How to crack the Booking.com algorithm

If we want to improve our positioning on Booking.com as rapidly as possible in order to increase sales, it is obvious what needs to be done.

Increase commissions!

This maximizes the profits of Booking.com and in turn its web algorithm will reward us with good search results.

NB: This is an analysis by Francesco Canzoniere, ex-CEO of Viajar and now founder and managing director of Travel Performance.

But do increases in commissions have consequences? Yes, of course.

Just as when hotels go headlong into a price war (downwards), the same happens when they enter into a commission war, they all end up with the same market share, but with lower net income.

At times It is possible that the hotel feels obliged to pay higher commissions but it is also clear in many cases that this solution is chosen for its “speed and simplicity”.

But is it sustainable to continue working with a strategy of “get some work and improvise”?

The data seems to suggest that the change cannot be postponed any longer.

chart1

Is it possible to make it so that it is the OTAs who ‘work’ for the hotel? Yes it is, but only If the right formula is found.

Let us see how to get started.

Positioning and strategic use of online travel agencies (OTAs)

When deciding on how to get good positioning on an OTA, we must ask ourselves which customer segment we want to reach.

Although this is a fundamental question when creating a campaign strategy, yet when asked, it is often answered with “I want to reach everybody”.

But shooting at everything is like shooting at random and not only is it more expensive but it often produces worse results – lower sales and higher costs.

Determining which channel and intermediary to focus our positioning efforts, is driven by the potential that each online travel agency is offering in the interest of the hotel.

However, although the travel agency with which you want to collaborate is carefully selected, signing a distribution agreement neither guarantees that the broker will make every effort to sell your hotel, nor that our hotel will achieve the expected success among its customers.

Moreover, the general impression is that it is the hotelier who is working for the online travel agencies, rather than the other way round, as it should be.

In addition, the strategies and segments that the OTAs manage to encompass in different countries and tourist segments vary widely internationally.

Booking.com is the clear leader at European level for online room sales but in the US, at least for the moment, this is not so.

chart2

While Booking.com guarantees a more widespread and global presence every day, basing a distribution strategy on this one OTA is very risky.

Moreover, market dynamics and customer preferences force us to be in Booking.com or whatever is the next best thing.

The great illusion of “super broker”

The big mistake that many businesses make is believing that the broker will do everything possible to sell their hotel.

Maybe we should be talking about naivety rather than mistake, but in the end, whatever the brokers say, the reality is different.

The fact that an OTA wants to maximize income, does not necessarily mean that it will dedicate all its efforts to sell our hotel.

Understanding the logic of the OTAs’ business model is very important when positioning and trying to outsell competitors, while at the same time not having to carry more distribution costs or reduce prices.

Because, make no mistake, this is what brokers (and sometimes direct sales collaborators) often suggest to the hotel in order to increase sales through their web site – “make an offer/lower the prices” or “sign this voucher/pay this commission”.

The business logic of the brokers

PIC1

The search results that the OTAs generate do not occur randomly but follow a clear strategy of maximizing sales revenue.

To understand how to improve the positioning of the hotel in OTAs we will take Bookiing.com as the reference but the same principles also apply for the rest (Expedia, etc.).

To achieve higher sales revenues Booking.com maximizes a formula similar to the following:

Expected Profit = (No. of reservations x Average selling price x % of commission) – Acquisition costs

Where we understand that:

No. of reservations = No. of queries x Conversion rate – Cancellations

This formula is clearly a simplification but is sufficient to understand the business logic of the OTAs, as well as most of the brokers.

Therefore, in this formula, the number of reservations depends on three factors:

  • How often the hotel site is consulted
    What the conversion rate is
    How many reservations are finally realized (usually, if a check-in does not take place, Booking.com doesn’t get paid)

Conversion Rate. It is worthwhile elaborating on this.

On what does the conversion rate depend? This is perhaps the most ‘intricate’ part of the formula because it is linked to all the other elements, directly or indirectly.

The algorithm of an OTA is usually a “reflection” of what positively or negatively affects their sales and marketing strategies. In this area the conversion ratio is a reference that allows both comparison between the hotels that are being sold, and the evolution of the effectiveness of the sales.

