hotels welcome
3 months ago
 

Opening a hotel? Give all your distribution to online agencies

Here’s a comment that is likely to make the hairs stand on end of many a hotelier and critics of online travel agencies.

“If I was starting a hotel from scratch, I’d give all my distribution to OTAs and just concentrate on the guest and their experience.”

That was the feedback from David Turnbull, chief commercial officer and co-founder of SnapShot, during a recent discussion about the power (helpful or otherwise) of OTAs.

Speaking at the Seize Opportunity In Disruption conference for hotels in London last week, Turnbull argues that the role of OTAs can be a vital one for filling a property, especially small independent hotels.

His idea is that the amount of time, effort and resources that hotels spend “trying to claw back direct bookings isn’t doing the guest any favours”.

“As long as the guest is happy with their stay (regardless of how they booked), they are good.”

Such a strategy could work for independents, those trying to get off the ground, Turnbull says.

Hotels could be “better off” investing in improving the guest experience, he adds, with the associated and knock-on effect of word-of-mouth kicking in.

This is where indies, in particular, get as much as 40% of their so-called brand visibility via friend and family or reviews.

Ensuring the guest experience is up to scratch can come in a number of ways beyond the obvious human customer service, Turnbull argues.

“They would need to focus technology to understand its data around the guest, rather than reservation.”

This means collecting and analysing both static and real-time data points around a guest’s stay.

Information should then be integrated and shared around relevant staff members so that they are “empowered to improve the guest experience”, he adds.

It sounds a little too easy and binary to entirely offload to a third party such an important element of a hotel’s mechanism for getting guests.

Yet, with the giant OTAs in the shape of Booking.com and Expedia having an ability to drive volume, as many hoteliers (often reluctantly) recognise, perhaps relinquishing power to drive awareness and establish early high capacity is a tactic worth considering.

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Kevin May

About the Writer :: Kevin May

Kevin is senior editor and a co-founder at Tnooz. He was previously editor of UK-based magazine Travolution and web editor of Media Week UK from 2003 to 2005.

He has worked in regional newspapers (Essex Enquirer) and started his career at the Police Gazette at New Scotland Yard in London. He has a degree in criminology, a postgraduate diploma in magazine journalism and publishes his first book - a biography about Depeche Mode - in 2017.

 

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  1. Patricia Cleary Clark

    We are currently running a Boutique Country Inn. 15% commission by “OTA” (acronym fobe – next time explain it in the article) is robbery; as a retired CTA – Certified Travel Advisor and watching small Experienced Travel Shops disappear we are seeing the “well healed experienced” traveller doing their own booking…direct. A well designed website plus 5 Star Travel Experience when the guest arrives is the best advertising. The undercutting of prices and clamouring for cheapest/best price is not what will help us to stay in business…it’s likely to be our undoing if we allow ourselves to participate.

     
  2. Rui Martins

    Very interesting and provocative view, but this is not one shoe fits all!
    It really depends on the strategy behind, the kind of assets being managed and management itself.
    If the hotel (property) isn’t yours, and you are being rewarded for sales alone, without a direct link to EBITDA (like some franchise hotel chains), then your approach to this will be very different from having to manage a hotel you own and that you’ll need to assure has the ability to payback accordingly to your financing terms (assuming you did use financing). Nevertheless, the idea itself is not incorrect.

     
  3. Tony Loeb @ Experience

    I think this is a very interesting approach of hotel distribution. There is indeed a direct link between :

    Guest Experience –> good reputation –> increase on OTA ranking –> more search under the hotel name on Google –> more direct booking.

    The point being if you have no reputation, there is also very little direct bookings.

     
    • Rui Martins

      Totally right! But still, if you allow OTAs to be “in charge” of 60-70% of your business, they’ll probably have the strength to direct bid on your brand without you being able to say no to them.
      In the end, this needs to be a balanced relationship, otherwise, you’ll end up losing negotiation strength and never actually owning your brand.

       
  4. Kopel

    Hi,
    I read this article, was nice, but one thing was missing or maybe I didn’t understand, but how can I increase my hotel sales.?

    Thanks.

