Broken down, how OTAs are eating hotel business

Fact – online travel agents are taking everyone’s lunch, apparently charging pretty high commissions and have become pretty good at the whole hotel distribution game.

No discussion about OTAs and hotel distribution would be complete without at least one mention of Booking.com (yes, we know there is debate about whether it’s strictly speaking an OTA).

The point is, how and why, has it (and others) become so successful?

Step forward Jenny Taaffe of iZest who recently gave a fascinating analysis of some of the tools and messages an intermediary such as Booking might employ to convert the customer. It’s not rocket science but it makes for a pretty interesting read.

Speaking at Enter 2014 in Dublin last month, Taaffe reminded the audience that customers go to OTAs to simplify things and get access to choice. She then launched into a breakdown of the home page.

  • Nice clear ratings – stars, text and numbers – customer can’t go wrong surely!
  • Discount messages
  • Thumbs up symbols – providing the customer who is not sure which way to turn with reassurance

hotel distribution

What else?:

  • Latest booking 20 mins ago
  • There are 32 people looking at this property

It’s interesting to note that when you click on the property, the number of people looking goes up and the time since the latest booking comes down. What this does is validate to the customer that he or she is looking at a good option and begins to create a sense of urgency – better book that hotel before someone else does!

Taaffe describes it as ‘sub-conscious positive reinforcements’.

Best price guarantees and ‘savings’ messages are also dotted throughout.

hotel distribution2

And, that’s not all. There are further carefully worded phrases and tools to help the consumer dive for his or her credit card. Free booking and free cancellation are some you often see, again providing the consumer with peace of mind that they can change their mind.

The reality is that the cancellation policy tends to be no different than if the consumer had gone to the hotel direct and you don’t tend to pay a booking free when you phone a hotel or book on its brand website.

Anyway, then the same messages are repeated again such as the number of people looking at ‘this hotel’ and the ‘last booking made’ while ‘book now, it only takes 2 mins’ button is added and then, a ‘confirmation is immediate’ message. Taaffe says:

“They (the OTAs) are doing everything they can to keep customers on their sites. It’s all very reassuring, like a pat on the back.”

hotel distribution3

And, when the customer chooses that room, he or she receives a ‘best price – you just got it message’ as well as various other ‘look how clever you are’ type affirmations.

The point of all this, as Taaffe says, is that when you compare the experience with the average hotel website, there is little of the same reassurance, the explanations of terms and conditions and often no reviews and ratings.

So, what can hotels do?

They often bemoan the power of the OTAs and how they need to fight, to claw their business back, so here’s a few of Taaffe’s tips:

  • Tell them why to book on your home page.
  • Keep pricing simple, less text/jargon, think about creating three simple options with names with ‘single short innovative lines’.
  • Tell them what you won’t charge them.
  • Show and link to relevant reviews.
  • Reassure, reassure, reassure – that’s what the OTAs are really excellent at.

And, she points to research from Cornell University revealing that consumers are also going to hotel websites as part of the purchase cycle so something is going wrong.

NB: Cat image via Shutterstock.

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About the Writer :: Linda Fox

Linda Fox is managing editor for Tnooz. For the past decade years she has worked as a freelance journalist across a range of B2B titles including Travolution, ABTA Magazine, Travelmole and the Business Travel Magazine.

In this time she has also undertaken corporate projects for a number of high profile travel technology, travel management and research companies.

Prior to her freelance career she covered hotels and technology news for Travel Trade Gazette for seven years. Linda joined TTG from Caterer & Hotelkeeper where she worked on the features desk for more than five years.

 

Comments

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  1. best hotels

    Have you ever thought about adding a little bit more than just your articles?
    I mean, what you say is important and all.
    But think about if you added some great visuals or videos to give your posts more, “pop”!
    Your content is excellent but with images and clips, this site
    could certainly be one of the very best in its niche.

    Superb blog!

     
  2. Tony Gomez

    Totally agree. OTA commissions add up to a substantial amount. You highlight the issues extremely well. I believe that with the right online tools such as database driven dynamic pricing tools, and more careful website marketing, hotels can manage a substantial shift from otas to direct bookings. I represent a technology company that is targeting hotels to stand up on their own and be less dependable on online travel agencies.