Let’s see some clear elements that influence the conversion rate from the point of view of an OTA (although almost everything applies to any hotel web page or any other broker)

1. The content

Booking.com has hundreds of people translating and writing hotel descriptions in several languages, while at the same time personalizing and optimizing the information.

Furthermore, the Booking.com algorithm ‘penalizes’ those hotels that do not provide comprehensive information about their hotel services (in the Booking.com extranet the percentage of information that has to be completed can be clearly seen).

Photos are also important and the hotels are encouraged to improve both quality and quantity.

Airbnb has a team of professional photographers whose only concern is to remedy the poor quality of many pictures provided by owners of apartments and rooms.

2. Comments

Positive comments may persuade a customer to book a higher priced hotel than another that is similar but with more negative comments.

Whereas, in the case of both hotels having the same price, the probability that the highest rated hotel will get the reservation climbs notably.

3. A better price

Booking.com can offer better prices in a situation where different offers coincide (not exclusive between them).

In general, this capability is still limited in many hotels’ own reservation systems although they are improving.

Besides, the hotels not only sign price parity clauses but also guarantee that they will post the best available rate on Booking.com at all times.

4. A larger inventory

To increase the number of bookings, Booking.com also needs to be able to sell as much hotel inventory as possible.

The more they can sell the better, and this is fundamental at times of high occupancy when it is easier to sell and when furthermore the last rooms are also the most expensive.

For this reason brokers include clauses that compromise the hotel to give access to the very last room available for sale.

This also justifies the minimum sales allotment clauses i.e. the minimum number of rooms that the hotel authorizes to sell every day.

If the hotel could close sales on days of higher occupancy, without being penalized, Booking.com would lose access to the easier sales (during periods of high demand conversion rates are higher) and the most lucrative (rates are usually higher).

Average selling price

Regarding the average selling price per booking, Booking.com is interested in it being the highest possible but obviously within the logic of the market.

If in the meanwhile the hotel sells directly and below the price charged in Booking.com or if their competitors do, then sales will be lower for Booking.com.

For this reason price parity agreements are signed. Some OTAs “penalize” hotels with positioning when they detect price disparity.

On the other hand, if two hotels have similar values in all elements of the aforementioned formula, the highest price will be prioritized in search results (the theory being that this higher price maximizes benefits).

Commission percentage

In Booking.com, hotels usually pay a minimum sales fee of 15% and 17% to participate in the ‘preferred’ hotels program.

The more commission the hotel pays the higher its positioning in search results. The hotelier also has a tool which shows how to improve ranking for each percentage increase in commission (the increase in ranking can be more or less proportional to the increase in commission).

Without doubt this is very influential in improving the quantities of bookings sold in Booking.com. However, does more quantity always mean more net income? In many cases no.

Other factors

Other criteria in OTA results management that is often taken into consideration is the variety of results, for its brand positioning in the market.

If the algorithm does not take into account brand factors, such as the variety of offers and products, the results may maximize sales in the short term but penalize attracting other OTA customer segments in the medium and long term (if we only encourage sales of four star hotels, those seeking alternatives will go to other websites and not return).

Of course there are more factors to consider. Furthermore, the logic of the Booking.com algorithm evolves, just like with Google and all eCommerce websites.

However, if we use the aforementioned criteria, we can better understand how to improve our positioning in Booking.com and in the rest of the OTAs.

How to improve positioning in Booking.com and OTAs generally

Applying the aforementioned logic, here are some examples on how to improve hotel profitability in the face of Booking.com’s interests.

How to influence their algorithm to favor us in search results, without having to pay commissions.

1. Comments

If we can increase the comments score, we can also increase the number of bookings and therefore the total profits that Booking.com achieves through our hotel.

And how can we achieve this? By inviting the more satisfied clients to write their (best) critiques in Booking.com.

2. Photos

“Seducing” more customers will more and likely increase the conversion rate.

Photos are a key tool in capturing the online community. Invest in a good photography service, ensuring meticulous preparation, and carrying out testing to see which ones attract more attention and further stimulate the decision to book your hotel.

