Probably 75% of the independent hotels, in Gulf Region (GCC), are dependent on Online Travel Agencies (OTAs). Meaning the OTAs are bringing them more than 60% of their overall business.
The main problem for hoteliers is how to increase their revenue with a limited inventory of rooms per day and any day lost can’t be recovered (perishable aspect). Once they have worked out how to fill the hotel, the issue is often how to decrease the market share of OTAs and increase their direct bookings. OTAs control directly hotel positioning on their web page, and they have multi factors to influence it (preferred programs, higher percentage of commissions, positive reviews, faster payment from hotel accounting department...). For those of you who aren’t hoteliers, OTAs take up to 25-35% commissions on the bookings they send to hotels. That is a very large part of the hotel’s profit. Looking into details, OTAs also make the client loyal to them and not to the hotel, because they provide the service and platform for bookings (Web booking process, confirmation, special offers, newsletters...).
Last year, RSVP Hospitality visited many independent hotels in Dubai and Northern Emirates, that were becoming quite popular on OTA sites, so much so that they had 60-70% of their revenues came from OTAs. While we congratulate the performance on the revenues side, it was obvious that this model would not last. It became urgent to work out strategies to shift to direct bookings. Here is how we initiate the change:
1) Website
We advised them to contact the best web marketing agencies and told them to make the best website. The web marketing agencies must think out of the box, to create the best hotel site. The areas to consider for General Manager and Marketing Manager, were full-screen images, easy navigation, easy to book, great contents.
(-) Avoid:
- To use generic website template that looks unprofessional,
- To use copyright pictures, or pictures taken from the internet,
- To crop pictures with basic photo editor,
2) Invest in your online marketing strategy
By allocating half of the OTA commission budget, we recommended to invest it into online marketing. Working with pay-per-click advertising, blogs and every possible means of direct marketing they had to offer. We weren’t going to make much more profit, but we wanted them to be independent.
(-) Avoid:
- To attribute these tasks to a non-marketing person,
- To expect large return on invest from the beginning,
- To think that everyone in your city knows about your hotel,
3) Use Social Media
We recommended working with Social medias, blogs, Facebook and any other medium they could find to get in direct contact with future guests. We had to get out there and make the hotel known to real people that were all potential guests for them.
(-) Avoid:
- To ignore negative reviews left on your Social Media,
- To monitor only positive feedbacks,
- Using cookie cutter answers / template,
4) Keep working with OTAs
OTAs are not bad for business, they’re just expensive on your P&L. We had to educate Revenue Managers on getting involved not only with Actuals Revenues from a statistics or PMS point of view, but also from a Finance side too. So of course we didn’t recommend to shut OTAs out and adapted some kind of revolution. But since hotel direct bookings took over most of their inventory, hotels didn’t have much to sell through them anymore. However we advise to keep OTAs all going and paid their commissions. Even if they were rather small.
(-) Avoid:
- To inform OTAs market manager about your strategies,
- To think that without OTAs production, you can look for another job,
- To restrict OTAs commission or margin to the minimal,
5) Best Rates Guaranteed
This is always a heated subject, but hotels need to decide where they’re going to head in the future. People need to understand that for 95% of the case, where the hotel is on BRG violation, it came from a manual input. To the exception of the currency converter variation, OTAs cannot fluctuate the margin price setup in their extranet.
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Best Rate Guaranteed - Hotels - Best Practice
When I worked in Starwood Hotels (2003-2006), Best Rates Guaranteed (BRG) was the priority for Revenue Managers, and Starwood Hotels and Resorts invented a BRG Violation Automated reports sent through the report provider to alert General Managers. For every case of violation, a penalty to the hotel was even considered.
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With about one year of work, applying the strategy, we changed mentalities. We have now hotels that increased their revenues by 20% over last year. It takes some courage and it must be pursue till the time the hotel finds a comfortable profit margin.
Romain @ RSVP-Hospitality
OTA now understands the threat branded websites have become for them,increasing competitions and have developed their own loyalty programs and value added services of benefits; Reviews Ranking, Expedia Corporate booking tool, Earning points and miles, package with airlines, car rentals etc. They are constantly innovating.
ReplyDeleteThe internet is the next future amounting to 80% of hotels bookings in the coming years. Due to this wholesalers have developed their operations on the web as well. We are in the age of too much information, thus confusing the customers.
Hence, developing a loyalty program only can prove a success story for the hotel. In the age of price sensitive customers, making customer loyal is very important, thus providing additional benefits in terms of amenities, which cannot be offered by the OTA.
Moreover, I'll add once the customer is in the hotel regardless from where they booked, the employees can capture the customers and entice them to book directly next time by giving interesting offers. Knowing that OTA has 20-25% commission or mark up, giving a 10% to 15% discount if the customer reserve directly can only be beneficial to the bottom line.
Sending offers to the customer database and as highlighted already above, the active participation in social media will divert customers back to the hotel website.
Hence, hotels have to constantly be on the edge of innovation and creativity. OTA are limited in terms of offerings due to their technological constraints and given that they have more hotels to take care of.
However, hotels are not really limited in terms of offering, hence tailor made packages can be proposed to drive the to the branded website.
Moreover, the increasing implications of comparing sites, such as Kayak, Trip adviser and so on affects the drive to web for hotels. Hence position the hotels and buying some key words from the search engines can proved to be key to their drive to web strategy.