As we know, guests want to book with the company who provides them with the best deals and best experience. Hotels want guests to book direct to save them the hindering of 15% to 25% they are paying OTAs. What if there is a way to give each side what they value and also build relationships that produce a winner’s exchange? OTAs have the leverage with their deep pockets that allow them to market at a scale that 99% of independent hotels can not.
Don’t get discouraged yet, because there is always a balance to something so one sided. Cornell University School of Hotel Administration performed a study called “The Billboard Effect: Online Travel Agent Impact on Non-OTA Reservation Volume.” The study showed that, on average, 53% of all bookings from OTAs first go to the OTA then travel to the hotel’s website, review more about the brand and what it offers (amenities, pictures, story, location, etc), then go back to the OTA to book because they see more value on the OTA. How can a hotel convert some of the 53% of people that end up on their own site to increase direct bookings? That is a great question! The simple version is adding remarkable value that is greater than the OTA. On average, hotels can convert 35% of the 53% “Billboard Effect” traffic in direct bookings, and we have seen this lower OTA fees by up to 9%. Keep reading to learn how you can lower OTA fees:
Examples of Revenue Increase
Before we get into how you can lower OTA fees, we want to share some examples of revenue increase with you.
Example 1:
- A company’s gross revenue is $2,000,000.
- 20% of their revenue is from OTAs. $400,000 is being brought in from OTAs.
- We know 53% of that $400,000 is coming to your brand’s website before going back the OTA to book their stay.
- On average, we are able to retain 35% of that 52% – growing your profitability by $70,000.
Example 2:
- A company’s gross revenue is $5,000,000.
- 15% of their revenue is from OTAs. $750,000 is being brought in from OTAs.
- We know 53% of that $750,000 is coming to your brand’s website before going back to the OTA to book their stay.
- On average we are able to retain 35% of that 52% – growing your profitability by $131,250.
How much profit can be gained from OTAs for your hotel?
You may be wondering how much profit you could gain for your hotel. Hotels OTA Revenue divided by 53% = X, then 35% of that revenue number = the amount you can gain back using the correct message at the right time paired with technology.
How can you do this and stay within the boundaries of your legal agreements with OTAs?
There are actually several ways you can increase your profits and stay within the boundaries of your legal agreements with OTAs. They include:
1. Use technology to show specific content and value propositions showing the guest the right content at the right time when they come from the OTA site to your site.
2. Stack value you can add that an OTA can’t compete with.
3. Have a rewards program to offer lower rates when booking direct while also giving rewards for future stays. This seems to be key to not breaching your OTA agreement, but it varies by hotel and OTA.
4. Engage with your guests pre and post checkout using targeted, value-added messages and communication.
How can I learn more about this?
This process is proven and working for hotels already. At first, this process and concept may seem complex, but it becomes clearer during implementation. It’s a beautiful method when a hotel is able to optimize their revenue in such a way that brings value to their brand and guest experience. We would love the opportunity to show you how our suite of products, called OTA Hero, can increase your direct bookings and ultimately increase your overall revenue and profitability. A consultation is free and takes less than 30 minutes to show you how we can help you grow your revenue and profitability with direct bookings.
Watch the video below for more information, and be sure to contact our marketing agency in Tennessee for help!