     
  3. Kelly

    For two years as a small start up budget hotel – I’ve survived without them. Only just. I caved in and listed with booking.com for a month last year and it was awful. Our own website is thorough and lists exactly what we do and don’t offer. (e.g. no ensuite bathrooms, only shared) Booking.com refused to detail this properly on our listing page as they felt it was ‘too negative’. They euphemistically wrote something like ‘guests have access to shared bathrooms’.
    From experience, this is not enough. Not having your own bathroom is very polarising; a total deal breaker for a great many people. Sure enough I got my first guests and they expected their own bathroom and a whole host of other things because the site is designed not to be read thoroughly but booked as quickly as possible. Grumpy guests are often also rude (they’re not getting what they want) and that makes for grumpy staff – no one likes being yelled at. I’d rather have a few empty rooms than guests like that. The guests I get from my own website are amazing, and love what we’re doing. Plus I don’t have to give away 20% of each sale. It can be done, but it’s definitely not the easy route. A decent website/branding/social media presence are essential.

     
  4. Julia Biedemann

    Booking.com and other OTAs are utilizing hotels to ultimately only profit themselves. I think that it’s time for the hoteliers to stand up to such booking bullies and revolutionize the online booking industry! We as customers have to find small scaled booking platforms that essentially give big OTAs such as Booking.com a run for their money. Bidroom, for example, only asks for 2% commission. It works WITH hotels does not fight against them. Best thing is that they guarantee 5% discount on hotel prices.

     
  5. chester

    Booking.com is eating everyone’s lunch. As a customer, they give me many reasons to keep coming back, namely for their easy cancelation policies, reviews, easy booking, and yes, all those reassurances that I’m getting the best price works too.

     
  6. James Gancos

    I commented on this article when it was first released (see below) and mentioned that my company’s offering was still in stealth mode. I’m happy to report that we are now live and accepting charter member hotels. Please visit http://www.universalpoints.com/hoteliers for some more information on how we plan to make direct bookings the norm once again.

     
  7. Colin Brownlee

    @stuart. You are right. It never ceases to amaze me either.

     
  8. Stuart McD

    At end of the day, bells, whistles, gimmicks & dodgy practises aside, Booking & Agoda are dead easy to use – while an awful lot of hotel and guesthouse/hostel websites deliver an absolutely ghastly user experience that’d make even AirAsia blush. It never ceases to amaze me how many hotels seem to thrive on making it as difficult as possible to give them money directly.

     
  9. Mohit G

    Great article. I run a boutique hotel in Goa,India and 20% of all our bookings are effected by OTA’s. Almost, 80% of them booked through OTA’s and rest 20% by calling the hotel find out if we have a better deal.
    I agree with Linda on the fact that OTA’s are eating out of our ever shrinking profits. But, hotels are not homogeneous commodity and the ‘age of hotel’ also plays a major part in marketing mix.
    A hotel like ours which is located at a leisure destination with 400 other such hotels ( Very few of them have unique propositions to market directly) can not possibly acquire clients directly without incurring hefty costs.
    Also, the fastest way for a new standalone hotel to fill its room nights is to approach these ‘guaranteed business’ OTA’s and offer them more commissions for a better positioning in the website. It has always worked for us.

    I believe hotels, after an existence of 5-7 years, have enough clients, reviews and experience to take on the OTA’s but before that it is just not possible ‘not to take the OTA shortcut’.

     
    • Colin Brownlee

      Good point. It is somewhat comforting to know the OTAs are there if you need them. If I was starting out again, I would use them with a strategy to wein yourself off of them. Exhortibant commission rates of 25% combined with pressure to discount, just push the margins to nothing.

      I participated in a groupon deal with an agency. Never again. On top of getting almost nothing for the rooms, we had virtually little restaurant, bar and tour sales. Even if I had a chance to woo the clients back, I would not want them.

       
    • Norma

      @Colin Well said. When you are new, use the OTAs, but with a strategy to move them to repeat as direct guests.

      @Mohit Almost every market has competition such as yours. It boils down to “how delightful was your service” this time for the guest…
      – to make her come back again
      – to make her come back as a direct guest and not via OTAs
      – to make her share your experience on social channels

       
    • anitha

      Hi Mohit, can you please get in touch with me.

