Ask any hotelier or rental business owner what their main concern is, and they’ll probably show you one of their latest online travel agency (OTA) commission bills.
Websites like Booking.com and Expedia have cornered the online booking market in the hospitality industry. Search for a hotel in <insert location here>, and Google will almost definitely present you with the option to book immediately - via an OTA.
There’s just one problem if you’re a hotelier. Every time someone books a hotel stay via an OTA, the hotel in question will pay a commission for receiving the reservation. It has been a bone of contention for a long time in the sector, but it isn’t quite as clear cut as it might seem.
More importantly, there are actually a few tricks hoteliers can use to grab more direct bookings.
The curse (and blessing) of the OTA
Online travel agencies have huge marketing budgets. They’re so big, in fact, that OTAs can chuck millions at Google Ads spending without denting their bank balances.
This means they can put their hotel partners front-and-centre in the most relevant search results. And, while that means the ability to place your hotel’s own website on the first page of Google is somewhat tricky, it does mean you can rely on their marketing spend to bring you new guests.
Those commission bills which arrive each month are, therefore, a mixed blessing. They simultaneously remove a slice of profit from each room sale but, equally, introduce a new market to the hotel in question. For instance, over half of the millennial generation now book their hotel stays via OTAs.
As business relationships go, this is a complicated one.
How much do OTAs charge?
Good question, and a tough one to answer.
This is because OTA rates vary. Some charge flat commission rates, while others charge booking fees (the global distribution system [GDS] is even more complicated - but that’s a topic for another day).
Typically, hotels are charged anywhere between 15 and 30% for an OTA booking. That fee is calculated on the entire cost of the stay, and if your hotel is based in the UK, you’ll pay VAT on top of that (meaning the commission rate can actually be as much as 36%).
Some OTAS will even allow you to pay more commission in return for higher placements within their search results pages.
You might think that you can simply win more direct bookings by charging less on your own website, but that will break the terms within most OTA contracts which state that the same price for a room must be offered on all booking websites. This is something that the Competition and Markets Authority (CMA) has long been investigating, and is currently attempting to reform.
How to increase direct bookings
It stands to reason that if you can encourage more guests to book direct, you’ll build a more profitable hotel business.
Thankfully, there are a few ways you can do this, without harming your OTA relationships.
Encourage repeat bookers to visit your website
One of the biggest mistakes hoteliers can make with their online booking strategy is to ignore the importance of encouraging OTA bookers to return via the hotel website.
Paying ‘double’ commission can be avoided relatively easily. For instance, to encourage people to book directly, you could:
- add a note to your guest invoices to book direct next time with a link to your website;
- use email marketing to reach out to past guests and tempt them back via your website;
- spend a little on magazine advertising within niches or geographic areas in which your ideal guest audience resides;
- train reception staff to make note of how easy your online booking is if the guest wants to return during the checkout procedure; or
- provide an incentive for booking direct next time with a discount code.
As hotel guests, most of us are inherently lazy when it comes to booking. This is why it’s important to be proactive as the hotelier in encouraging people to book direct then next time they stay, rather than looking at their list of past bookings on an OTA.
Offer a great online booking experience - and a little something extra
When was the last time you put yourself in your guests’ shoes and attempted to book a room via your own website?
How easy was that? Could you book the room swiftly? Was the journey intuitive? Did you try it on your smartphone, and if, so, was it a pleasurable experience? If you hit any roadblocks, you’ll be sending potential guests back to the OTAs.
Guests will shop around online, therefore if they find you on an OTA, they may well hunt down your own website. This means you need to do two things:
- Offer the best possible online booking experience.
- Provide them with an incentive for booking direct.
That incentive is the last piece of the puzzle. When you’ve got them on your website, you have the ideal opportunity to avoid paying commission to an OTA. Sure, you’ll need to abide by the rate parity rules we mentioned earlier, but that doesn’t mean you can’t offer something extra.
By advertising the same room prices but throwing in a free breakfast or bottle of wine on arrival for booking directly, you might just nab a few additional direct bookers every month.
Harness your guest WiFi
Chances are, you offer guest WiFi throughout the hotel, but have you ever thought of it as a marketing opportunity? More importantly, what if it could help you tempt people to rebook directly?
Earlier, we suggested you should reach out to existing customers and encourage them to book direct, and your WiFi system could be the key to getting the data you need to do that effectively.
For instance, with Beambox, you can use the Interactions platform to send timed emails to guests a specific number of days after their visit. This means you’ll never forget to send that all-important ‘why not book direct next time’ email, and obtain the personal data you need to do so effortlessly and ethically via the login to your WiFi service.
Once you have the data you need, the following guest engagement journey can be fully taken advantage of:
Clearly, hoteliers need to find a balance between OTA commissions and their ability to attract as much direct business as possible.
The key lies in establishing and maintaining a positive relationship with each OTA and a resolute focus on drawing return guests back via your own website. Our additional tips above for marketing to direct bookers should help reduce those commission bills further.
Online travel agencies are going nowhere, but they’re to be worked with - not conquered.