Direct Bookings vs OTAs in 2017 and Direct Strategies that Truly Work!

gorilla scratching head

 

Scratching your head over Direct vs OTAs booking war? Don’t…

 

First the overall:

I’ve landed in the Travel sector and particularly in the hotel chain’s scenario back in 2010, roughly 7 years ago.

 

Since the beginning of my journey in this amazing and hefty industry, I’ve increasingly come to realize genuine discomfort between ends of the same stick:

 

  1. On one hand, hotels and other types of lodging owners with their attempt to drive bigger volumes of direct business and thus increasing bottom line;
  2. On the other side, tour operators and agencies that still have an established business model and strive for continued growth and survival;

 

The recent changes and increased reach & influence of online channels in the travel booking path and consequently the rise of online giants as large scale online travel agencies (in the last decade we’ve moved from several online players to basically 2 huge ones, Expedia and Priceline/Booking), has only accentuated the distances by forcing them to compete in the same battleground.

 

Still, this is old news. Probably since the beginning of the hotel business back in biblical times, direct and third party bookings coexist (kind of) in a not very friendly and symbiotically mutual relationship.

 

Along the way several myths related with this troubled relation have been created and endured, more often due to popular believe, rather of proven correlation.

 

Honestly speaking, its easy to get why! Both from the hotel owners and from the third party perspective are lots of reasons to try and explain things their special and sometimes biased way, or as we Portuguese like to say: “pulling the ember to its sardine”…

 

 

priority blue stamp

Why direct bookings matter so much for hotels?

It’s no wonder that hotel owners prefer their customers booking directly. Besides the general proudly sensation you have, followed along with the “it’s my loyal customer” tingling, tons of reports from very reputable sources support the idea that direct business is better for hotels finances, especially relating them with CLTV (Customer Life Time Value).

 

Recent studies like this pass the idea that Direct Bookings are 8 to 19% more profitable than their 3rd party counterparts and despite most studies (like the above) are not the finest example of a well sustained and unbiased report, it sure sets the tone for the conversation.

 

To further consolidate the feeling, hotel marketing agencies, software developers, vendors, content providers and pretty much everyone else in the market –that isn’t an OTA or OTO, are also very interested in passing this idea along with their magic key to the very secret and almost unbelievable world of the “get customers without having to pay for them”.

 

The whole idea here is to get a bigger piece of the pie, both for hotels and their helpers alike, even if some “direct booking experts” are not as expert as they appear to be.

 

That being said, enough about hotels for now, and let’s move to third party providers aka. OTAs, Agencies, Operators or Travel Distributors:

 

 

Why third party providers worry when hotels get more direct bookings?

Do you really need an explanation here? Third parties don’t own hotels some make a living on your business. And if their revenue diminishes, they’ll have less money to reward stakeholders, they’ll need to cut back costs, personnel, marketing funds…you get the picture!!

 

(Added on 24th May, 2017) The above remark by no means implies that all travel agencies and/or tour operators make a living on hotels. Nevertheless, there are plenty who do. 

 

swimming to stay alive
Feel like swimming to stay alive?

Now for the hard stuff!

If you’re still reading this article (love your patience!), by the looks and so far, it may seem that every single booking coming from a third party provider (travel agency, OTA or traditional tour operator) is a waste of time and profit for the hotel.

 

Is this a good reasoning? The straight up answer is…No, because You are asking the WRONG question!

 

The question needs to be re-phrased and more closely related to this one:

 

Is this incremental revenue or not?

 

In the end of the day what really truly matters is if the revenue your hotel is getting from those different channels you struggle so much to contract and manage, is incremental to your business or if you can get it cheaper or at least more directly somewhere else.

 

For example: if you are setting up a negotiated package rate that will give you access to publish and advertise your hotel directly to an airline customer right after he completes his flight purchase, why not? How more incremental and timely can it be? You can fence your rates, while reaching out to a highly engaged, interested and relevant audience, and one that will probably have lower cancellation rates also.

 

Another example: a specialized online travel agent wants to feature your resort hotel on its hotel short list, and for that, asks for a negotiated net rate discounted around 25% off your flexible dynamic rates. Notice that this isn’t a generalist online travel agent, but a specialist, featuring probably only a handful of hotels within your destination. It’s hardly the same has having your hotel displayed in Booking.com, Expedia or even Trivago.

 

Now that we’ve established common grounds, let’s move to the juicy stuff about hotel direct booking strategies:

 

Question: What’s the best direct strategy for your hotel?