Be careful, hotels are often advised to keep some photos just for the hotel website, in some cases it may be successful but in many others it is simply stupid.

3. Cancellation Policy

In times of low occupancy, remove any restrictions in order to improve the likelihood of getting more sales.

On the other side, this will also increase the number of booking cancellations.

4. Increasing availability

The more availability we upload the greater the potential benefit we offer Booking.com. But be careful.

What happens to your hotel profits if you sell more than you should through brokers?

We could continue with many more examples…

Maximizing the brokers’ algorithm without paying more fees or having to lower prices can generate significant improvements in profitability in the short term but also in the medium and long term.

However, if we do not include these actions in a global distribution strategy, we may end up transferring stocks from cheaper channels (website, phone, email, cheaper brokers…) to more expensive OTAs which damages hotel profitability.

NB: This is an analysis by Francesco Canzoniere, ex-CEO of Viajar and now founder and managing director of Travel Performance.

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Viewpoints

About the Writer :: Viewpoints

A founding principle of tnooz was a diversity of viewpoints from across the spectrum. Viewpoints are articles by guest contributors from around the travel and hospitality industries. The views expressed are those of the author. and do not necessarily reflect those of the author's employer, or tnooz and its partners.

 

Comments

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  1. mark gilchrist

    Very interesting! i would love to see an article for the consumer, explaining how to get the best prices. I guess there would be a conflict of interest there…

     
  2. Kelosa Ibiza Property

    Very interesting article, thanks! Booking is the largest companies because it has always had an excelent way of engaging its visitors.

     
  3. Joel Brandon-Bravo

    You make a good point about the fact that lowering price or increasing commissions simply causes a war between properties in the same location fighting for a fixed audience already looking for hotels in that area. That’s why we at Travelzoo have been helping hotels for 16 years now in two ways. First we send emails to our members with recommended properties promoting outstanding value to encourage people who are potentially undecided about where to go but looking for leisure break ideas. So fishing OUTSIDE of the same pond. Secondly by running a short promotion to hundreds of thousands of members for a short space of time it can drive a base level of business allowing the hotel to yield up closer to the arrival date working towards a fuller occupancy. Finally don’t underestimate the ‘billboard’ effect. Aside from repeat direct business the simple act of promoting a property to so many people, on a commission basis does drive incremental sales at higher rates – maybe weekend dates not included in the promotion, or travel outside of the offer period. I get feedback all the time of additional bookings off the back of this which effectively lowers ‘net’ commission considerably when this is factored in. I’d welcome people’s feedback.

     
  4. Ralph

    Good article, but was expecting more tips on how to “crack the code”. I think the first three tips apply in general to any hotel, even if they are trying to increase conversion on their own brand.com sales channel. Increasing availability shouldn’t be an issue there obviously, and comments could come from tripadvisor/google+ etc.

    I think the key thing to understand from your article for hoteliers, is that conversion and cancellation % are two of the key elements in the algorithm. Include in that average commission per booking (an indicator measured internally in Booking.com) and you’ll come a long way in understanding how to get a better ranking. Lowering your rates means you need even more bookings to increase the profit for the OTA, so that’s not the answer to increase your ranking.

    I’m not sure if being “preferred” by paying higher commission % is such a big deal anymore now or soon, as in the future search will become a lot more customized to profiles of bookers. Nobody used to look at page after page of hotels in a city of 300+ hotels years ago, they won’t do so now either. You’re either on the first page or you are not. You may be able to cope on the second page and get some bookings.

    Secret deals which undercut your own BAR pricing of your website are also off limits. Any sensible hotelier trying to improve direct sales should stay away from this.

     
  5. Anonymousman

    It’s very interesting to see this.

    I’ll just say this, though commission is important, it is by no means the way to maximize sales.
    Introduce varying offers from a revenue management standpoint (pricepoint vs. restriction on cancellation vs. booking lead time), make sure your content reflects reality, and put as many rooms to sell as you can.

    This will allow you to take advantage of whatever demand there is, regardless the product.

