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Finding The Balance Between OTAs And Direct Bookings

Feb

2014

While the majority of hotel marketing articles focus on OTAs being too expensive and too aggressive. We find it important to take a step back and look at the bigger picture.

This article is a recap of the second hotel marketing seminar in the WIHP Academy series. Find out when we’ll be giving seminars in your city.

History

OTAs became powerful and efficient due to good work (and a little brand-jacking). Before, hotels sold to wholesalers, who sold to tour operators, who sold to travel agents and finally to guests. Transparency in this markup system was non-existent. Neither the hotel nor the guest knew how much was being paid. When OTAs entered this space, they gave control back to the hotels and guests received a clear picture of how much they were going to pay.

Hotels could now yield their rates and develop a more intelligent pricing strategy other than just a high / low season. 

 

OTAs encountered almost no friction when taking over the online space. Even though users were flocking to the internet, many hotels didn’t have an online marketing strategy in place.

 

Another point that benefits the OTAs,  as well as meta-search sites, is what we call the vertical search. Specialized sites, such as Expedia and Amazon, account for almost 33% of product and travel searches. The user experience of finding the perfect travel destination is much better on these niche sites as opposed to Google or Bing.

 

OTAs were able to become big and powerful because there was nothing else there. They filled a void, that could have been filled over by GDS, Tour Operators or Wholesalers. OTAs just happened to be faster.

 

Most hotels would love to have 100% of their bookings be direct without having to pay commission to anyone. We have achieved this with some clients but it’s not necessarily the best solution and certainly isn’t the fastest. 

 

We find the best balance comes from direct bookings being on par with OTA bookings. However, exact percentages can vary from city to city. For example, the best balance for a hotel in Paris is around 30% direct and 30% OTA. The remaining 40% come from corporate and phone bookings, return guests and some tour operators. Those figures are different in Rome where it’s closer to 40% direct and 40% OTA. 

 

These are not absolutes, but they are a good benchmark for a healthy split. 

 

Why is this a good split? Well consider that Priceline spends over $1 billion dollars a year on marketing and Expedia over $800 million. Being listed on these sites allows you to tap into an advertising budget you could never afford. Of course in exchange, you’ll need to pay a commission and that’s fair. 

Per a recent Google survey, 52% of travelers will visit your hotel’s website after seeing you on an OTA. WIHP also conducted a three-year survey on the billboard effect. We found that over 20% of direct bookings occurred after the guest found the hotel on an OTA. Which shows us, being on an OTA can also increase your direct bookings.

OPTIMIZING FOR DIRECT BOOKINGS

In most cases, the problem hotels have isn’t how to increase OTA bookings, but rather how to increase direct bookings. We’ll be discussing some simple actions you can take in the tips section below. These are actions we take with our clients all the time, which have an immediate impact on direct bookings.

 

In essence, what you need to understand is the word PARITY, but not necessarily rate parity. We mean presentation parity, image parity, text parity, room type parity etc.

 

The classic booking path for a guest starts with a search on an OTA. Then they make a shortlist of interesting hotels and check each hotel website for more information. The user gets frustrated if they don’t find the same room types, names, pictures and cancellation policies. This frustration causes the user to leave your site and head back to the OTA.

Users on OTA sites, will visit an average of 5.6 pages per visit and remain on the site for an average of 6 minutes. We hear of hotels being happy that the time on site increased and the page views doubled. This is not something to be happy about. Guests need their questions answered as fast a possible with as little friction as possible.

 

More details on this below.

OPTIMIZING ON OTA

In the rare case that you want more OTA bookings or your general online booking volume is low, the fastest way to increase volume is with OTAs. 

 

There are a few things you can do to optimize your OTA presence. The first is to hire a professional photographer to take photos of your hotel and upload these high quality photos. We often see hotels using low quality images with wrinkled sheets, crooked pillows and burned-out lights. Invest in good photos and lots of them because emotion is what drives the sale

Write compelling copy about your hotel without sounding like a robot. Every hotel says they have “wonderfully decorated rooms.” Tell the user what’s unique to your hotel. 

 

Clearly explain the location of your hotel, the inspiration for your decor, and how you manage the price point of the hotel. Remember your USP is a combination of location, comfort and price, so be honest and helpful when talking about them.

 

And of course if you want to give it a boost, you can always bump up the commission or make a special offer, but those are measures of last resort.  

5 TIPS

1. Languages :

Booking.com publishes their site in 40+ languages and reaches as many people as possible. If you think English is enough because people read in English think again. When it’s time to buy, people want to understand what they are buying. Not having the fine print in their native language is going to cost you the booking.

Analyze the top nine languages of users on your site and ensure everything is translated into those languages.

2. CONNECTING IT UP:

Connecting your PMS to your Channel Manager and supplying your rates and inventory to the OTAs and Booking engine with a two-way connection has been found by our consulting teams to increase availability by 30% on your hotel website, sounds incredible? Well consider that major OTAs like Booking have a cancellation rate of 30%, if you don’t get that inventory back into your PMS and channel manager, and in turn to your booking engine, it will be sold on OTAs.

3. SIMPLICITY IN ROOMS:

There’s a good reason why the smarter OTAs don’t allow you to create room types and names ad lib. They want simple names that are easy to recognize like Single, Double, and Superior. The Orange, Eiffel, and Empire rooms have little meaning. They may sound fancy, but to busy travelers searching for a double room, it’s just too much to process.

Reduce the complex stuff, keep it simple. Remember when users arrive on your site they are looking for answers. The faster you serve those answers, the better you’ll convert.

4. POSITIVE TERMS:

“Buy now, Pay Now!” is the positive equivalent of NON-REFUNDABLE! It’s also much more friendly for your guests. The same goes for all the terms and conditions. Go through the average hotel website terms and it reads like a lawyer’s cease and desist letter. Turn those terms into reasons to buy. 48 hour cancellation policy can become Free Cancellation up to 48 hours before arrival. If your rate is not including breakfast, don’t call it “Room only” but say that there’s a breakfast supplement of $19.

 

In short, positive language throughout your site will help increase conversion rates.

5. PROTECT YOUR BRAND:

The first thing to do is trademark the name of your hotel. But here is the trick, register and trademark it as the hotel name plus the city. Adding the city name is so important that we even recommend legally changing the name of your hotel. You can either hire an agency or do it yourself. Once it’s done file the registration with Google (trademark it without any logos etc, just the text) that will help you get started. The other way to protect your brand is to outbid OTAs on paid advertising channels.

 

There is a lot more legal work you can do here, but that depends on the budget you are willing to spend.

SUMMARY

The balance between OTAs and direct bookings is different by city and sometimes by hotel. The important thing is figuring out how to use the OTAs and make it a win-win for both direct and commissioned sales. We often see that we double or triple direct bookings for a hotel without reducing OTAs, because the OTA sales remain or increase. Is that a bad thing? Not really. It means that we have managed to increase the occupancy or the ADR and everyone wins when that’s the case.

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Martin Soler

VP Marketing and Sales

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