Rethinking OTAs in an uncertain market

TD Editor
Tracy Dong, senior advisor in Asia Pacific region at IDeaS Revenue Solutions

Tracy Dong, senior advisor in Asia Pacific region at IDeaS Revenue Solutions talks about how hoteliers must properly understand the value and costs when engaging with OTAs in this era of uncertainty.

For many hoteliers, online travel agencies (OTAs) are an accepted part of a distribution strategy due to their marketing power and high customer traffic. However, today’s costs for acquiring guests are significant, and in some cases, OTAs may be hurting your hotel more than they are helping. With 15-25% commission being charged on average for every OTA booking secured, these third-party costs directly impact the amount of revenue hotels can secure from each guest, which can in turn dampen profitability at a time when COVID-19 is impacting a hotel’s ability to generate revenue and every dollar counts. On top of that, many OTAs require a last-room-available guarantee for their channels, which results in hotels losing ultimate control on yielding of inventory.

When engaging with OTAs in this era of uncertainty, hoteliers must properly understand the value and costs associated with the third-party distribution platform. Any relationship weighted in favour of an OTA to the detriment of a hotel’s bottom line needs to be reviewed.

Attract more direct bookings

Given the cost associated with doing business with OTAs, hoteliers should explore all opportunities to grow bookings from alternative channels. Importantly, the most cost-effective online booking channel for a hotel remains its own website. But how can you maximise direct bookings through your website?

The first step is increasing web traffic from potential guests and converting “lookers” into “bookers.” In an effort to attract more website visitors and increase booking conversion rates from this channel, hoteliers need to understand those people who land on their website. What dates are they searching for? What is the purpose of their trip? Where do they search? Collecting this information provides data that can be used to develop targeted marketing campaigns that attract the right type of website visitor—those with a higher chance of becoming a guest.

Hotels can also increase direct bookings by retargeting past visitors and directing them to its own website. When researching a location, potential guests may visit a variety of travel websites and OTAs before deciding where to stay. Hotels need to keep their property on the top of the consumer’s mind and influence guests to book on the hotel’s website. Technology that offers tailored ads customised around visitor behavior or website activity can help achieve an estimated 10 percent return rate on website visits, increasing direct-booking opportunities.

Create a seamless online experience

Today, a greater share of a hotel’s marketing budget is dedicated to attracting more qualified traffic to their own website than ever before, but what if the actual architecture and content on your site prevent rather than enable the booking process? If a website’s booking process is not seamless and secure, guests will book elsewhere. Hoteliers need to ensure their website delivers an enhanced experience with user-friendly features that provide easy navigation and booking; otherwise, the work that went into attracting a potential guest will be for nothing.

Potential guests often visit a hotel’s website for more information on the property and to assess if the property will reflect the experiences they seek. If the hotel website isn’t focused around the needs of the consumer, such as explaining local attractions nearby, and having more photos, videos and reviews than an OTA, website visitors may quickly move on to another property. Hotels may not be able to compete with OTAs on the level of website traffic they generate, but they should beat them at showcasing their own property.

Today, health and safety are a traveller’s top concerns. Therefore, hotels should reassure their potential guests by highlighting the health and hygiene protocols or certifications upfront on their website.

Meanwhile, independent hoteliers need to think about altering site content that appeals to the new targeted audiences. For example, promote staycation offers with various amended activities following social distancing orders. A hotel’s own website is the perfect channel to showcase their property’s personality and unique selling points. Hotel websites should also incorporate user-generated content from social media, such as user ratings and reviews, to assure guests of the credibility and service standard of the hotel. Since over half of online bookers search online reviews before making reservations, it is critical to provide online reviews as a component of website content. A hotel’s website must also be informative, multilingual and regionally customised—enabling customers to be assured of the credibility and service standards of the hotel. Optimising their website for viewing on-the-go with iPads, other tablet-sized devices and smartphone compatibility is an absolute must to meet the expectations of tech-savvy travellers ready to embark on their next experience.

Refocus marketing, reward loyalty

Hotels often focus their marketing spend on acquiring new guests to broaden their customer base. However, by doing this, they can overlook a major revenue stream that can be engaged at a much lower cost—past guests. Email marketing allows hotels to communicate with their past guests at specific times throughout the customer journey, such as prior to arrival, during their stay and after checking out.

Additionally, hotels have valuable insights (and data) on their past guests, which means they can send specific messaging to these individuals (e.g., promote welcome-back packages, outline the hotel’s COVID-19 cleaning and safety protocols, and provide special offers and incentives that help generate ancillary revenue) to drive direct bookings and avoid having to rely on costly OTAs to support occupancy. Hotels need to think beyond guest rooms and leverage their entire customer relationship management system database, including guests who have been to their restaurants or day spa. With rooms’ demand being depressed, hotels could consider leveraging their popular restaurants to drive web traffic. Total revenue management and profit optimisation are more important than ever, and hotels need to consider their whole property to maximise opportunities.

OTAs can still support your business goals

Hotels need to understand their true channel costs. Having reports on the cost of guest acquisition by channel partner can help hoteliers to negotiate better contracts with third-party OTAs, gaining flexibility in managing rate and availability parity. This information builds a basis for more profitable decisions in the short-term and more long-term channel-value-centric decisions.

It should also be stated that OTAs are not all bad. They can introduce hotels to an audience of potential guests a property might never have a chance of reaching—especially in lower demand periods like the industry is currently experiencing. Hoteliers heavily invested in OTAs to secure bookings might consider ways to use those platforms to better support future business. For example, to increase both new and return business, intelligent hoteliers are letting OTAs handle the initial capturing of guests and then implementing strategies and incentives that ensure those guests book future reservations directly with their hotel, eliminating ongoing third-party booking expenses.

Reduce third-party costs, maximise direct business

In today’s uncertain COVID-19 operating environment, every dollar counts. Any method to support growth in guest bookings should be explored, and every guest secured should be evaluated to determine their true worth. With costs associated with acquiring new guests through OTAs increasing, hotels need to consider their most effective booking channels and maximise direct bookings.

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