       
  10. Philip J Milton

    But there is plenty of deceit too and someone should do something about that. The prices aren’t ‘the best’ but simply the rates which the hotels use themselves. There aren’t only ‘last 2 rooms available’ but just the last few the hotel may have made available for the site at that point. Hotels are allowed to self-assess for stars – what a joke!

    Booking.com boosts your rankings’ position according to the higher commission you pay it – is that really an independent review site?

    Reviews – not authenticated and owners have no right to reply nor seek removal of factual failings either. We were summarily struck-off for approaching a customer over just this matter. So far we have had not even an acknowledgement from Booking.com nor recognition of the defamation and its joint liability in this regard.

    The public (and hospitality businesses) need better protection and clearer facts and information.

     
  11. William Gallahue

    The reason OTAs convert really well is that they run on lower margins that force them to innovate or else the business model collapses. That’s why they focus so much on conversion and conversion tests because any bookings they can keep from funneling to the brand site is a huge win for them.

     
    • Dorian

      William, even by their own accounts the largest OTA’s have the highest customer acquisition costs in the industry. Sure, they concentrate on conversion but not in keeping with their prolific advertising. Their primary aim is market share.

       
  12. Timothy O'Neil-Dunne

    I think there is a simple fact that some of the comments have overlooked. Its a buyers market out there for hotels. (Unlike the airlines which are in general a supply side market). You need aggregation of some sort. Like Murray – i ignore the little “pats”. I do spend a lot of time on Booking.com and its proved to be good place to search and buy. I do think the days of the OTA in hotels are numbered as the meta search chaps do a better job over time. The brands suffer because despite their strength – the time taken to search across brands is too complex and too long. Thus its a natural bias for the OTA. Expedia’s bulk and cash vs Priceline’s bulk and cash – not a fair fight for everyone else.

    Cheers

    Timothy

     
  13. Derek Andrew Spisak

    I still think that all of the cut-ins, guarantees, slot toppers, etc which could be added to a direct website merely point out the same dollar value as comparable OTA.

    What is still missing is how a guest even comes to know your property exists, whether in a major metropolitan city such as NYC or the foothills in Mongolia. Then how many hoteliers will ensure that language, both grammatically and contextually will be in wide diversity of languages, also that phone assistance is available in the same diversity of languages.

    Further, how can a hotel distinguish itself as an ‘ombudsman’ in the event of their disconnect in sales promise to sales delivery?

    You must think beyond the screen to understand that the majority of your available and valuable guests that are obviously beyond your well trodden hinterland paths are not even giving the hotelier a peep of interest because more than likely, the hotelier nor the potential guest have been ‘introduced’.

    That is the beauty of the “Pay for Performance” models, coupled with editorial and curatorial strength, transactional ability across language, government and currency barriers, plus a reach across the globe both in width and depth that combines a market by market knowledge of dynamics and ability to tie it up into potential higher revenues for hoteliers when, again, OTA’s are used as acquisitional marketing arms and billboards for bringing eyeballs, mouseclicks, and telephone calls direct to you.

    Again, will you speak their language, understand the real fears and needs of the guest, and truly offer the most ironclad guarantee of satisfaction if you fail to deliver, or even if the consumer fails to choose wisely.

     
    • Colin Brownlee

      Very informative. Many things I never thought of. I still feel fortunate enough I have not had to go there. But I always know that marketing channel exists should I feel the need.

       
  14. Tom Keller

    Very interesting article. As the owner of a very small lodge in Costa Rica I certainly feel the pressure of OTAs. We tried booking.com for a few months and soon realised that for us it was a mistake. We are used to being in contact with potential guests and used to giving a very personalised service. Most guests come for 6 or 7 nights and especially repeat guests come for longer. Suddenly we had reservations for 2 or 3 nights from people who did not react to e-mails and who, when they arrived, very clearly did not have a real idea of what they had booked. As a consequence, guests were less happy than what we are used to and we missed reservations from other potential guests for longer periods.
    The power of OTAs shows also clearly on Tripadvisor where the space next to a business listing has been sold to these OTAs. A visitor to Tripadvisor, looking for accommodation will be easily tempted to follow suggestions from OTAs and be lead away from booking directly.
    Marvellous, a business pays Tripadvisor for a business listing to see potential guests either being drawn away or tempted to make the reservation through the OTA.