Answer: I have no idea. There’s no such thing has one size fit’s all in the hotel business, especially considering strategy! There are however, basic concepts that should be faced as basic “rule of thumb”.

 

  • Always offer your best rates to your most loyal customers;
  • Always offer a small extra to guests booking directly;
  • Save your last rooms for your own direct booking channels (unless they get unsold repeatedly);
  • When  upgrading free of charge, do it first to guests that have booked directly;
  • In big seasonal special offers, such has Summer Sales, January Sales or Reveillon Packages, always run a pre-buy sale to your loyal customers, offering them the chance to buy it sooner & cheaper from you;
  • Your direct channels should always be the firsts to open for sales and the last to close availability;
  • Keep high-demand rooms for your website and voice reservations (this is especially true if your suites & family rooms are within your best selling rooms);

 

Regardless of above, the answer is still really simple: The best direct booking strategy is the one that will get your hotel as much revenue as it possibly can, at a controlled cost, leaving a margin for other channels and providers to help you get the highly regarded and precious incremental revenue.

 

Don’t get me wrong, E-commerce Website Basics (below) must be assured, but their full potential will never be achieved without a good, adjusted to reality strategy:

 

Quick checklist on hotel website basics:

  • A very fast, user-friendly and mobile ready website;
  • An easy to use booking engine with secure payments;
  • Direct integration with meta-search for increased reach;
  • High-quality but real photos of your hotel assets;
  • A relevant loyalty guests program;
  • Make it easy for your guests to reach you (highlight contact information, have a click-to-call and up-to-date contact details);
  • Fresh relevant content (it’s a good idea to host and update a niche blog that potential guests can relate to);
  • Social media channel integrations (Facebook, Twitter, Instagram & Youtube)
  • Display social validation signs (your Booking.com, Expedia and TripAdvisor guest review scores, TrustYou and Feefo ratings, just to name a few);
  • Showcase trust signs from independent sources (Verisign, TrustE, Symantec, etc…);
  • Your central reservations department need to answer phone calls and emails promptly, professionally and is a knowledgeable way,
  • And needs to do it at least in as many languages as you have available on your website;
  • Preferably 24 hrs a day, 7 days a week;

 

Deal breaker: putting in place a well thought-of strategy and then suddenly realizing that your hotel direct channels (brand website and voice reservations) are not working correctly.

 

hammer crushing egg
Get the basics right or you’ll get hammered!!! The hammer = OTAs. Guess who’s the egg?

 

After this, you’ll still need to take care of your web presence and digital marketing, especially for brand related searches, were OTAs usually dominate (with good reasons), sometimes even by high jacking brand keywords such as your exact hotel name.

 

When all that is done, it really comes down to strategy. And strategy depends on the type of business you’re running and the type of business you aim to run in the future.  Let’s see one simple example:

 

  • Hotels in Asset Light / Franchise Model – in this type of business, the brand is not the real owner of the property. Normally, the property owner pays a fee to use the brand and also needs to accept the brand standards. For the brand, the actual money comes from the fees and the services it provides to the property owner. Many times there’s just no real pressure on the brand side to evaluate the business at the profit (EBITDA) level.

 

In this case, the brand main interest is to have a good share of direct bookings, even if that means to sacrifice some of the profit of the hotel. That’s because the brand needs to be able to quickly prove value to any hotel owner that wants to be part of their brand chain.

 

The best way to do that is by assuring a big share of direct bookings and also a big database of loyalty customers, meaning that as soon as your booking engine is switched on within a new property, you’ll be able to immediately showcase the power of the brand and its loyalty users.

 

Don´t forget, your direct booking strategy will never be the same if you actually own hotels instead of just taking a franchise fee, but we will tackle that another day *)

 

 

About the “correct” direct booking strategy

Your job as an hotel direct sales manager, head of distribution or e-commerce director is not just to increase direct booking revenue by facilitating your customer’s decision to book directly with you, even if that’s in the job descriptions.

 

No! Your main goal must be to help your hotel or hotel chain to achieve the best possible financial indicator closer to EBITDA margin (earnings before interest, tax, depreciation and amortization). If you can’t access EBITDA in your company, you can probably get GOP (gross operating profits) and take management decisions with that KPI as a target.

 

So, the key here is to understand where you can leverage and push for more direct business, without scaring or undermining all the third party provider partners that can help you achieve incremental revenue.

 

It’s not just group, corporate or tour operator business. Even OTA business can be incremental if correctly approached!