     
  5. Jim Burney

    @ David while I am not trying to compare experiences… but for the record I have 40+ years in the industry as well… having operated hotels for 10+ years and rest providing technology solutions… 1st in the industry to introduce a PMS on microcomputers (1984/’85), 1st to build yield/revenue management technology directly into the PMS (1992), 1st to introduce the OTA price comparative model (1995)… But I won’t use up this space talking about myself… you can always look me up https://www.linkedin.com/in/jim-burney-7a536b7.

    While I agree that hotels cannot only focus on directing business via their direct channel, the solution of giving away control of your distribution to 3rd party OTA channel(s) and becoming dependent on ‘partners’ who have no loyalty to you or your products is a guaranteed road to the hotel’s ultimate closure. And, no it’s not just the costs that concern me, but more importantly it’s the loss of your guest loyalty, loss of intelligent data collection that is needed to provide that optimum experience you talk about, the understanding of changing market tends, changing expectations of your repeat hotel guests… it’s these kind of losses that would bother me. Once you’ve handed your distribution it’s difficult to switch back. We cannot look at channels as off and on switches, that when we are ‘ready’ we’ll simply cut out the OTAs and switch to direct. It will not happen. The problem is that OTAs, priceline, hotel tonight, flash sales, hotwire and similar models are based on the flawed assumption that a hotel room is just a commodity and star rating and pricing are the deciding factors. The fact is hotels compete on multiple levels, brands, location, services, etc. etc. Once you fall into that trap, it’s sayonara revenue management as well.

    As for giving guests an awesome experience, most hotels are falling short by focusing on providing optimum service and amenities within the four walls of their property when their guests are seeking an exceptional overall destination experience – a key reason for AirBnB’s success. Unfortunately, the hotel model designed to cater to large volume of guests, is ill-equipped to provide the level of customized attention today’s guests are demanding. This is where innovative technologies can help overcome the model deficiencies.

    Sorry for the long post! 🙂

     
  6. Jim Burney

    My apologies Kevin, I meant David Turnbull. 🙂

     
    • Kevin May

      Kevin May

      @jim – teehee, thanks for the clarification 😉

       
    • David Turnbull

      Hi Jim, be nice to Kevin 🙂 For the record, I have 20 years in the hotel business with a focus on revenue management, profit optimisation and driving long term asset value for hotels – most recently as co-founder of SnapShot, a marketplace and data platform for hotels. The comments whilst tongue and cheek were made within the context of a wider discussion on the true costs of acquisition (where direct channels often fair poorly) and raising the point that OTA’s have a very important role to play in driving demand (especially 1st time customer acquisition). The “direct is best” dialogue however i feel is clouding the issue of where hotels should really be concerned – namely planning & investing in technology that drives superior onsite guest experience. This is the one area where hotels (as operators) technically own the guest and yet we see no significant shift in how hotels plan to collect, store and effectively use data collected on property to drive real-time service delivery and guest experiences…this is where reputation scores, premium rates, increased repeat demand (via direct channels) and ultimately higher profitability will derive from….but to conclude, in my last 5 hotel checkins, Tripadvisor & Booking.com both contacted me within minutes of arrival to ask me to rate my check-in experience and what my plans were during my visit to the respective destination: just saying…we as an industry have got a lot of work to do as I on all of those visits, typically only received digital communications with the hotel brand, after checkout….

       
  7. Jim Burney

    Its quite obvious that the writer has very little idea of hotel business. It’s these kind of “bright ideas” post 9-11 that got the hotels where they are – take all the risk… while the OTAs enjoy risk free returns.

     
    • Kevin May

      Kevin May

      @jim – I’m the writer of the story, FYI, and would never claim to have much of an idea of the hotel business. Presumably, therefore you mean Turnbull who spoke about the distribution strategy that the report is based on?

       
  8. Peter Fabricius

    Clever hook David, surely sparked a discussion.

    While the advice is clearly questionable, regardless of a hotel’s size and sales strategy, to idea of shifting attention to guest experience, rather than getting caught up in a booking war, is valuable food for thought.

    Exciting times for our industry indeed. Hope to meet you somewhere in the future.

     
  9. Pradeep Patel

    Most hotels in the US are already doing that. OTA are responsible for at least 80% of room revenues. In order for that to change we have to get rid of rate parity and thats only way we can take back control of inventory and rates. We need to galvanize the hotel industry and the only way to accomplish that is be offering better rates at hotel level. Also OTA’s preaching rate parity well how bout lets get some parity on commissions . This is a 2 way street.

