather than the hotel brand is becoming the key differentiator for customers when choosing a hotel. This will cause a drop in hotel ADR(Average room rate) and RevPar(Revenue per available room) and thus further drive down the overall profitability of the hotel industry.
Now hotels are under the threat of OTAs who are seeking control of the hotels’ distribution channels and position themselves as the platform offering the lowest rate while constantly asking the participating hotels to offer lower rates. The fact that many hotels are still undecided whether or not to refuse the OTAs makes us concerned about the courage and vision of the hotel industry leaders. Hopefully this joint action taken by the major hotel chains to stop cash rebates will not only be a short-term tactic for the peak National Day holiday season but it will also encourage the healthy development of the hotel industry and help build a collaborative relationship for both parties.(Translation by David)