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Getting the balance right: are online travel agents eating your lunch?

Getting the balance right: are online travel agents eating your lunch?
Dec.19, 2019
by Hotelbeds

Getting your distribution mix right is vital. Large OTAs can help you to increase your occupancy rates but in the process, they may erode your margins. So, how can you increase your direct hotel bookings and maintain your revenue per available room (RevPAR)?

Full occupancy is the holy grail of the hotel industry. But achieving it is never easy. There is a constant struggle between direct booking channels (your website) and online travel agents (OTAs). OTAs can offer you greater visibility and reach than you could ever achieve on your own. But beware of cannibalization. Your website is a strong branding channel and the only online distribution channel that generates direct sales with no third-party commission. However, when considering your website as your primary channel for bookings, it is important that you bear in mind the marketing costs linked to generating relevant traffic to your website.

There is a valuable third option, Bedbanks or wholesalers, who can help you to extend your reach and target international market segments that are hard to access via the other channels.

Turning your OTA bookings into direct bookings

OTAs charge considerable commissions, often between 14% and 20%. This can dent your profit margin, which is why it is important not to rely too heavily on OTAs if you can avoid it.

Direct bookings will save you the high cost of commissions and will also mean that you have full access to all your guest data. The higher the proportion of direct bookings for a property, the higher the profit margin. But, getting direct bookings via your website may not be as cost-effective as it first seems. To secure bookings through your direct channel requires major investment in traffic generating techniques to compete with the large OTAs advertising power.

However, B2B distribution channels such as Hotelbeds are compatible with your direct strategy, since they are targeting a different set of guests, who will have no effect on your direct channel.

Here are some ideas to boost your occupancy by reducing the dependency on OTAs.

1. Integrate booking engines to increase direct hotel bookings

It goes without saying that the best place for guests to book is your own shop window, otherwise known as your website. Some cloud property management systems allow website booking engine integration from within. This means that web visitors have real-time information on availability, room rates and so on. It’s an easy way to increase direct bookings. However, with third-party booking engines, the hotel often needs to integrate a booking widget, which carries a fee. Beware of these hidden costs, which occur not just in the form of commissions but in added staff costs and contract requirements. These can include agreeing to room availability and rate integrity clauses, a loss of direct relationships with your clients and building their own brand at your expense.

2. Work with bedbanks to access hard to reach customers

Bedbanks are often a great way to reach international travellers, who are often hard to find through other channels.  In fact, 60% of bookings coming from the Hotelbeds network are non-domestic, with the booking originating from another source market. Bedbanks drive incremental high-value bookings from B2B travel trade sources such as tour operators, travel agencies, airlines and point redemption programmes.

 3. Be seasonal

Remember your peaks and troughs and don’t use the same approach with OTAs all year round. You might want to try a more seasonal approach to OTAs. Getting a healthy base of early bookings can be a great way for your hotel to optimize its pricing strategy for its regular booking window. You might want to consider giving specific inventory to those distribution channels with longer lead times. Hotelbeds guests generally book earlier than guests coming from large OTAs and generally offer longer lead times than other channels. So, one approach could be to go seasonal. If you have peaks and troughs in your bookings calendar, consider changing your approach. If you know your higher value units will be sold out during peak months, don’t promote them on the OTAs. Instead, use them to get visibility with your lowest price inventory and then draw potential customers into your own website, where they can see other room types.


 

4. Remember your reputation is on the line

An excellent guest experience is always a top priority for a good hotel. The better your online reputation, the better chance you have of getting direct bookings. One of the best ways of communicating your reputation is by partnering with trusted review sites such as TripAdvisor.

Every time a guest leaves a positive review on your website, it will also appear on your TripAdvisor page (and the same in reverse)
That’s why you should always respond to reviews, whether they are positive or negative. This sense of responsibility encourages trust in your business
Accept responsibility if you get it wrong. And give customers an incentive to come back so that you can get them back on side. Guests love it--and so do people who read those reviews

Key fact: 98% of travellers read hotel reviews and for 80% of travellers reviews are extremely important in making a reservation. 

All that glitters is not gold

While at first glance it may appear that direct channels are the obvious choice, beware that everything is not always what it seems. In many cases, the hotel will need to integrate a third-party booking widget and these have fees attached, which can be a disadvantage. Additionally, it is important that you bear in mind the marketing costs linked to generating relevant traffic to your website.

It requires specific expertise and experience to get the direct channel right. If done properly, it can be a very efficient route to revenue. But it is difficult to scale and, if done wrong, it can be a very inefficient way of spending your marketing budget.

Find out more

To find out more about how different channel distribution strategies can improve your hotel’s performance, check out the Hotelbeds guide to hotel distribution in 2020.

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Understanding Hotel Distribution in 2020

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