     
    • macy

      Where do you get your 80% figure? If it’s from PhocusWright, it’s meaningless, since GDS are excluded from their data. Seems very high in any case. Actually, according to most studies, OTA penetration in Europe is higher than in North America, due to a higher proportion of independent hotels.

       
  10. Miha Bratec

    Hi Guys,
    very interesting discussion indeed! What I somehow miss here is the question/mention of Daily Deal/Flash Sale Agents. As they are here and growing with the likes such as Secret Escapes & Voyage Privee…Don’t you think that if ever, then they might come extremely handy when it comes to positioning your new property on the market? With an efficiency and reach even bigger than the OTAs and albeit at a “high” cost in terms of the required discount and the commission, yet with an upfront cash collection and guaranteed sales & marketing effect. What are your thoughts? Can they be a valuable partner?

     
  11. Michalis Michalatos

    Well I started a small hotel in Corfu and I couldn’t do it with the help of the OTA’s. I concentrate on my guests and my goal was to get good reviews, special in the beginning. And then it comes by itself from mouth to mouth. Important is you have to have a good website and good hotel software. That together with the OTA’s and it’s a succes to start a hotel where ever or when ever.

     
  12. Ture Strange Nilsson

    Provocative statement for sure, but it certainly sparked an interesting thread.
    While i don’t believe there is a one-size fits all, there are a few point to consider when outsourcing to OTAs.
    First of all, what many don’t think about is, that the OTA is usually the first customer touch point, and often the last before arriving at the hotel, meaning that in actual fact, hotel is outsourcing their “outstanding service as well as their first impression”. Often times, as many receptionists can confirm, the guest arrives with an already bad experience from the OTA in terms of lack of information or otherwise, which is then reflected on the hotel who will have an uphill struggle to convert the guest into a returning customer or ambassador.
    Second, YR1 hotel operations apart from just getting occupancy (!) should be all about collecting data on purchasing behaviour, in order to optimise prices for the coming year. Unfortunately, working with online distributors, channel managers et al, will scatter this data all over, making it difficult for the hotel to get the holistic insight needed to make the right decisions.
    My point being, whatever the hotel decides to do, just make sure that the data is kept in-house and not lost in the websphere

     
  13. Del Ross

    Worst.Advice.Ever.

     
    • Del Ross

      To be clear, OTAs can add tremendous value. The best and highest value they can offer is the acquisition of new customers who are not brand- or hotel-loyal and have not yet made a choice. If a hotel uses them in this way and works very hard before, during and after the stay to secure future bookings via less costly channels, this is the path to optimal ramp-up and profit. Outsourcing ALL distribution to them is effectively ceding the customer relationship to a 3rd party, putting the hotel in the untenable role of “service delivery provider.”

       
      • David Turnbull

        Hi Del, thanks for this update. The comment I made during a panel was (tongue & cheek) surrounding the fact that we are as an industry, quick to blame the OTAs when in fact they are represent good value for acquiring new customers, especially if you are independent and have little formal representation. I pushed the envelope however by suggesting that for a new independent hotel, its way easier (and frankly compared to many channels, more profitable) to source that new funnel of demand via an OTA and as in some circumstances would reduce significant complexity & cost in terms of management (labour, fees etc) and permit more focus on scoring great reputations and generating repeat demand – ideally using data collected by the hotel during the customers visit. Thanks for joining the best.debate.ever 🙂

         
  14. Yakup Demir

    Hi All,
    Instead of the fight to OTA’s let’s accept them as our partner! There is no company in the world that help you without earn nothing so of course you should pay them commission! All hoteliers should focus their reputation at first. I meant they should focus on their service, guest satisfaction, and advantages. Lets welcome guests even they come via OTA or agency or Gds. During their stay do your best to make them happy and offer them best offer on check out time for their next holiday. Of course there are so many trick to get direct bookings but at basic those details that all hoteliers focus on. Thank you Kevin

     
  15. Michael Mallory

    The biggest problem I see for everyone is the fact that most hotels are commodities. The decor and amenities may be a little different, but basically, to the potential guest, yours looks the same as every other hotel in its class in your area. This means the main choice will price or location or both. That’s what the OTA’s cater to.