    And as it is a commission, yes you will pay more if you sell more, but you will earn more too. Something 95% of GMs and owners fail to see. All sales channels have costs, even direct sales channels (website investment and operation, sales team, overhead, etc.)… You just need to see what channels can produce how much at what pricepoint so in the end you maximize your profitability

    Thanks!

     
    • Francesco Canzoniere

      Hello!
      Thanks for your comments.
      You are right, all sales channels have costs and it is important to do the right cost attribution analysis in order to see which one is more profitable.
      Best
      Francesco

       
  6. Angelique

    I think the article misses the mark on a few points, I do not feel like I work for my OTAs, least of all Booking, because they give me more control of what I am offering their guests. So I didn’t relate to the main idea of the article but some very good points, which they have already shared with me.

     
  7. Margherita

    This is a good article but remember that you cannot ask your clients to leave a good review on Booking.com as Booking.com accepts only comments by the people who have actually booked their stay there.

     
    • Francesco Canzoniere

      Hello Margherita,
      I appreciate your feedback. Thanks!
      You are right, I should explain better this point. I was refferring to those clients that book their stays through Booking.com.
      Thanks for spotting it.
      Best
      Francesco

       
    • John

      I think what they mean is more actively request for a review from certain guests. By your interaction you might notice certain guests prefer your hostels to others. When they leave send them an email requesting a review from where they booked i.e Booking.com

       
  8. joan sanz

    Is an excellent title for your post! It just is something that we know that if we do it, we will sell more and pay more.

     
    • Francesco Canzoniere

      Hello Joan
      thank you for joining this conversation.
      Well, I am not sure what you meant but, apart from word of mouth, I don’t see any channel (nor direct, or indirect) where you don’t need to pay more, if you want to sell more…
      Thanks
      Best
      Francesco

       
  9. Mr. Tona

    Good!!

     
  10. Avijit Arya

    Otas are your official partners upto fourty percent of your revenues without investment , they are growing and arm twisting but there are ways to ensure you best the system and that can happen only if you ensure your happy and genuine checkout guests write more reviews and this affects their algorithm to show you higher coz if your a good hotel u get booked more and they get more commissions so make its good service instead of top commissions.

     
    • Francesco Canzoniere

      Hello Aviijit,
      Thanks a lot for your comments.
      Indeed, I also believe that delighting customers is the most powerful weapon hoteliers have in order to increase their sales, decrease their direct marketing costs and their total acquisition costs, increase their direct sales and being more profitable.
      Best
      Francesco

       
  11. AS

    What’s the cheaper alternative to a commission increase to win more market share? Inflight magazine add? News Paper add? Personal door-to door sales? Travel Fairs? entertaining travel agents with wine and Booze? Its very easy to term OTAs as brokers, but that’s a pessimistic view towards a successful business which is bread and butter for the survival of the business of selling accommodation. Everyone wants higher rates and less cost per booking, but its easy to pay 35% commission and earn a booking via an OTA than maintain a sales office with monthly fixed cost which exceeds the benefits and not being able to measure the success or failure. Comments, photos, availability and CNX are factors for all hotels to work for – but you have under estimated the fact that a booking.com page will have over 400 properties with all this fixed, the question is how do you get the bulk of the share if all are good diamonds listed?

     
    • Francesco Canzoniere

      Hi AD
      Thanks for sharing your feedback.
      Well, I suppose that the cheaper alternative to a commission increase to win more market share should be, as always, delighting your customers. Word of mouth usually generates the cheapest and best marketing you can get. The alternatives depend on the case we may contemplate.
      Considering 400, or more, hotels all in the same league, from a customer point of view, it’s something that I don’t see. Nonetheless, I also reckon that it is not easy when there is more offer than demand but, in my opinion, boosting a commission war is not the solution.
      Thanks a lot
      Best
      Francesco

       
      • AS

        Thanks for your feedback. From a hotels perspective I would rather challenge my OTA partner to work on a PAYE method and offer a comm override if they game me more bookings. Its good to be able to sing on paper to give 10% more comm and be at the top of the league within secs in the market you want, rather than paying brochure contribution to a operator who can have a shop located next to the Lindt Café in SYD CBD. The more delighted the customers are the more demanding they become, the more they research, 1000 reviews on a neutral site such as booking.com would bring a hotel better referral business than 2000 reviews on your own brand site which customers may not trust. Business is always the survival of the fittest, love at first sight is still true, being on top of the search results and getting their faster gives you more bookings quickly so that the hotel staff can spend lot of time delighting customers. what you think?