     
  15. Lukas Vermeer

    “[…] and you don’t tend to pay a booking free when you phone a hotel or book on its brand website.”

    Just to clarify: Booking.com does NOT change any booking fees.

     
  16. Charles J

    OTA is big business and, as in every market where there is money to be made, there will be sharks waiting. The BOTA’s (big OTA’s) play it smart. These guys are not per se hoteliers, but common business people who combine opportunities, a pile of money, the right advisers (read: seasoned hotelier experts) and the right implementers (read: IT development).

    While their bait is the buyer in many more ‘civilized’ areas, it’s different in upcoming markets. In these new markets (like SEA for example), their bait is not the buyer, it’s the producer. Lower educated/experienced executives (frequently pushed by the owners) tend to go for short term success a.k.a. brute occupancy.

    Many SEA based hotels generate another big vaccuum. They often are especially built for short term production. Huge competition and room rates often don’t match the operational costs. They’re built for generating – some – money. At the end it doesn’t matter how much, the increase of land price is far more than potential operational profit anyway.

    The BOTA’s promise to produce, but in many occasions they’re actually stealing.
    A business model where both the supplier AND the buyer is considered bait, is a dream business.
    An economy where many (underexperienced?) hoteliers prefer occupancy rates (short termed vision) above profit (slightly longer term), is thriving BOTA’s to a level where they become the virtual owner of the hotel.

    Google search results are infested with BOTA’s, both on level of ‘honest’, and more ‘pirated’, sneaky and disguised SER. Many BOTA’s run a wide network of ghost sites. It’s a well kept secret that BOTA’s do everything what’s possible to avoid direct bookings by using both white and black hat SER poisining. BOTA competition is only feeding this phenomenon. Basically BOTA1 rather has BOTA2 running away with the booking, than the customer gos direct.

    Google doesn’t mind. They’re an advertising agency and they do get their advertising money from the BOTA. BOTA competition just fuels up the PPC/PPI rates, and many hotels don’t buy online ads anyway.

    The hotel sites don’t help this bad situation either. They’re lacking transparency and they’re way too technical. And why improving it, BOTA is producing more anyway, nah?

    The fact is that it’s all too little too late. Guests are looking for the best deal and hotels need to pay staff salaries today to keep themselves in operational state. Remember the loss of profit in the music industry because of MP3’s? We’re in the Napster era now.

    The iTunes of the hotel industry will come eventually and will offer a unified platform with honest comissions. Sadly, many hotels won’t be around nymore to witness that.

    Until then, the pirates are loothing freely, they do it legally, and you can’t do anything about it. And it’s not just about you – fighting them would require a significant percentage of the market to join the war and that’s just not going to happen. Current economy is just not allowing many hotels to risk the battle.

     
    • Dorian

      “fighting them would require a significant percentage of the market to join the war and that’s just not going to happen.”

      It already has. There’s a minor revolution sweeping across Europe. .

       
      • Charles J

        If the battle is already started that’s a good thing. But there are a lot of opportunist wannabe’s around that are happy with some crumbles. How many request does a common hotelier gets * every day * to be listed/featured in yet another small OTA startup? Fighting the big ones requires joining forces. Combine several 2014 buzzwords (joint initiative / collaboration / open source / community / crowd funding / foundation / wiki style) and just then we might have a winner.

         
  17. Brian Friesen

    Love this. Hoteliers are certainly going to need to step it up to compete with the big OTAs if they want to regain control of their inventory. That said – i’m not so sure the addition of positive reinforcements through the booking process, and events to create a sense of urgency are really all that revolutionary or game-changing for OTAs. Surely hotel brand sites can adopt tactics like this to keep up (they’re starting to), and as long as the booking engines that power independent hotel reservations systems can keep innovating, the hotel sector shouldn’t be left too far behind in terms of an optimized sales funnel. The real danger for hoteliers is obvious – an unhealthy reliance on OTAs that charge high commissions and a failure to diversify and focus on driving direct bookings.

    Like a lot of people in the travel startup space, I came from the hotel world wanting to build a “different” kind of OTA. Direct booking model – reasonable commissions – timely and friendly service. It hasn’t been easy. Customer acquisition has been our greatest challenge, especially with a limited budget. But we have something the OTAs don’t – a model built with hoteliers in mind – and it’s finally starting to pay-off. Happy travel startup-ing everyone.