    If you target your hotel very specifically to a niche group that has money to spend and has show a willingness to spend it on their passions/hobbies/interests, you can market directly (Facebook is very good for this) and more or less set your rates to whatever your target niche will bear, regardless of what the general market will bear.

    If you want to be a generalist, you need the OTA’s. If you are a specialist, you can market directly to your “tribe” and rely more on word-of-mouth.

     
  16. Mergim K.

    Hi David,

    While I agree with the position that focusing on the customer experience is a key factor in the success of a new hotel, learning how to market and sell your own rooms through diversified distribution is also a critical component of long term success. Outsourcing this task from day one is robbing owners of this valuable skill. As with any industry, you can have an amazing product or service, but not understanding your customer purchasing behaviour (which OTAs are not so keen to share) is going to lead down an unpleasant path. I would say that a prerequisite for owning a hotel should be not only that you intend to provide an amazing experience, but that you also intend to invest the effort to learn how to sell that experience. The industry today (unlike 10 years ago) is full of incredibly simple solutions that can ease that pain. Some of our independent hotels are slowly creeping towards 100% direct because they learned to excel at this guest experience/selling balance.

     
  17. Jefferson Davis

    I think it is pretty obvious David Turnbull has never had to write a commission check at the end of the month.

     
  18. Enrique Verdier

    You are FIRED!!!

     
  19. Martin Soler

    During my time in a hotel marketing agency, I’ve opened a dozen hotels. This isn’t some secret revolution that David is saying here, this is how we’ve opened most of the hotels. Some very successful hotels who are now making lots of direct revenue, started by giving almost all of the revenue to OTAs and it worked great.
    As Simone Puorto asked yesterday “Is Guest Experience the new Direct Booking?”
    The crazy and scary idea is what if this could work for everything. I agree the risk factor would be huge, OTAs will inevitably raise commission costs (or find some other fee to bill like a transaction fee or so) and the P&L will take a hit. However I do agree that the direct vs OTA “wars” isn’t doing guests a favour, rather just annoying them to yet another message. Besides hotel websites user experience (website+booking engine) is one of the worst navigation experiences in the world of e-commerce.
    The risks are huge – can it work? I doubt it, but the idea is interesting.

     
  20. Yannis Moati

    Well put. I like this Mr. Turnbull more & more… Was it Expedia’s CEO who said: if you (ie-hotel) have not captured the client on his second booking through us, then shame on you! -paraphrasing-
    Our business works with the same assumptions & we are pleased to help our hoteliers increase revenue.

     
  21. Lennert

    It is black and white but very true that for an independent the cost of getting new customers is much too big compared to using ota’s. Use them to attract customers, get your experience in order and make them come back because you execute your experience, and offer incentives for low cost return channels. Rate will go up and costs will go down, but you grow in in months rather than years.

     
  22. peter syme

    The article did not mention risk. Outsourcing 100% of customer acquisition to OTA’s comes with a large deal of risk. An example they put up their commission % to a level the hotel cannot afford. They change their business model in a way that hurts the small hotel owner. Google changes its business model in a way that damages the OTS’s and so on and on. No matter wat the core strengths and weakness of the small hotel owner they best be able to manage risk and loading 100% of inventory to OTA’s whilst feasible is playing a high-risk strategy.

     
  23. RobertKCole

    In all sincerity, this is the single worst piece of advice I have ever heard regarding hotel distribution.

    There are two reasons for this conclusion, I will allow David Turnbull to explain:

    1) “trying to claw back direct bookings isn’t doing the guest any favours”

    If the hotel opens with 100% of its distribution sourced through OTAs, this implies that by employing this strategy, the hotel will have permanently ceded distribution to OTAs.

    If the hotel is 100% reliant on OTAs for business, it will also be very difficult to negotiate favorable terms, as any concessions made by the OTA would be based on unilateral generosity as opposed to competitive leverage.

    2) “They would need to focus technology to understand its data around the guest, rather than reservation.”

    Unfortunately, the standard practice is for OTAs not to share detailed customer data with the hotel prior to arrival. That then requires the hotel to inconvenience the guest by re-extra ting information that has been previously provided to the OTA by the guest.

