OYO, Makemytrip look to douse the discount fire from partner brands

Online travel and hospitality brands are caught between customers and clients as they walk the line between discounts and deals

For a few months now, budget hospitality chains in big and small towns across the country have been stewing over the flurry of discounts that has become the leitmotif of the online world of travel and hotel aggregators. While customers have swiftly embraced the age of discounts, planning their travel around cheap hotel rooms and rock-bottom airfares, hospitality chains are crying foul. Discounts are diluting their brands, while improving the value and valuation of the online service providers, say the hotel owners.

While there have been several flashpoints over discounts since 2013, in the latest, hotel owners and association heads have slapped legal notices against  Go-MMT (GoIbibo and Makemytrip combine) and OYO. The Federation of Hotel and Restaurant Associations of India (FHRAI) allege that their business practices are exploitative, unethical and divisive and have led to predatory pricing and other market distortions that they believe could harm hoteliers and consumers in the long term.

“One of the biggest concerns is that after securing discounted rates from a hotel, the OTAs further discount it on their online platforms without the hotel’s consent. This damages the hotel’s reputation, and also simultaneously distorts the market scenario. Ironically, the OTAs have a clause in their agreement that forbids hotels from discounting their own rates but are themselves free to do so,” says Gurbaxish Singh Kohli, vice president, FHRAI and President, Hotel and Restaurant Association of Western India (HRAWI). Reputation and value are key ingredients in a hotel’s brand mix say experts.
 

OYO offers hefty discounts, but hotels are not always on board with the offers.

Both OYO and Go-MMT have denied all allegations and said they will solve the matter amicably. However, neither agreed to respond to the specific allegations made by the hotel owners for this story. 

In some ways, market distortion is a sign of the times. Be it airline tickets, consumer goods, groceries and anything else, online marketplaces have had to face the ire of the brands that they sell. Sandeep Goyal, chairman, Mogae Media feels the hotel owners are particularly impacted by the rapid erosion in their brand equity, commoditisation and the de-intermediation of the hotel-guest relationship. “The likes of OYO and MMT basically play on the demand-supply dynamics and the immediacy of customer conversion,” he adds. 

Hotels say that on the one hand discounts have pared down their brand values and on the other, the hefty commissions being charged by travel aggregators are denting margins. They charge anywhere between 18 and 40 per cent, the hotels allege. There is another issue that hotel owner associations are objecting to; S K Jaiswal, vice president (North), FHRAI says that more than 40 per cent of the room inventory available on the OTAs is illegally operated. By this he means that they are not affiliated to the state tourism bodies or the associations. “The hotel associations have their back to the wall. The very existence of many hotels is under threat,” says Goyal. 

The protests must be seen against the backdrop of the sectoral boom in recent years. The total contribution by travel and tourism sector to India’s GDP is expected to increase from Rs 15.24 trillion in 2017 to Rs 32.05 trillion in 2028, according to IBEF. While online travel companies have opened up the sector, especially among millennial travellers, future expansion depends on how well they handle the fury of their partner-hotels.