 

 

4 great examples of how OTAs are incremental to your hotel business

 

1. IMPACT ON NATIVE SPEAKERS! Most of the times OTAs have a higher native language reach than brand websites.

Imagine that your hotel is part of a well-established boutique hotel brand, and features a complete and user-friendly website beautifully translated to English, Spanish, French, German and Portuguese (BR) languages.  Pretty nice right?

 

That said,  and overall agreeing that by offering those languages, you’d be reaching lots of qualified potential guests, you need also to consider that you’d be missing out on a big part of the available market!

 

Just naming a few: Mandarin (roughly 1Bn native speakers), Hindi (roughly 300 Million native speakers), Arabic (also roughly 300 Million native speakers) and so on…

 

According to a 2012 Harvard study, more than 70% of “consumers spend most or all of their time on websites in their own language.”

 

Not just that, but:

  • “72.4% of consumers said they would be more likely to buy a product with information in their own language.”
  • “56.2% of consumers said that the ability to obtain information in their own language is more important than price.”

 

What does this mean for your hotel?

By not providing your website users with their native language, you are automatically excluding a huge potential client base which is especially dramatic for hotels and resorts placed in highly visited / international destinations.

 

Also, if you present your customers with their native language, they’ll even consider paying a little more for the room. Guess price isn’t the only turn-on when it comes to travel!

 

OTAs, of course, are well known for having multi-language websites, with Booking.com being perhaps the leading and most perfect example of that approach, boasting a staggering 43 languages!

 

multi language websites are crucial for conversion increase

 

2. LOCAL CURRENCY! ASAP!!!

Every e-commerce manager that runs or has runed an international website knows that local currency is a key conversion factor Your customers will always prefer to buy from you using their local currency. They will feel way more comfortable, at home, less frightened on what might be charged to their credit cards.

 

By offering your customer with the option to pay and be credited in their local currency, you’re breaking an e-commerce big barrier.

 

With online travel bookings being a global adoption, it’s crucial to offer your guests with an easy to understand, free of charge-back, currency conversion or foreign transaction fees, payment method.

 

The same goes for settlement currencies. It’s very important to accept payments from your guest not just in your local currency, but in theirs also!

 

Guess who has stacks of currency options to choose from? Yes, OTAs! You’re getting good at this!!! Booking.com has even more currencies than it has languages: 51 of them to be exact!

 

 

3. REMEMBER OTAS ALSO HAVE LOYAL CUSTOMERS?

Yeap! You’re not the only one pushing for loyal repeat guests. OTAs have been doing that for ages now. You’re probably familiar with Genius rates from Booking.com or with Expedia’s Members Only Rates (got to love the Chrome extension).

 

Don’t get me wrong. I’m not saying that Genius rates and Member Only rates are not a bit shady, which they sometimes are. What I’m saying is that they can prove incremental, especially if you don’t forget to offer the same discounts to your loyal guests, just to prevent some of this rates to cannibalize on your guests.

 

The best strategy here is to fish in their pound as much as possible, without having them (OTAs) fishing on yours. Seems easy right!?!

 

 

4. DROP DEAD IS WORST THAN TERMINALLY ILL!

A bit of a shocker? Actually it isn’t. Regardless of the shocking words, drop dead is always worse than terminal illness.  And walking slow is normally better than being stopped.

 

Of course paying 20, 25 or even 30% commission is really bad, because no matter how you twist it, by the end of the day you’re always cutting directly on your net profit.

 

However, paying commissions still beats not having guests at all. The trick is not how much commissions you are pay for incremental revenue, but how much commission you are paying for guests that would probably just end up booking directly with you (sometimes just because you’re one of the few choices…).

 

A personal experience on the above subject:

I manage third party online sales channels for the biggest Portuguese Hotel Chain in its historical Pousadas hotels brand.

 

Some Pousadas are in high demand, highly competitive destinations such as the Algarve and Lisbon or Porto cities. This means that on those destinations, we need to have a very different commercial and marketing approach from when we’re selling a Pousada located on a low demand destination (like Pousadas of Queluz, Estremoz or Valença).

 

Having the same strategy and commercial strategy in Lisbon and in Estremoz (down in Alentejo, close to the Spain border), would only damage revenue and and eventually, bottom line results.

 

 

So…Wrapping up

 

Understanding the do’s and don’ts, setting up the right strategy for your business (never make the big mistake of assuming there’s only one strategy for all business types) and implementing your direct booking strategy assertively and always considering your destination and business type, will effectively help your accommodation unit being considered within the ultra-competitive online travel environment.

 

Undoubtedly, there are still lots of different ways to improve your direct booking revenue, from brand bidding to remarketing, from correctly setting up your loyalty guests program up to ensure the correct distribution and pricing strategies and we’ll go there step by step!