    Additionally, the OTA captures all behavioral data regarding the sourcing of that guest and their actions on the website to determine interests and preferences to develop a robust user persona. This puts the hotelier at an unenviable strategic disadvantage with a complete absence of pre-arrival data.

    Look, I am not an OTA hater – OTAs provide a valuable role in hotel distribution. Similarly, trying to drive 100% of bookings through a hotel website is an equally ludicrous strategy.

    The best run and most profitable hotels manage a healthy channel mix to reduce risk, minimize distribution costs and optimize profitability. Maximizing customer lifetime value and net revenue contribution should be the primary goals.

    Suggesting such a naive “one size fits all” strategy ignores critical factors such as the condition of the broader economy, local market and competiive conditions, as well as the hotel’s branding, positioning and financial structuring.

    It is hard to know if such a strategy is more a result of ignorance or laziness. Could it potentially work for a single hotel somewhere in the world? Certainly. However the particular conditions that would result in a financially successful, viable hotel over the long term would be VERY specific and most definitely not apply to nearly any other hotel on the planet.

    I agree completely with the operational sentiments involving focus on the guest experience and empowering staff to provide exceptional levels of hospitality on a consistent basis.

    A well run hotel needs to have balance between market segments – a healthy mix of transient, corporate, group, leisure, etc. based on seasonal supply and demand.

    As someone who has been personally involved in the opening strategies for over 50 properties ranging from economy to five-star, both independent and chain affiliated, I can tell you that if I was aware of a competitor sourcing all of its demand through OTAs, I would bury them by wholly isolating them from all local demand generators and locking down that business to create a formidable barrier to entry if the “OTA hotel” should ever choose to shift its strategy.

    Since I would also know that the OTAs are generally not able to independently generate 100% of a hotel’s occupancy without fee premiums and rate discounts relative to the hotel’s competitive set, it would also be clear that the hotel would have difficulty sustaining sufficient profitability to support quality guest service, a well maintained physical plant and owner profitability goals when exposed to a premium variable cost on every reservation.

    Instead of going “all-in” on OTAs, I would strongly recommend using a mix of distribution, with each channel optimized to appropriately address the market segment that it is best suited to serve.

    Relying on OTAs as the sole source of business to open a hotel, in virtually any case I can imagine, is nothing short of marketing and financial suicide.

    My only conclusion is that Mr. Turnbull has never been responsible for starting a hotel from scratch, which would appear to be the root cause of such an off-base conclusion.

     
    • David Turnbull

      Hi Robert, the aim was to playing devils advocate, and get the debate to switch from the endless “book direct” discussion which is predominantly an issue for large global hotel brands to solve (and they should) and instead remind hoteliers (especially those in the independent sector) that the real opportunity to claim the customer as your own, is to start investing in technology that captures real-time inhouse data that can be actioned as perishable insights to drive amazing guest experiences.

      This is the one last area where the hotel can truly claim to own the relationship and distinguish themselves from the booking brands.

      Ontop of that, I would question, why as owner/operator of an independent hotel, in YR1 of operations want to set-up complex distribution solutions for my own known hotel versus turn on a tap of fast acting demand (admittedly with high short-term costs). Especially when my main focus is on delivering amazing guest experience, knowing that this is the quickest way to increase my reputation and ability to generate repeat demand and higher pricing/profitability.

      Hotels are too often sucked into a “crowd pleasing” mindset where they are presumed to source demand from all known segments (corporate, leisure, group, airline etc etc) – which naturally demands more complex distribution but also higher costs just to acquire the customer (res/sales labour, marketing etc). As an owner/operator, I would want to simplify this, focus on 1 or 2 segments only and leverage as much demand out of as few channels of distribution as possible.

      Naturally my comments are simplified and to a degree tongue & cheek, but ultimately as we start to see a separation between stay brands and booking brands, we must as industry start to question where our focus and future technology investments lie, when booking brands are investing USD3+ billion dollars per year setting up their shop fronts.

      Thank you for contributing to the debate.

       
      • Robert Cole

        I already agreed that the guest experience must always come first – I am taking exception with your proposed distribution strategy.

        Your suggestion that hotels invest in real-time in-house data means that you are ignoring the importance of invaluable and highly actionable website navigation, marketing campaign and pre-arrival data that is not vailable through the OTA channel. In most cases, the hotelier has no idea if the booking came from a metasearch, affiliate or even which OTA branded website. Was it purchased as part of package? Without a unique guest email address, physical address or phone number to work with, you have no idea if they have stayed with you before if they rebook through that OTA.

