Before the coronavirus pandemic, the lion’s share of hotel bookings primarily came from Booking.com and Expedia. These and other OTAs contributed accounted for two-thirds of hotel revenue from online sales in 2019. The imbalance between OTA-generated revenue and direct bookings began was unsustainable. With hotel businesses cut to the bone operationally, the lost income from this imbalance eroded many brands. Since the coronavirus, a lot has changed, including the way hoteliers must navigate the complex channel management situation.
As some predicted, the pandemic, which forced hoteliers to adapt, transformed the hospitality business. As a result, hoteliers had to reevaluate and engage customers in more traditional ways. The hotels still in business are much more agile than before the coronavirus crisis began. Their managers relearned how to innovate, elevate customer service, marketing, and other aspects of their operations. Armed with this new resilience, astute hoteliers can go on to differentiate themselves from the pack.
For years now, hotels have struggled with balancing the mix of booking channels, always attempting to regain OTA commissions that can often scale up to 30% of bookings. Before COVID-19, the OTAs had an insurmountable advantage over hotels. The leading OTAs have enjoyed a remarkable increase in their market shares for any number of reasons. But COVID has caused what may become a paradigm shift in the opposite direction. With the right strategies and reasserting themselves, hoteliers may finally achieve the correct channel balance.
Stop Clicking Around - No, Really!
Digital marketing, advanced analytical tools, direct buying tech, and an array of guest loyalty strategies have helped many hotels recapture part of the bookings share in the last few years. But, unfortunately, the tug of war between hotels and OTAs was going nowhere by the end of 2019. By 2016, the most significant inroad into OTA dominance came with Hilton’s “Stop Clicking Around” campaign, which drove OTA bosses crazy.
But chain innovations were few and far between until the Spring of 2020, when the pandemic caused demand to drop out of sight. So the Hilton moves are consequential now as a kind of template. Back then, Hilton CEO Chris Nassetta told Skift his company’s loyalty membership jumped from 51 million at the end of 2015 to 85 million, as reported in March 2019. The Skift analysis turned out to be prophetic since the suggestion was for every hotel to take lessons from Hilton and the other big brands to circumvent the OTAs. Here are a few of the suggested strategies that are even more applicable now.
- Create/recreate a strong brand presence - Nothing is more important than a hotel’s brand; expand on your good name
- Offer best-rate guarantees - While this should be obvious, it’s important enough to reassert over and again
- Lure guests with loyalty benefits - Hotels should continue effective practices and innovate for new benefits
- Take advantage of the pause in globalization - Hoteliers should maximize their local advantages
- Focus more effectively on niche guest demographics - Domestic travel, alternative travel should be prioritized in some markets
- Examine and optimize all non-guest opportunities - revenue managers need to expand on non-room revenue streams.
- Study guest data to cultivate the most meaningful relationships - This is a crucial area where hotels maintain a considerable advantage over OTAs.
In addition, hoteliers need to resist the temptation to strive for the short-term benefits the OTAs provide in favor of mid-term to long-term strategies. A recent Siteminder e-book details the post-COVID trend that showed hotel websites gaining on OTAs and wholesalers.
Hotel websites have remained steady in the reset channel mix in most markets. For instance, in some markets, hotel websites have made notable gains. For example, in Australia, Italy, Netherlands, the Middle East, Portugal, South Africa, and Thailand, direct bookings through hoteliers’ sites are usually stronger than the OTAs.
The trend shows that, over the past year, consumers book, ever increasingly, accommodations locally and directly. The Siteminder data tells of hotel websites gaining in share for more than one-third of all destinations researched. And in Germany, France, New Zealand, Italy, and the United Kingdom, hotel websites stand at position two behind Booking.com.
OTAs Serving Hotels - Not the Other Way Around
While gaining ground and revenue from counterbalancing OTAs should be a top priority, underestimating the value of their massive reach is also a danger. Let’s face it, Booking.com is not going anywhere, nor should we wish for such a thing. These brands are trusted channels for hundreds of millions of consumers comfortable with, dependent on, and serviced by huge companies that funnel massive revenue to hotel partners. The problem we’ve faced is not the existence of such partners but the fact they’ve leveraged a disproportionate share.
