‘Cap foreign online travel agencies’ commissions as border reopens’

KUALA LUMPUR – A cap on foreign online travel agencies’ (OTAs) commissions is something that needs to be looked into urgently in tandem with the recovery of the travel and tourism sector, said the Malaysian Association of Hotels.

MAH, in reiterating its calls for the government to introduce regulations and cap commission rates of OTAs, has asked for a speedy relook since the transition into the endemic phase of Covid-19 starts on April 1.

MAH chief executive officer Yap Lip Seng said the cap on commissions is needed to help protect local hotels whose businesses have been badly affected by the pandemic.

“2022 is still a transition year, where we will not expect tourism to return to pre-pandemic days despite the reopening of borders,” he told The Vibes when contacted recently.

There are still a lot of external factors, such as borders reopening in other countries, that are of significant value to us, like Singapore, China, and even India.

“We have yet to see a unified approach to managing the pandemic worldwide or aligned transition to endemic phase.”

An industry player has noted that commissions to OTAs accounted for an estimated RM3 billion in outflows from Malaysia alone.

Malaysian Association of Tour and Travel Agents president Datuk Tan Kok Liang noted that the foreign OTAs have their own business model, with maintenance and overhead costs.

However, he said, the foreign platforms will lose their influence if Malaysian hotels do not subscribe to their services.

“The OTAs will die off if all of us stop placing our products on their platforms,” he told The Vibes recently.

(We have to) stop competing among ourselves and getting ‘upset’ with OTAs. It is time for a unified Malaysian approach, both by public and private stakeholders, to dictate the terms and commission structure to OTAs, rather than allowing them to charge ridiculous rates.”

Despite this, Tan also agrees that the local tax laws on the matter need to be amended so as to impose “taxes at corporate rates derived from Malaysian operations”.

In September last year, the Malaysian Budget and Business Hotel Association (MyBHA) had called for regulation of foreign OTAs, following claims of exorbitant sales commissions that reduce hoteliers’ profits and also of activation of promotions without hoteliers’ consent.

MyBHA Johor chairman Jarod Chia said that the monies are advanced by OTAs to hoteliers based on past revenue forecasts.

The hoteliers have complained that while official commission rates range between 20% and 25%, the introduction of promotions by the OTAs without giving notice to hoteliers can bump commission rates to as high as 45%.

In October, Tourism, Arts and Culture Minister Datuk Seri Nancy Shukri said that the government is currently reviewing the need to regulate the industry.

However, she said any decision will have to take into account the views of both parties – travel booking platforms and accommodation premises.

Nancy also acknowledged that the country currently lacks any OTA regulatory mechanisms, which she said may be necessary to ensure better service quality for consumers.

Meanwhile, Yap said the reopening of international borders for Malaysia also means that the foreign OTAs will be playing a major role in driving hotel bookings from the international market.

He added that foreign-based OTAs dominate the sector with their worldwide reach and extensive marketing budget.

This is why local OTAs have not been able to compete,” he said.

“Without a large enough marketing budget, homegrown OTAs do not stand a chance and will just die a natural death.”

A homegrown OTA has a vital role

Meanwhile, Mohammed Amin Mohammed Sidek, the executive director of PETRA Digital and chief executive officer of an upcoming homegrown travel booking platform called TravelWalla, echoed the cries for regulations on foreign OTAs.

Ahead of TravelWalla’s launch sometime in Q3 2022, Amin said that he backs the calls by the hoteliers, and also stressed the importance of harnessing the potential of platforms to keep the funds involved circulating within the local economy.

“A homegrown OTA is required to reduce the flow of commissions being paid out to foreign ones,” he told The Vibes.

These amount to billions of dollars where taxes cannot be imposed. These are funds that must be retained in order to further develop and empower the national tourism industry.”

Amin said TravelWalla has successfully raised US$2 million in pre-seed funding, with an additional US$8million in capital to be gained if certain targets are met in the near term.

He also said TravelWalla has appointed three prominent corporate individuals, former Petroliam Nasional Bhd executive vice-president and chief executive officer (CEO) of downstream business Datuk Md Arif Mahmood, and former Lazada EVP and CEO Andrew Gnananantham, as well as Fave Malaysia country manager Gary Yeoh, as advisors.

“Firstly, we position ourselves as Malaysia’s first online travel partner (OTP) and not as an OTA,” he said.

“We will be implementing a zero-commission model, which is the first-of-its-kind in this region.”

He said TravelWalla will be the first OTP that aligns itself to empower hotels to retake control of their rates and distribution channels while giving users the lowest possible rates, and educating them through its destination marketing features.

Amin added that TravelWalla is currently on an aggressive talent hunt, with 50 vacancies available for positions, including data analysts, partnerships and business development, software engineers, pricing and revenue management, digital marketers, customer services, as well as finance and human resources. – The Vibes, March 25, 2022