     
  18. Loizos Maxoutis

    The OTA are MASTERS in Marketing ! That’s simple.

     
  19. Dorian

    There are lots of unqualified notions in this article.

    1. Is there a debate as to whether Booking.com is an OTA? That’s the first I heard of it. There’s a debate as to whether it is acting as a true agent in legal terms but what else is it if it’s not an OTA?

    2. As Murray noted, the high pressure sales environment on Booking.com is most likely a turn-off to many people. For all we know, it inhibits conversion.

    3. Just because Booking.com is huge and growing it doesn’t mean that it’s the one to watch in terms of design and functionality. What we do know about the company is that it spends a phenomenal amount on advertising, actively prevents hotels and rival travel agents from undercutting it, and uses a best price guarantee from discouraging customers from looking elsewhere. I’d say those reasons alone most likely count for the majority of its growth.

     
    • Linda Fox

      Thanks Dorian, great comments.

      the high pressure environment is interesting, I wasn’t buying when I was putting the story together just getting the screenshots together and yet I did feel a certain sense of urgency bizarrely! I’d love to see an eye-tracking map on some of those elements to see if (as Murray says) you can ignore them. Also, worth mentioning that Booking.com was just the example used in the presentation at Enter 2014 and as we all know, there are many others.

       
      • Charles J

        Eye tracking is a great tool. However banner-blindness doesn’t necessarily is a bad thing.
        Banner-blindness could become BS-blindness where buyers read through the crap with only the nett price box in eye sight.

        Visitors with certain content blindness have in general higher IQ. Or at least they think they have. They are in a state of feeling that they’re more smart than the system and therefore are entitled to those best possible rates.

         
  20. Darren Craig

    Some great conversation in the comments and I hope it keeps going. I’ve just finished teaching an online course about your overall online presence in tourism and hospitality and I intentionally left the website Until the end to reinforce the guest journey to booking online. There’s too much money spent on web development without thinking about some of the tweaks that can be made to try and convert lookers into bookers. Obviously there’s offline processes to back this up too…like using those customers emails to boost reviews etc.
    Some great insight below.

     
  21. Amit Saberwal

    Interesting Article and some great comments Linda.
    Booking.com is the main reason that Priceline has a US$ 58 Billion market cap. They are obviously doing things right and it makes perfect sense that hotels should adopt some of their best practices as mentioned in the article.
    I was a hotelier, turned OTA (with NASDAQ listed Makemytrip.com) in my previous assignments. Having seen how OTAs work from within, l am convinced that there is no way hoteliers can ever ‘compete’ with them other than on price. It is an ever evolving science. As consumers are using new ways to access the net across multiple devices and over different sessions, things are getting more and more complicated. OTAs run hundreds (yes hundreds) of concurrent experiments a quarter. When was the last time a hotel ran some AB tests on their site? The point is that the OTAs are here to stay and are thriving. Hotels that have a naturally high demand (good Tripadvisor reviews and pricing-therefore good conversion) would always be wooed by OTAs. Two similar hotels in the same vicinity could be paying different commissions to the same OTA. As a hotel you can stand firm by having a healthy mix of business from across channels, relationship with different OTAs and more importantly your own site. You would end up paying hefty commissions if you are too lazy to work hard for your own business and have ‘outsourced’ online marketing to OTAs One would end up doing this in any business, where one distributor becomes too powerful.
    Though I was an OTA for 8 years I continue to be a hotelier at heart and am deeply passionate this situation.

     
  22. Murray Harrold

    I use booking.com A LOT. I ignore all the “last room”, “this many people looking…” and all that stuff – perhaps because as an agent, I am immune to that sort of thing but perhaps also because I know a lot of it is rubbish. Many clients also treat this sort of “encouragement” with an element of disdain – to the extent that it works in reverse: the more you tell me it’s the last room, the more I know you are talking a load of twaddle. I would venture to go further. Many people actually resent anything perceived as high pressure sales – at least, many Brits do. I cannot vouch for other nations … from some of the “never use a sentence when 3 paragraphs will do” American selling technique, perhaps in the USA it does work. What one should never forget, is that just because something may work in the USA, does not mean that it works in the rest of the world – indeed may have exactly the opposite affect in other countries.

