The power of OTA's
Does your hotel rely on OTAs for bookings? Would you prefer to have more reservations made directly with your hotel? What can hotels do to take the initiative back from OTAs and implement a successful direct hotel bookings strategy that will minimise their dependence on OTAs?
In 2017, the American Hotel & Lodging Association unveiled a new campaign designed to spread awareness about the “dangers” of booking a hotel through a third party. The campaign was a thinly disguised shot at online travel agencies (OTAs) and metasearch engines, which have gradually transformed from hotel partners into actual competitors. Hotels such as the Marriot, Hilton and Hyatt are joining the direct-booking campaign with greater intensity by encouraging loyalty sign-ups – which enables them to offer lower rates to loyalty members—without violating rate parity or undercutting OTA prices.
Why is it that online travel agents (OTAs) such as Expedia, booking.com, Agoda and Travelocity, to name but just a few, have gained so much popularity? OTAs these days have become the new norm and it is now becoming rarer to see customers deal directly with hotels. In just two decades, the travel booking landscape has been completely turned upside down.
Prior to 1996, travelers had two choices: book direct or speak to a travel agent. Back in those days, hotels sold to wholesalers, who sold to tour operators who sold to travel agents and finally to travellers. The problem with this system is the transparency; nobody knew and even now, knows how much was / is being paid. With the arrival of OTA it gave control (seemingly at that time) back to the hotel, enabling the hotel to know how much the guest was paying and how much the hotel was receiving.
For years, OTAs and hotels coexisted harmoniously. OTAs raked in profits without having to spend anywhere near the overhead of hotels, while hotels could move unsold inventory and enjoy “free” marketing. In the early days of OTAs, when commissions typically averaged just 5%, the partnership for hotels was an easy decision requiring little or no further thought. In recent years, however, the story has dramatically changed. Not only is the share of transactions booked through an OTA rising, but so is the commission rate per booking. Hotels that enjoyed as much as 25% indirect bookings suddenly discover that they now can be charged upto 30% commissions by OTAs such as Expedia and Priceline. These rising costs and a slow-down in hotel revenue growth can be a two-fold blow to the hotels’ bottom-line.
The reality today is that OTAs are here to stay. They provide customers a swift opportunity to carry out research and compare hotels and there will always be guests who prefer shopping around, despite best efforts to drive them to book direct. In fact it would be unwise to undervalue their importance – especially to fill occupancy in times of low visitor activity. However, your hotel should follow its own strategy when it comes to pricing and distribution. And that means avoiding giving 3rd party channels rates that are lower than that which is publicly offered on your own website.
Hotels that adopt direct booking initiatives that move room reservations away from online travel agencies (OTAs) and other third parties will not only benefit with lower cost but also make it possible to take advantage of important opportunities such as repeat bookings, cross-selling and up-selling, and increased brand loyalty, which all ultimately lead to higher revenues and higher profits.
The Kelvin Hotel in Glasgow for example, in addition to providing those who book direct the best rate guarantee, throws in a complimentary full Scottish breakfast (as opposed to the complimentary continental breakfast when booking through an OTA).The hotel also issues a Kelvin Hotel Loyalty Card which offers the guest 1 free night on the 5th visit. Furthermore, all guests that book direct are entitled to a complimentary Kelvin gift bag full of useful goodies as the hotel’s way of saying thanks to guests who booked directly with the hotel. What it creates here is awareness that booking through the official hotel website will have something different compared to booking through OTA. Besides that, a guest who stayed at such a hotel and receives these perks will leave positive comments on social media which will again influence other web users to book through the hotel’s official website.
Shafeek Wahab – Editor, ‘Hospitality Sri Lanka’, Consultant, Trainer, Ex-Hotelier
|
|
|
|