        With a new hotel, having no rating history or market awareness, “turning on the tap” normally requires artificially low rates, increased commissions or incremental marketing spend with the OTA. As OTAs primarily drive leisure traffic, that potentially leaves major gaps that require filling.

        I would argue that the independent hotel needs to differentiate itself both online and on-property from the major brands. I have fairly good experience in this area, having grown a start-up rep firm for 4 & 5-star hotels from one to 320 properties.

        The bottom line is that distribution strategy for an independent hotel depends on the specific hotel; the same way as its marketing strategy and pricing strategy. Cookie-cutter strategic generalizations and guest experiences are what kill property profitability.

        I’m not sure you are looking at this the right way – as an owner/operator, you want to capture the maximum amount of demand at the optimum cost of customer acquisition that leads to the greatest customer lifetime value. The key is getting the biggest bang for your buck, regardless of the number of channels – if you can efficiently access huge demand from five channels at a very low cost, why would you want to limit yourself to only two?

        Having worked through at least three significant recessions, artificially limiting channels may be an option during high demand periods, but when demand dissolves, you need all the options available. Relying only on the OTA channel puts you at risk of a competitor effectively out-bidding you for traffic that formerly patronized your hotel by cutting rates or boosting commissions. If that happens, where do you turn? You don’t have another tap to turn on…

        Failing to set up a well designed website that can 1) reflect the property experience better than a generic OTA search result list and photo gallery, and 2) serve as the hub for future search, landing page and direct booking initiatives is essential (either via a brand or independently).

        A hotel needs to have an online experience that is consistent and relevant to its on-site experience – to effectively set expectations. The hotel must have a superior search and booking experience relative to the OTAs in order to change guest behavior = especially if they were initially satisfied with the OTA experience.

        For example, let’s say you want to wow first time guests. If they happen to find you through long tail search, metasearch, PPC, social outreach, destination referral, guest advocacy, etc. you may be able to determine “why” they are staying and provide an incredible first time experience.

        Trust me, I’m no fan of some of the brain-dead brand strategies feebly attempting to shift share to the brand website – especially discounting their highest yielding and most loyal frequent guests. My analysis shows that the hotel owners are the ones bearing most of the risk exposure.

        I look at hotel marketing and distribution as similar to a portfolio strategy – one must diversify to reduce risk and each client has different investment goals and risk tolerances – on size does not fit all.

        The separation of booking and stay brands is very dangerous game for hoteliers. Airbnb certainly doesn’t distinguish between the two… True, I know of hotel owners in NYC that have allocated 100% of their inventory to OTAs or tour operators, but they may also require a risk position for access to the inventory and pricing to eliminate their downside risk; they also eliminate their upside benefit.

        Your points may have been intended to play the devils advocate and tongue in cheek, but i would suggest a better approach would be to advise hotels not to put all their eggs in one basket – direct or intermediary. They need a well thought-out strategy to optimize their distribution. For any hotel, nobody knows the best answer until the analysis has been conducted and the strategy successfully tested.

        If one assumes the phenomenal guest experience to be a constant, then the challenge winds up being the allocation of available marketing and distribution resources to optimize property performance over the owner’s desired time horizon.

         
        • Jeff Pan

          Hey Robert,

          Good to see your name pop up 🙂 I’m going to have to agree with David, even if his comment was tongue-in-cheek.

          For the independent hotelier (one who may not have economy-of-scale to have a revenue manager or heavy investments in technology), their reservation strategy should absolutely be to just “turn on the tap.”

          There is simply no way for an independent hotelier to outperform OTA’s on direct customer acquisition, and they’re going to get a much better ROI on their time by focusing on the guest experience & running a better hotel. Leave the technology part to the OTA’s, with their billions of dollars of investment of driving bookings to hotels, and focus on the part that’s easy to control.

           
      • Patrick Landman

        Patrick Landman @ Xotels

        Hi David,

        Cheeky ;-). And again, a good wsy to get attention.

        However, instead, l have to disagree.

        An opening strategy should not be focussed on merely 2 comoponents of the strategic spectre.