         
  12. Naresh Prabhu

    Very good article and views. Only thing which is missing is one more factor that is the search criteria. The flexibility that we get in booking.com in terms of selecting the number of people and the search results match. If i’m going with family of 4 in europe, booking.com is the only site which suggests me quadruple rooms or family rooms or apartments. I tried priceline or any other site which always suggests me to go for two rooms…

     
    • Francesco Canzoniere

      Hello Naresh,
      I appreciate your feedback, thanks a lot.
      Well there are a number of factors not included in this discussion but, you know, trying to get the full picture would probably make this post too complicated. Flexibility is indeed a good example of the quality of Booking.com search results algorithm but it is something on what hoteliers can have usually a limited influence.
      Best
      Francesco

       
  13. Evan Davies

    Yes the basics are what really makes the difference. 1. Great Pictures 2. Great Copywriting 3. Great Reviews

    Also make sure that you are 100% on their content meter

     
  14. Ray Mason

    A good, detailed analysis, Francesco, which I hope many hotels will take time to read and understand and then take action according to their chosen distribution strategy.
    I would like to emphasise the point you make in your final paragraph – that there is a very real danger that by adopting your suggestions / recommendations on how to maximise bookings from OTA’s, this will damage hotel profitablility in the short, medium and particularly the long term. I would agree that including many of these actions will boost exposure of a hotel in the search results and generate bookings (which can be a positive thing, when controlled), but if they do this, then a hotel equally needs a strategy for driving direct bookings, particularly on their own website. This is where many hotels are struggling to find the right, balanced approach. i.e. recognising the importance of OTA’s as an generator of a significant number of bookings and revenue , albeit at a typical cost of 15 – 20% (for which which your article is very useful), whilst also having a clear strategy and action plan to encourage and incentivise bookings to be made direct on the hotel website, especially for repeat bookings, without damaging the exposure that OTA’s can provide or breaking any contractual agreements that may be in place over rates etc.
    We are increasingly being asked at The Marketing Medic to help hotels understand how to achieve this and are implementing plans which will prevent them from losing (even more) control over their rates and distribution to the OTA’s.
    Keep up the good work on raising awareness and understanding of this issue, Francesco. I predict that this topic will become increasingly important to hotels during 2015.

     
    • Francesco Canzoniere

      Hi Ray
      Thanks a lot for your comments.
      Well, actually, it was not my intention to suggest doing anything. The real aim of this analysis was to stimulate hoteliers to think differently in order to improve their sales. I believe that it is posible to have a win-win relationship with OTAs as long as hoteliers understand that they need to find a balance between their interests to improve their direct sales and to decrease their distribution costs, and the OTAs interests to improve their profitability. Understanding your business partner objectives is the first step in order to get the most out of your relationships with OTAs.
      Best
      Francesco

       
  15. Jamais Trujillo

    It is difficult for smaller rental companies to get any sort of rank on Booking.com, but we are glad we have the opportunity to be listed among the “big players” on this site for our vacation rental business.

     
  16. David Defter

    Great insight Francesco. Basically, to rank higb in booking, you have to think in terms of whats best for booking. This means focusing on getting your conversion rate high. That entails haveing competitive pricing and availability and top knotch content. Also enrolling in their primotions helps with the pricing part. Furthermore, it is no secret that paying your invoice on time helps too. Even joining their direct debit program gets you a knotch higher in the rank. But I only advise that for managers who are on top of their game.

     
    • Francesco Canzoniere

      Hello David,
      Thank you very much for your feedback.
      Well, you are right, paying bills on time is indeed another example of how to avoid being penalized by Booking.com. Thinking in terms of what’s best for Booking.com will help, of course, but it may be not the best option in every case (for the hotel’s direct distribution strategy).
      Best
      Francesco

       
 
 

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