Strategies to shift bookings from OTA’s to Direct
An area of the travel industry that has been booming in recent years is the Online Travel Agencies (OTA’s) offering a convenient way to find and compare hotels and book online at low prices. In the eyes of most clients, they provide a quick and easy way to book an affordable room for the night. No wonder that over 50% of all hotel bookings are done through online travel agencies. However, the more I research I carried out for this post, the more disturbed I became about particular OTA’s ( Online Travel Agencies).
For the sake of this article, we will focus only on a few of the many sites out there. There are a few different types of OTA’s, such as Agoda, Expedia, and booking.com that are regular booking sites, then there is Laterooms.com, Lastminute.com that specialize in last minute booking. There is also unique sites trying to fill a niche – by providing, for example, a carefully chosen selection of luxury or boutique hotels such as Mrandmrssmith.com and Travelintelligence.com.
The process of OTA’s in the client’s eyes
- Find the OTA’s site
- Select the area and dates you desire
- Compare and choose a hotel.
Easy – Right. Well……. Yes and that’s what they are selling, simplicity. They are well aware people are very busy in their daily lives and do not have time to go from hotel website to hotel website.
So what is the price tag for this level of convenience and who pays?
|OTA||Total (%)||Collected by guest (%)||Collected by host (%)|
Figures collected from various web searches.
Looking at the above table, we can see the average commission collected by these booking sites for accommodation is a whopping 15 – 20%. The way this is collected varies from site to site, some collect commission from the host, some collect from the guest, while others collect from both guest and host
The reason Agoda, Booking.com, and Expedia receive commission only from the host, is that it leaves the customer thinking that they are paying no commission. As we know, some hotels will raise the room rate to cover the charges from the site, thus at the end of the day means a higher price for the guest. If the guest were to visit the hotel’s website to book directly, they might find the price there is more expensive, the reason for this is that these sites force the hotels to sign a contract prohibiting the hotel from selling their rooms at a lower price anywhere else including their own website. This restriction is known as price parity. That is the reason your customer will never find a better price at the hotels’ own page.
A survey made by RoomPlex showed that hotels would reduce their rates if OTAs did not collect commissions from them.
The bigger problem, if you are being charged a high commission and are not passing this on to the guest, then this is eating up a big portion (15% -30%) of your hotels’ profit. OTA’s are focused on proving the best price for customers, as this is how they stay in business, a recent report from J.D. Power and Associates issued a report stating that Booking.com has “the highest customer satisfaction rate of independent travel websites,” mainly due to the competitiveness of pricing.
Heres where the mixed feelings come in, the hoteliers love the reservations that these sites provide but, they dislike it when they have to sell a room booking for a low price. In Addition to this Booking.com recently made changes on how their system operates and forcing hotels to adapt.
Let’s look at two examples from booking.com
- booking.com now reserves the right to automatically resell a room that one of its customers has canceled, the reason for this is to protect their commission,
These issues make the relationship with hotels unbalanced. Hotels might be selling rooms and receiving significant revenue from the reservations that are made through the site, but if they depend solely on OTA’s for their reservations, they have little bargaining power.
No hotelier wants to have their hotel completely booked this year from OTA reservations if they are receiving substantial fees, and finding themselves empty and helpless next year because a significant amount of their reservations only came from OTA’s and they didn’t have any other avenues established.
Hotels need to have a multi-channel digital marketing strategy, to avoid any dependence on any one service for their online bookings.
The action to take and take advantage while the guest in on the property is.
- Put more focus on your own website. Creating a friendly experience and easy to use. In the era we live, technology is vital, and content is key.
- Customer relations. Provide the kind of experience to your guests where they cant forget you. And experience where they leave your hotel, go home and immediately book for next year.
- Card handouts. Give a business card for your hotel, with all information, name, number, and website. If you have provided the right experience when they revisit they will contact you directly.
- Customer love free stuff. For example a small wash bag with accessories, with the name of your hotel/ resort on it of course. They will put things like this to good use and your name stays with them after you leave the hotel.
- Reward system, a free meal or bottle of wine if they book again direct with you using a certain code.