 

Anyway, just don’t forget your hotel is not an island, and that probably all types of businesses are welcome when properly negotiated.

 

If in the meantime you have any doubts or comments, please feel free to drop a quick email and I’ll be happy to help as soon as possible!

 

Warm regards,

Rui Martins

Hotel loyalty rates and OTAs – Expedia promotes Red Lion Hello Rewards

According to Travelweekly, Expedia has been promoting to its customers the Red Lion Member Rates. Red Lion is a US / CA hotel chain with a little over 100 hotels.

 

Expedia Red Lion River Inn
Expedia featuring Red Lion Hotels Hello Rewards Program

 

Similar to many other hotel chains and independent hotels, Red Lion Hotels have their own member rates, named Hello Rewards and they offer loyal customers an exclusive “thank you package” with the following benefits amongst others:

  • a free night every 7 stays,
  • discounted rates,
  • express check-in and check-out;
  • late check-outs;
  • room upgrades;
  • member-only offers;

 

All of this is now available to Expedia and Hotels.com users, since July 2016 at least. Check out the screen shot below.

 

 

Is this an historical landmark we´re seeing?

 

For some time now, hoteliers are turning to loyalty rates to fight OTAs predominance in the online travel bookings landscape.

 

This is a commendable effort, but hardly a new approach!

 

In fact, the likes of Booking Genius rates (with a staggering 10% off) and Nectar Points from Expedia are being pushed for years has a (strong) selling point to OTAs users. They do even better not only offering “member only rates” but also asking hotels for “secret offers” and the pitch them publicly to indiscriminate users (see screen shot below).

 

secret offer on Booking.com
Publicly pitching a “secret deal” on Booking.com

 

The new thing here is that so far, OTAs and Hotels have been pulling in different directions and this seems to be the first time publicly open attempt of an OTA promoting a hotel member only rate to its customers.

 

 

Why? Does this make sense?

 

Hotels are worried at OTAs gaining more share of their online bookings pie and that is why most of them are trying as much as possible to increase their direct bookings online channels. Member only rates are a good way to force their customers to understand that “booking direct is better”.

 

OTAs are also worried at Hotels starting to recover their share. They need to keep on growing their share on online travel bookings. An example: the 2 giant OTA groups, Expedia and Priceline, are amongst NASDAQ biggest players on Cyclical Consumer Goods & Services sector. Priceline has a Market Cap of 69,63B.

 

Instead of entering a fratricide war against big hotel chains, it seems that Expedia Inc. is now looking at a more pleasant alternative: to collaborate with them!

 

This is a bold move because Expedia is helping Red Lion fuel its own loyal customer’s database, which on the long term can probably hurt Expedia by lowering its recurrent customers to those specific hotels.

 

On the other hand, OTAs strive on the customer’s idea that they “have all in the market” at the “best rates in the market”, and this is exactly what Expedia is aiming to offer its customers, the best rates in the market.

 

If this is going to work and get out of beta stage or not, we don’t know but we promise to keep an track on it and report it to you 🙂

 

Yours trully,

Rui

Hotel Digital Strategy in 2016 – Increase Direct Bookings

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This article’s objective is to help you define & set proven quick-wins for a well succeeded Hotel Digital Strategy aimed at increasing your direct bookings.

 

First, let’s just get 3 things straight:

  1. Your marketing budget makes little difference;
  2. It doesn’t really matter if you are the owner of a Big Hotel Chain with 1000s of rooms or you only manage a small 15 room Boutique Hotel;
  3. Makes no difference your current standing point on digital marketing;

 

Specifically hotel and in overall travel digital landscape is a hard and competitive one.

We´ve spoken before that a winning digital strategy from 2-3 years ago, if used now in 2016 exactly as it was before, will probably end in you losing money daily. The reason why is that global tourism and hospitality industry has underwent major chances with the increasing predominance and wide spread of mobile, social and overall worldwide IT advancements, and in fact it will keep on evolving tremendously on the forthcoming years.

 

Therefore, the goal here is to focus on 3 solid and up-to-date quick-wins:

| Fix your pricing;

| Enjoy the metasearch wave;

| Take advantage of mobile & social merge;

 

Flexible & Accurate Pricing

This is probably one of the most important details in your strategy. Online bookings thrive with high demand periods such has summer season in beach resort destinations, event dates, holidays and similar high demand / high conversion periods.

