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Clash of the Titans: China’s hotel groups Vs OTAs

12/09/2014| 11:46:39 AM| ChinaTravelNews 中文

“Beating them at their own game” is the key tactic being adopted by hotel groups in their fight with the OTAs.

TravelDaily – Tensions between China’s hotels and OTAs shows no signs of easing as each side is encroaching on the other’s territory, with China’s three major hotel groups entering the OTA field following Ctrip’s earlier moves to take equity in the three major economy hotel groups.

Things started to heat up when China Lodging Group teamed up with Home Inns Group to successfully block the cashback offers of the top three OTAs – Ctrip, eLong and Qunar – in late September. Home Inns went a step further in November by completely delisting from Qunar’s platform, terminating its partnership with the OTA. 

Home Inns, China Lodging and Plateno have had rocky relationships with OTAs, although Ctrip is a shareholder of the three top economy hotel groups. The recent spats show that the hotel groups are emboldened to take a harder stance now and they are recruiting independent hotels and smaller sized hotel franchises to their own booking platforms to rival the OTAs, fueling the conflict further.

So is this a sign that the hotel groups and OTAs are going their separate ways? And in what direction are the hotels going with their OTA ambition?  

Economy hotel group’s tenuous relationship with OTAs

OTAs have been a mixed blessing for the hotel chains – while OTAs are bringing hotels increased customer flow, the high commission they command is eroding the hotels’ profit margins. The recent cutthroat price war between OTAs offering cashbacks further put pressure on the hotels’ pricing systems. 

Having their price-setting rights encroached upon by the OTAs in addition to losing profit margins to them are perceived by the hotel groups as serious affronts. 

The hotel groups also think that their brands are weakened as the loyalty of customers may lie with the OTAs they book through, or they are simply attracted by low prices.

These problems have spurred Plateno Hotel Group to start pursuing a strategy of brand diversification since late 2013. The group’s director Alex Zheng told TravelDaily:”The hotel group’s future rivals will be OTAs instead of other hotels. Of course we won’t square off for the time being, but victory will go to the platforms that are closest to the customers, so we must be prepared”. 

Right now the three major hotel chains are confident and ready to open the battle with OTAs, Home Inns told TravelDaily that OTA distribution channels only account for 10% of its total bookings. 

Hotels’ brand diversification challenges OTAs

 “Beating them at their own game” is the key tactic being adopted by hotel groups in their fight with the OTAs. 

The hotel groups have been diversifying their branding as they upgrade from economy to mid-range brands in response to the pressure to stay profitable. This diversification, and the enormous membership bases that have been developed, are giving fuel to the group’s ambition to be replace OTAs booking services entirely.

Plateno is a classic example of this transition – it boasts a separate platform for members and for brands. The members’ platform has 20 million active members among a total of 80 million loyalty members. Plateno has conceived and invested in a dizzying array of new brands including the 7Days Premium, 7Days Sunshine, Portofino Hotels, Lavande Hotels, James Joyce Coffetel, ZMAX, Xana Hotelle and Dao Jia Hotels to meet the diverse demands of its members. It has also partnered with Paris Inn Group to build the Albar Hotel and introduced the Hampton Hotel brand from Hilton Worldwide. Mr. Zheng said Plateno is still hatching new brands and plans to have 26 brands by 2018. “Plateno is promoting these hotel and lifestyle brands for our 80 million loyalty members to experience,” he said.

Plateno’s official website offers multi-level hotel booking making it essentially an OTA-style platform for general users. 
(Report by Xianhao Zeng)
(Translation by David)

TAGS: OTA | economy hotel chain | hotel group
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