    There is a more insidious side to this, of course. Online hotel booking agents can go to 17% – much more than selling through a hotel room through a GDS or a travel agent. Further, the pressure to offer “the best” rate to a big hotel booking outfit – and not to any other site – is great – to the extent that the Office of Fair Trading has launched a formal investigation into price fixing in the online sales of hotel rooms.

    What one has to remember, is what is at stake. Many of these hotel booking outfits have spent millions of dollars/ pounds/ yen/ flavian pobble beads on the site on the staff on the advertising – and they have to shift the rooms to get the payback…. so, some arm-twisting is almost inevitable. Of course, in the days of travel agents … hotels were able to get better money for their rooms (paying 8-10% commission, not 17%). But then along came the internet.

    And they saw that it was good. And they said unto themselves “Lo, this interweb -thingy shall bring unto us many people. And we shall fill out rooms. Yeah, unto the stable shall we fill them.. Oh! Hang on! ….

     
  23. James Gancos

    I’m a long-time hotelier having been GM of 3 hotels and Hotel Manager at 2 hotels, plus some corporate experience.

    I recently left to address this exact issue because I care deeply about the industry. Not only do OTAs charge exorbitant fees, but they also get between you and your guests which prohibits contact before arrival. This makes it harder to deliver the personalized service that today’s traveler craves.

    I’m working on a startup that will encourage and facilitate direct hotel bookings by providing a 5% rebate for guests who book DIRECT (or through a traditional travel agent who supports you). There will be no violation of the Best Rate Guarantees within your OTA contracts, since this concept is already in the market in the form of the loyalty programs that all the major brands have been using for years.

    It will also help increase business from business travelers and meeting planners – which really love their rewards. And by the way, you won’t need any technology integration or special booking codes (an industry first). This service will be available for any independent hotel.

    We’re in stealth mode until we launch the service the end of February. If you’re interested in learning more, please contact me at gancosjames@gmail.com.

     
  24. Chris

    Having been in hotel management for a number of years and now finding myself a part of an OTA, I have to say that the amount of money available to OTAs to market themselves (and in turn, the markets and then the properties) is astronomical in comparison to those that the individual properties plus commerce boards plus brands may have to do the same. A necessary evil, perhaps – but what isn’t dictated by marketing? A property in the middle of nowhere with an ADR of 30/per night has a very limited, if any amount of money to spend on marketing. OTA comes in and allows this property to be seen by hundreds of millions of people (for a fee). This article takes into consideration why the OTA website is successful, but what about the initial search?

    I couldn’t possibly know there exists a phenomenal 30 room boutique property in the middle of Madrid without the assistance of an OTA (and I know all the channels to take). Step into this with the mentality of someone who knows nothing of the hospitality sector – the chances are almost non-existent that this property will be booked.

    As far as commissions go, how much is the property allotting to marketing? Market research? STAR reports are pricey. OTA market managers will sometimes divulge a lot of critical market info that can be useful in your revenue strategies. On top of the marketing. On top of their affiliates. All for a xx% commission. All in one package. Convenient. (Sometimes) negotiable.

    Doesn’t sound like a bad deal to me.

     
    • Colin Brownlee

      Ok… Fine. But to take my brand name that I have worked to build and then use it to bypass and encourage people away from website, no…. I think it’s a really bad deal. And this is one the main reasons I won’t list with them. I also don’t want an OTA booking option to come up when my upgraded listing which includes a direct link to my website.

      If anyone can afford to hand over 25% to a company for referring them ( in many cases stealing) a customer, you are charging too much.

      I can not afford it and maybe that is why I have 90+% occupancy. I intend on doing whatever it takes to keep it that way.