For your business to fully take advantage on that you need to ensure:

  • Public available rates are all accurate and on parity (this is not just for rates, but also applies to room categories, offers, payment options and cancellation policies);
  • You can quickly increase rates and also close lower margin channels.
  • The cheapest and more unrestricted available rate (public or otherwise) is always the one you offer your direct customer;
  • Your loyal customers are rewarded as such;

 

Questions for you (we) to answer:

How can we keep rates accurate and on parity at all (most of the) times?

Answer: Stop thinking old school. Especially with online distribution, all channels should have access to the same rates –give OTAs and OTOs gross rate. If you want to differentiate one channel from the other, set specific marketing contribution for targeted goals, define a rappel commitment attached to a revenue objective, or simply differentiate them with inventory access. Let them me bigger and more important based on their own merits aligning with your business strategical needs, not by pricing and contracting mistakes.

 

How can you quickly and fully increase and yield your rates if you keep on contracting static rates, with fixed safety allotments?

Answer: Unless we are talking about specific tour operators that sell (the best term here his PUSH) exclusive holiday packages, often including flights, transfers and destination management services, chances are you don´t lose a real amount of bookings and revenue by only contracting flexible rates.

 

How can you I keep the best rates to my direct business?

Answer: Save some room categories exclusively for your direct channels. Offer exclusive rates on your contact center (online is way more visible) and don’t forget to save a little extra for your loyal repeat customers.

 

Tour Operator Static Rates | Quick tip

Even when offline rate publishing is needed (catalogs and brochures), you can still print a “starting from $XX”.

 

Bottom line is:

By choosing to have only or on majority flexible pricing 3rd part contracting, your business will be able to yield rates and take serious advantage of high demand dates.

 

 

Enjoy the Metasearch (big) Wave

TripAdvisor, Google, Trivago and Skyscanner are the biggest players on the sector and all report huge increases. In this article, Trivago (hotel metasearch platform) is very clear about this and in a very simply displays what we all consider to be a shift in travel consumer behavior. It maybe because user considers them unbiased or it can have something to do with the crushing amount of marketing dollars they spent, but be it has it may, metasearch’s are heavly used and here to stay.

 

Use of Metasearch by online travelers (people that book travel online) in 2014:

  • 35% of British travelers;
  • 38% of French travelers;
  • 42% of German travelers;

 

This Google Trends graph says it all:

metasearch trends 2010-2016

That said and proven, how can you leverage this power for your direct bookings?

Rest assured that OTAs are already there and have been there for a while now. The good news is that you can also be present directly and in a comfortable and cost controlled manner.

Netaffinity, Seekda, BookAssist and other partners can easily help you singly connect to all major metasearch platforms without the need of establishing a direct contract with each one. And some, like Seekda, can even help you effectively manage your “metasearch budget”.

Others like Siteminder our SynXis, can still connect you but you will need to have direct contracts with the metasearch(s) of your choice.

And don’t forget Google Hotel Ads (different from AdWords), because we have a feeling it will grow quickly.

 

 

Take Advantage of Social & Mobile Merge

Have noticed that your customers – actually the World – are getting more and more accustomed to search & book on mobile?

The Connected Traveler is now both a reality and a growing trend. Even after bookings, you can start impacting your audience on social platforms, BUT them again, nothing new here!

For ages, marketing managers have made efforts on approaching customers where they were the most, and now, your customers (and prospects) are the most on Facebook, Instagram, Snapchat and others. And as a result of having big audiences, these platforms have became experts in providing business the tools to market to them.

 

Take Facebook has an example:

Those simple 2010 Facebook Ads are long gone. Facebook has recently launched its new Facebook for Business and on it, we easily noticed a distinguished industry: Travel, highlighting how to approach those Travel related customers and providing success stories with Secret Escapes or Hotel Tonight.

If you take a minute to think about it, this merge makes perfect sense!

Facebook knows our customers in-depth. Were they live, what they do on a daily basis, what time they post or consume content, what type of content they interact with….

It’s overwhelming and powerful to know that much about someone or something. And it´s not just Facebook!

Several companies keep track on our behaviors and collect meaningful and actionable data that can later be used to promote products and services – tourism and hospitality included.

Not only can you re-market to a preexisting customer database, but you can also create and manage look-a-likes, meaning prospect databases that are similar to your best buying and most engaged customers.

 

If this interests you, here are 3 Tools you should check:

 

That’s all folks! Hope you can benefit and if in doubt just drop me an email.

 

Post Scriptum

This article was especially written for those of you looking to:

  • Increase your hotel direct bookings effectiveness;
  • Increase your hotel digital awareness and relevance;
  • Step up your already existing online direct strategy;
  • Shift your marketing focus from offline to online driven strategies;