In the past, hotels have approached this balance situation incorrectly. Instead of understanding corporations and big business dynamics, most hospitality businesses chose one of two paths. Hoteliers either gave in to the synergy of OTA channel dominance, or they adopted an adversarial approach that never really worked to reset the balance. In the former case, Booking.com and the others essentially became a monopoly perpetuated by massive revenue and capital. In the latter case, independent and even large hotels were in a pitched battle against these goliaths.
Revenue managers found themselves in the trenches of a war where the weapons are data, marketing, and sales technologies. In most cases, these revenue specialists used sticks and stones against mechanized asymmetric warfare. SEO, advertising, marketing, and big data technologies possessed by the OTAs, their brand presence, made it impossible for hoteliers to retake revenue share. Or, so it seemed.
So, in the wake of this pandemic disruption, it’s time to rethink the hotel/OTA relationship and shift the balance to parity. The key here is target acquisition. Instead of looking at OTAs as adversaries to which we only want to sell unsold beds, we must leverage the hotel’s advantages. Locality and individual value are the only areas where hoteliers have a distinct advantage over Booking.com, Expedia, and the others. Therefore, hotels must promote these OTAs to get constant revenue, win guest loyalty, and get the billboard effect on social and other channels. This is another aspect to be discussed in a future article, but it’s essential to understand that OTA guests are guests, the end conversion proposition.
The OTAs have established intelligent programs to help hoteliers achieve better visibility, better ratings, and more conversions. Hoteliers must take advantage of all the value Booking.com and the others offer. Local representatives are on hand to help our businesses convert these resources into sales. Remember, OTAs are the champions of guest acquisition, so leveraging this power to forge guest relations for the future is an incentive for working “with” instead of “against” the OTAs. Another area where hotels can glean power from third parties is marketing prowess.
By emulating the OTAs’ marketing strategies, hotels and chains can power their efforts. Expedia and the rest take advantage of stunning photography, killer content, and even locality specifics to convert guests. Interestingly, most hoteliers are unaware that some travelers who use Booking.com and other OTAs would rather book directly. A PhocusWright report shows that 60% of travelers visit OTAs when researching, then book via the hotel’s site. So, isn’t it a good practice to support OTAs as a visibility channel? Of course, it is. And, what about reviews? Recent data shows that travelers are 1.4 percent more likely to book where a hotel has 50 reviews or more. So, think about it: a potential guest researches destination hotels, gravitates to the highest rating/price/value proposition and seeks a better deal via the hotel website.
Finally, the logical question arises from this positive thinking toward OTAs. “How do we rise to the top of Bookings.com listings?” The answer is simple. Hotels must offer value-added incentives to defeat the competition. For example, free breakfast, free parking, and other complimentary perks are differentiating factors. When the user activates the “free breakfast or WiFi filter,” the matrix of listings changes accordingly. Traveler booking habits reveal how to take advantage of the OTAs and how to make the most out of the direct booking channel. Partner agreements, higher compensation rates for the OTAs, and other strategies will also force the hotel up in the results. The bottom line is, become an expert at truly leveraging all the OTAs have to offer.
Direct hotel bookings are any hotelier’s preferred mode of selling rooms. The lower costs of conversion, the higher revenue, and direct contact with guests are paramount. Things like ensuring best rates, mobile-optimized websites and booking engines, multiple language support, and SEO/SEM optimization strategies can help drive direct, commission-free bookings. That said, the pandemic has forced most hoteliers into becoming consumer behavior analysis experts. We’ve also returned to being local experts, domestic traveler gurus, and more astute at fine-tuning offers. And this is how the direct/OTA balance has shifted.
So, double down on the strategies forced by the pandemic and leverage OTA channels. If you think about it, the whole process is natural. OTA fix hotelier assets with tremendous branding power. They can never, however, become the hospitality value they are selling. Booking.com, Expedia, Kayak, or even TripAdvisor cannot serve the hotel guest breakfast, a view, or a crisp pillow to sleep on. As hotel operators, the job is to understand, leverage, emulate, and take advantage of every aspect of the online channels but stay focused on being hospitable to every guest.