        1. Internet marketing to drive direct sales pays off. Also in year 1. It comes down to choosing the right elements.

        2. Corporate sales (including groups) is a long term investment, and harvasting on this would only be delayed by the path you are suggesting. Which strategically is a bad choice as cost and dependency will be larger over time. Not the way to go.

        3. Delevering amazing guest service and a unique experience should not prohibit a hotel from implementing a comprehensive sales and marketing strategy. If that is the case, there is something severly wrong. We are advocates of separating operations and strategies in hotels, and having (separate) specialists for these areas to ensure great success for a new hotel opening.

        We have done so wih great success opening many hotels, turning them both into market leaders finacially and becoming the top ranked hotels on TripAdvisor for their destination.

        Lets have a beer at ITB Berlin, and we can talk it over 😀

         
  24. Valentin Dombrovky

    I think, some of commenters don’t understand that the main point here is that enhancing guest experience should be main hotelier focus because it will help to bring more direct bookings via word of mouth.
    And I agree with David on that point.

     
    • David Turnbull

      Thanks Valentin – thats one of the key arguments

       
      • Patrick Landman

        Patrick Landman @ Xotels

        Of course it is key to deliver an amazing guest experience.

        But that does not block you from a smart market segmentation with an enhanced marketing strategy.

        Actually taking all into consideration, this saves cost vs distribution via intermediaries, so you will have a better budget to further invest in optimizing the guest experience …

        With our hotels we try to accomplish over 50% direct sales. And the guest experience is pushed through the roof …

        A provacative stance gets you attention David. Credit for that. But strategically, these items are not mutually exclusive. Heavily disapppointed in your advice.

         
        • Valentin Dombrovsky

          I am sorry, Patrick, I don’t have that much experience in hotel revenue management as you do certainly, but for me it’s just a common sense question: if hotel has a choice to put his money into driving better guest experience (and there are always ways to invest in smth. to make it better, in my opinion) OR to invest money in advertising trying to drive up “direct bookings”, that come from search engines for instance, – where should it put his money?
          As a consumer, I’d be glad if hoteliers leave such sort of marketing to OTAs and focus on guest experience which, again, can help get direct bookings via word of mouth and repeat customers (without need to invest in other channels).
          What do you think on that?

          Actually, it slightly corelates with Doug Lansky’s piece on destinations websites – https://www.linkedin.com/pulse/maybe-its-time-destinations-get-out-website-business-doug-lansky – quite “radical” opinion, I’d say, but the point is the same – if there are those who’re more powerful and professional in online marketing, why bother “competing” with them?

           
  25. Viko B

    Interesting take. David Turnbull sounds like a lifelong revenue manager that wasn’t good at his job. If you like lower profit margins and longer payback periods in your investment, sure give all your inventory to OTAs.

    Pro Tip: Hotel owners don’t build hotels to make less profit. That’s why they’re the owners, and demand to make the most profit from their investment. If they did it any other way, they wouldn’t get far with their hotel investments.

     
    • Glenn Wallace

      It isn’t a question of being a revenue manager. It is about ROI for your marketing efforts. If you think an independent hotel has the skills, tools and expertise to market their property in a number of channels (SEM, SEO, email, social etc) to reach a larger number of buying customers and can do that at a better cost than Booking and Expedia (remember Expedia pays the CC fees and they both cover some amount of the pre-trip customer servicing costs with changes, cancels etc), then go for it! For the property, it should always be about ROI. I think the conclusion he is presenting here is if you have a finite amount of resources, focus on something that builds your reputation and repeat guests. I have no doubt the major chains can do as good or better job as the OTAs at good ROI on marketing, but even they participate with the OTAs. And that’s your proof point right there. If anyone could do without the OTAs, it should be the big chains. But a new hotel, what possibility do you have of delivering a better ROI than the OTAs?

       
    • Rebecca

      I believe they are saying to start with OTA’s. He also mentioned multiple times that for independents OTA’s are the way to go in the beginning and then you rely more on word of mouth advertising. OTA’s aren’t the bad guy. Like it or not, a lot of shoppers are brand agnostic and want the best deal. They want to see all of their choices in one place.

