OTAs get respectable

Online travel agents are teaming up, and sharing data, in a bid to consolidate their place in the market. But amid efforts to appear more mainstream, come a continued barrage of regulatory challenges.  

Airbnb and Vrbo have come together to share information and prevent the problem of party house rentals. Too frequently making headlines, home rentals can easily be booked by individuals who then use the venue as a house party, creating mayhem in often quiet residential neighbourhoods. The new collaboration, called the Community Integrity Program, will see the pair sharing information to prevent individual troublemakers from switching platforms, if blacklisted by one.  

In a statement, the pair commented: “While rare, disruptive parties can meaningfully impact the community’s quality of life. This pertains to a very small minority of short-term rental properties, however, for the neighbours these can be genuine neighbourhood nuisances. Neither Airbnb nor Vrbo have tolerance for this type of irresponsible activity.”  

And in India, Airbnb has teamed up with EaseMyTrip, OYO and Yatra to create a new industry association, the Confederation of Hospitality, Technology and Tourism Industry (CHATT). CHATT will look to promote domestic tourism, encourage digital transformation, provide thought leadership and provide training and support.  

India’s minister for tourism and culture, Prahlad Singh Patel, has blessed the formation of the group, commenting: “The consolidated efforts by CHATT will be highly beneficial for SME, MSMEs hotels, homeowners and partners and I welcome them to join the various government committees to represent the unified voice of the industry.” 

Elsewhere, in western markets, Airbnb has proposed more regulation, and a listing system for host properties that would help ensure rental period restrictions are adhered to. Airbnb co-founder Nate Blecharczyk told The Times in the UK the company is proposing governmental registration, to support housing and tourism laws. Hosts would only be able to list properties on an OTA platform, if they had a registration number from the local authority’s database. “Many communities have a lot of rules around housing and tourism. So rather than having an antagonistic approach, or not having any approach, we are going to seek partnership.” 

The move has received the backing of the UK Short Term Accommodation Association, with chair Merilee Karr commenting: “We think it’s great that one of our member companies and one of the major consumer brands in the sector is conducting stakeholder research and putting forward positions to help find constructive policy solutions to help the industry grow responsibly.” 

But as Airbnb takes further steps to legitimise its business, that call was somewhat undermined as a Bloomberg investigative report revealed the lengths the company goes to, to keep the scale problem rentals out of the public eye. The report said the company uses a team of agents to keep problematic issues including thefts and sexual attacks out of the public eye, supporting affected guests and hosts, while keeping misdemeanours out of the media and out of the courts. As a result, the scale of problematic rentals remains unreported, though the company is able to learn from the experiences and put further safeguards in place.  

The online travel agency community also continues to face issues around the degree to which it remits local and national taxes. In Italy, Genoan police are investigating a potential EUR150m underpayment of VAT, uncovered during a tax audit carried out for a separate criminal investigation. The suggestion is that Booking.com is responsible for ensuring VAT is paid on reservations made through its platform; while the OTA says that such declarations and remittances should be made by hotels and B&B businesses themselves. Discussions are ongoing.  

HA Perspective [by Andrew Sangster]: One of my go-to sources for insight on digital matters is Professor Scott Galloway of NYU’s Stern School of Business. His latest bout of crystal ball gazing has seen him focus on “dispersion”. 

This thesis is that after globalisation came digitisation and now we are moving into dispersion. In his words, “we are entering the post-distance era, as tech has dispersed ever larger segments of the economy without regard for existing distribution channels”. 

Examples are working from home, telemedicine and remote learning which he claims represent an impending disruption of over 25% of the US economy. “The largest sectors are about to leapfrog HQ, doctor’s offices, hospitals, and campuses.” This follows what has happened in retail thanks to the likes of Amazon and in film thanks to Netflix. 

But I’m not sure there will be as much dispersion as Galloway thinks. Offices are likely to remain critical to any company attempting to grow a culture and remote learning while certainly effective at teaching, has to dislodge incumbents from their primary source of value in the market (which is providing individuals with credentials).  

A key part of Galloway’s argument is that dispersion returns more control to creators of value, taking control away from intermediaries. And it is here I think he has a fascinating point that also contradicts one of his recent core messages about the disruption of the hotel business. 

Galloway is unashamedly bullish about Airbnb. But surely this company is an intermediary which will see its power dispersed by consumers going direct to the owners of property? 

The outcome is probably not going to be binary. Intermediaries will continue to have a role but I suspect this will increasingly be one where they work more closely with those directly running hotel operations: OTAs finally living up to their claims of being partners with hotels. At the very least, OTAs are clearly stepping up to take a more active leadership role for the wider accommodation sector. 

Ironically for owners of hotel properties, this relationship is often going to be intermediated by the global hotel brands, given the asymmetric power that distributors hold over the fragmented ownership community. 

OTAs will, as we discuss in the article above, have to become increasingly innovative in how they create value for their accommodation owner customers. And part of that innovation is likely to see them offer services which increasingly resemble those offered by hotel brand companies.  

The creation of the first OTA accommodation brand has been much hyped but has yet to truly come about. Airbnb has, for example, repeatedly been written-up as starting its own branded condo hotels. Natiivo in Miami was hyped in early 2020 as just such a scheme. In reality, Airbnb appears to have worked with the developer to create a scheme that is purpose built and licensed for home-sharing. 

For OTAs, getting down and dirty with the lower margin and more capital-intensive business of operating and / or branding properties is not appealing while they can keep growing and extracting their current margins.  

Once this position shifts, which, perhaps, the great dispersion may lead to, then they may start to roll-up their sleeves and join the managers and branders. If it is to happen at all, then the next year or two seems the most fertile period for the change. 

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