       
  25. Frederick Buhr

    Booking.com and OTAs give a better online experience than Hotel chains because they are fixated with the customer not the inventory. They are also quicker and more nimble when it comes to designing, testing and implementing changes.
    On the other hand, Hotel chains are better at retaining customers than OTAs thanks to their expansive loyalty programs.
    When the ultimate goal of a sound marketing strategy is to create the highest lifetime value per customer,
    does it really matter if one acquisition channel does a better job than your own as long as its cost is under control?
    My advice to hotel marketing teams: add a lot more social media to your loyalty programs, emailing offers and point status is not enough…

     
  26. Thomas A. Gardiner

    OUCH… Linda has put OTA ‘salt’ on the Hospitality ‘amputation’ !! DIRECT BOOKINGS IT technology is being achieved via Banks-Pinpoint Loyalty Management & Marketing programs directing participating merchants to do business with the Bank’s Credit Card Members DIRECTLY !! NOW… The ‘disruptive’ Question is “R U an EARLY ADOPTER or a Me too ?”

     
  27. daniel

    Good article, but I don’t like the title. It feeds on “hate love” relationship hotels have with OTA’s. The title should rather read: “How OTA websites are better than yours and what you can learn from them”.

     
  28. peter picataggio

    In years past the management team and myself have talked about getting rid of the OTA’s but we just never really put a plan into action.

    This year, 2014, we ( management team ) made a decision to start stripping some of the OTA’s away.

    We started with Expedia, yes the 800# gorilla.

    The amount of power we as hoteliers allow Expedia to have over our business is perplexing on one hand and a crime on the other.

    Their contract allows them to do things like take 10% of the rate if they package it. They are allowed to take a % of rooms you give them and put it into a packaged rate.
    If they should find a cheaper rate on your website , the language in the contracts allows them to go match or 10% cheaper.
    They dictate walk policies and so forth as well.

    When you sit back and read the FINE DETAILS in an Expedia contract ( I am sure the other are similar ), they are really running your business..

    If you do some simple math you really start to understand the cost of doing business with the OTA’s is absurd.
    Room Rate = $100.00
    OTA Margin = 15% to 30% ( Depends on OTA and your contract ), Lets say 25% for this example
    CC Fee = 2.5% ( some might be a tad higher some might be a tad smaller , 2.5 is a safe bet )
    Back Office Time : $5 ( a number must be factored in for the back office to audit you OTA’s and Travel Agents )

    In the end that room was ~ $68 that you sold it for…( why to take that $32 and put it into marketing, better website design, better messaging, etc.. your own brand )

    When I start looking at Real numbers like my over simplified example above I start to feel duped…

    Well my fellow Hoteliers it is time to take our products back and not let others dictate how we do business.

     
    • Colin Brownlee

      Great to break it down to hard numbers. Why not spend 10% of your gross on customer experience and marketing ? I am very aggressive with marketing and I have been able to withstand signing up with OTAs. I have customers ask me about booking through booking.com and I just tell them I would have to raise the rates just to accommodate it. Customers are not aware of huge commissions these OTAs demand.

       
      • Ken Powler

        I’ve seen your site and know of your business. You need a lot of help, it’s like you’ve been out of the loop for 10 years. Dated. Dated. Dated.

         
        • Martin Rusteberg

          the site is by buuteeq 😉

           
        • Colin Brownlee

          For a small hotel, I am very happy with Buuteeq websites for hotels. Maybe you could elaborate how Buuteeq websites are so outdated and why you feel my business needs lots of help? #1 on TripAdvisor for 5 years running on whole Caribbean Coast of Costa Rica.

           
      • Peter

        @Colin,

        EVERYTHING that is wrong with BUUTEEQ is listed in the article below:
        http://www.hospitalitynet.org/news/4066013.html

        Take control:
        1. Hire a web designer
        2. Get a good hosting solution provider
        3. Work with freelancers to do your SEO and site optimization projects

        Btw. You just sold your soul to the Devil you have been fighting so hard 🙁

        Cheers,
        Peter

         
    • Peter Loebel

      If some one need a bit help to calculate. 😉

      Profit – Commission (What if?)
      http://www.travel-web-services.com/en/TheHotelProject/ToolsProvision
      and

      Direct distribution and online portals (OTA) – Comparison
      http://www.travel-web-services.com/en/TheHotelProject/Tools_Direct_Distribution

       
    • Norma

      @Peter You hit it right. As a startup focused on growing Direct Bookings, we have been advising the same to every hotel we meet. If you are going to lose 30% from your profit as commission outgo – why not *invest* a part of that in growing your direct channels? We have a free calculator online to help hotels find the value lost as 3rd party commissions: http://hotelmarketingclub.com/profit-leak-calculator/

      Do NOT fill rooms ‘somehow’ – it’s bad strategy or an act of desperation. Instead, find the channels with lowest cost per booking – and grow them. After all your goal is not filling rooms – it is to fill rooms to BE profitable as a business in the long run. Moreover, the cost to grow your direct bookings is less than what you lose with OTAs.

