The power of the OTAs
We don’t need to tell you about OTAs’ role in your distribution mix. It probably comes up in every commercial review and you’re getting tired of the never ending discussion. Though they haven’t been in the market for much more than 15 years, OTAs have build up a very strong position in the distribution mix and have dominance in discussions with hotel providers, sometimes even showing behavior that undermines your and your consumers’ interests.
Though it might feel like a dire situation, there are a few things you can do about this. There is no silver bullet but looking at it as a long-term strategy there are definitely things you – as the hotel company – can do.
Let’s quickly reiterate the complex OTA issues so we’re starting off on the same page.
Why the OTA discussion is so relevant
1. It directly impacts your profit
Every dollar you could save on the commission is a dollar saved on Cost of Sale that could go through straight to the bottom line. Easy as that. From the original 5% commission levels have soared to 15-30%, or even more depending on the size of your company.
Every single dollar you save on commission goes straight to your bottom line.
2. Wrong consumer perception
In a study of 1,000 consumers in the UK, 75% believed that they get a cheaper rate when booking via an online travel agency. This perception is further strengthened by some OTA practices showing your low demand days as ‘discounts’ when really there are none, only price savings compared to your high demand days.
Furthermore the search results aren’t as objective as the consumers believe they are with ranking and star rating distorted by their own commercial considerations. With consumers rarely clicking beyond page 1 or 2, OTAs have immense power to influence consumer booking behavior without them even noticing.
Pair this with huge advertising budgets and you can see why the consumers go to the OTAs directly.
3. There are no signs of OTAs slowing down
Au contraire! Own loyalty program, penalizing behavior if not abiding to their rules. – dimming.
OTAs are by far outreaching any hotel company’s marketing budget heavily investing in market dominance. According to tnooz, the Expedia group spent around $2.8 billion in marketing offline and online buying search terms in 2015. All the while the Priceline Group was the biggest spender on Google adwords in 2014 with a budget of $1.8 billion.
Some studies go as far as saying that by 2020, Priceline Group and Expedia will control 94% of all online hotel bookings (Red Burn Fundamental Research/Travel and Leisure/2 March 2015).
According to statista, Booking.com had about 166 Million visits on their website in Jan 2014 alone!!
What you can do to stand up against OTAs
We have heard it from Marketing and Ecommerce – we need to strengthen our own channel. A lot of resources are invested in optimizing the booking funnel and conversion. But this is only half the battle. The other half is the amount of traffic that you are (not) getting on your own website because it’s going straight to the OTA. Improving the online experience is important, but it doesn’t address the issue of traffic.
The long and short is that unfortunately there is no wonder-weapon that will turn your distribution mix around overnight. But the good news is that there are things you can start doing now to improve direct bookings in the future.
1. Finger pointing (the good kind)
Part of the consumer perception of finding cheaper rates on OTAs is that it can be true. Whatever the reason for lower rates on OTAs – be it a technical connectivity issue, a single hotel going rogue or a violation on the OTA side. Make sure to keep tap on the rates the OTAs are selling online and call them out whenever it happens. Shut down those rate and make it clear that you won’t tolerate it and you are on watch.
This is where BPS partners with you to take some weight off your shoulders. We understand that it’s impossible for your team to scan the net 24/7. Our proprietary software does this for you and keeps you in the loop with regular reporting. Contact us here for more details.
2. Give extra incentives
Those consumers who do book directly say to do so based on lowest price, ease of booking, better check-in process and a more personal experience. Optimize the booking funnel on your website, work on the check-in experience on property, offer them special add-ons as part of your loyalty program when booking directly with you.
3. Drive more traffic
You may not be able to compete on adwords but you can work on improving your natural listing.
Work with your Ecommerce team and your online agency to make sure your website is as optimized as possible. For example – Is your site optimized for mobile? Are you targeting long tail key words? Do you offer multiple languages? Do you display good pictures and title them correctly for SEO?