       
    • David Turnbull

      It’s tongue and cheek Viko but I’ll wager banks who finance independent owners would rather see a YR1 strategy where the operator (who is the owner) is focused on what they do best and handover responsibility for sales and distribution to booking brands like OTA’s. The media and industry obsession with branding OTA’s as the bad guy is distracting us from where the conversation should be – how can hotels collect, store and use realtime data to create amazing guest experiences that drive reputation, rate and repeats demand (back to a direct channel if it’s one that converts). I doubt you will find a YR1 hotel cost of acqusiiton analysis that has costs below 20% so throwing it right back at you, which strategy will yield the better long term asset value? I must stress this was said tongue and cheek on a panel about cost of acquisition but I am pleased that this is sparking a much needed debate

       
    • Vikram

      Viko,
      David Turnbull is my friend and very well respected leader in the hotel revenue management world. Your comment makes you sound like a jerk. David just shared a view point on stage at a conference. Instead of making a personal attack like this please try and have a civil conversations instead. Don’t forget that in the hospitality business everyones connected…you never know when you are going to be working someone here who is reading your comments. Being respectful and being right are not mutually exclusive.
      Stay classy.
      Vikram

       
      • Viko B

        Hi Vikram,

        My remarks were not be a jerk and we have connected on LI (and my comments were tongue-in-cheek as well) – but it gets tiring hearing opinions of revenue managers, who have never been in a hotel ownership role – and furthermore, have only been a part of the hotel industry in the post-online era.

        There are many nuisances in the OTA discussion that are never mentioned by revenue managers because their depth of understanding P&Ls for hotels is non-existent. I’m addition, I have read your may posts on the topic of ‘How to get more Direct Bookings’ — but the truth is, direct booking is a myth -it has never existed in the hotel industry, including the pre-OTA days.

        Plus, I do agree with David Turnbull about hotel brands pushing direct booking too much and focusing on guest experience is key. But the solution is not give all your inventory to OTAs — and it will never be for successful hotel owners.

        I will send a post on Direct Booking to Kevin May and let’s continue this discussion. Let’s get to the bottom of this 3rd party debate, once and for all (you may want to read my comment to Glenn a Wallace below).

        Be warned: My take is coming from the perspective of a hotel owner who remembers the pre-OTA days + the co-founder of mobile checkin, room selection and digital room key startup that first introduced mobile check in to the entire hotel industry at Phocuswright TIS 2013 – I have a few thoughts on the topic.

        Hope to stay classy,

        Viko

         
  26. Evan Davies

    Even if you rely 100% on OTA’s to sell your rooms, you still need a website otherwise your just losing money as guest often want more information, pictures etc. Booking engines and websites are very affordable today so even brand new hotels have no reason not to have a direct channel.

    You can get a whole hotel system of: website, channel manager, booking engine and PMS from just £50 per month.

     
  27. Michal

    Not a bad idea to start a completely new hotel.

    1. Start getting the first customers from OTAs – expensive but you need to start somewhere.
    2. Provide excellent service, earn excellent reviews and, hopefully, word of mouth.
    3. Get your pricing right while data is coming from OTAs and you are learning about your new business – improve your results from OTAs.
    4. Work on repeat and WOM business.
    5. The rest will come sooner or later.

     
    • Glenn Wallace

      If the OTAs were too expensive, at the massive scale of the big chains this would be very costly to their bottom line, why would they still use the OTAs? Answer: the OTAs deliver bookings (both through the OTA and halo effect) to them at a reasonable ROI vs their direct efforts.

       
      • Viko Bhakta

        Glenn — OTAs are not a brand issue. That’s one of the main points in this complex issue that most observers forget:

        Brands collect royalty revenue from hotel owners, regardless of the source of booking.

        The Direct Booking campaigns are mostly lip-service to outraged owners, similar to brand-coalition of Roomkey.com a few years back. Failed marketing attempts to appease hotel owners, with no gain in market share.

        Owners are burdened by OTA costs, not brands. But, lower profit margins for hotel owners leads to many unintended consequences for the overall hotel industry, including lower supply growth for hotel brands, which ultimately leads to brand consolidation — as we have seen the past few years.

        OTA commission are not some mythical problem, long-term effects of brand consolidation are a reality — most just can’t see the linkage.

         
  28. Matthew Walker

    Interesting idea. Could this strategy not lead to long-term problems if a critical mass of hotels participated? Similar to airlines participating in Google flights.

     
 
 

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