       
      • Rohit Shukla

        @Norma Let’s a hotelier clearly knows their occupancy costs & has a formula to project based on occupancy levels.
        1. Would you suggest they take a booking from OTA & make say 5% while paying 18% in commissions instead of not taking that booking at all?
        2. Can’t a hotelier invest in CRM & customer retention/loyalty programs to bring that customer direct next time?

         
        • Norma

          @Rohit 1. That call would depend on your current occupancy and other factors. We are all for optimizing the lowest cost channels including OTAs, but our focus remains on growing direct bookings so as to reduce your dependency on OTAs.
          2. Of course, we actively promote usage of all five options to grow direct bookings – search engines, social media, email, CRM and mobile. Your hotel should actively convert OTA guest to a direct booking for next stay – CRM is a great option to achieve this.

           
  29. Colin Brownlee

    Good subject. However, I am surprised that such an important subject offered very little suggestions on how to encourage more direct bookings.

    Personally, I make it clear to our guests, that why deal with a stranger when you can deal with us directly.

    There are no better rates. I always maintain full rate integrity.

    Guests upon leaving are sent a follow up an email inviting them to participate in an anonymous survey about aspects of their stay. We also alert them that they, their friends and their family are eligible for a 15% food and beverage credit ( based on room stay total rate) should they return or refer people.

    More importantly, buy your brand name with Adwords and Bing. It’s not expensive because you are a direct match, your quality score is high. I can not understand why more hotels do not do this. Don’t let OTAs steal your customers based on your brand name.

    Buy TripAdvisor upgraded listing.

    These are just a couple. Would be great if other hotels shared their strategies on how to deal with OTA s. This can be very helpful for us all. I will not be a slave to Expedia.

     
    • Linda Fox

      Colin,

      thanks for commenting. Some of the other advice Jenny gave included for hoteliers to think of themselves as ecommerce managers with strict conversion targets, more interaction on social media as I think someone mentioned above, nudge marketing practises and being seamless across devices in terms of the context of your audience. She gave Pizza Hut as an example where colours and themes from the outlets are carried across to the website…

       
  30. Derek Andrew Spisak

    Great Article. In my own experience, Hotel Managers should look to extract the greatest value from OTA’s as their aquisition marketing arm (and also treat the investment as a marketing cost that is marginal, versus sunk, and as part of the most expensive stage in the marketing lifecycle of their consumer… aquisition) and bridge the gap to where traveler’s find their greatest value from OTA’s. OTA’s in general provide motivated (and monied) purchasers of travel both intermediary and ombudsman to the promises of hoteliers. The more naive a traveller, the more likely they are to use an OTA. Naive in this since means lack of knowledge or ability to quickly aquire knowledge for a confident purchase. Namely language barrier, then followed by the need of guidance as to hotel quality, location, amenities, friendliness / openess to culture, and importantly, that a fair price was paid. In the event of a service breakdown or sales promise broken, and OTA can be relied upon to help fix the situation to the satisfaction of the guest, and hopefully maintain the acquisition of the guest by the hotel. The hotel must then ensure that the marketing continuum by the guest – to a loyalist, by their own onsite skill and talent. Though other OTA’s offer different models to help hotels achieved optimal occupancy and rate, the premise is the same. If a hotel had a employees on staff to find guests all over the world, communicate with them their unique value proposition, and hand hold to the front door and beyond, then we would have very different marketing staffs, and very different cost structure. It is typically pay for performance and the value of an OTA should be looked at with a holistic viewpoint and not let the value of a job well done be curtailed by a rush to squeeze those producing results.

    And yes, reassurance, money back guarantees, etc work. One just has to look at the time and skill Affinia uses to build relationships through their tripadvisor responses to know that they are hoteliers who care, and in a market like NYC, the cost of a hotel is pretty significant a purchase. And in the eyes of your loved ones, a memorable time is and should be priceless.

     
  31. Lia

    More publicity for Booking.com!. Go OTA!!:)

     
 
 

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