OTAs: Their Rewards & Risks in Hospitality, Part 2

Head of Research and Insights
Published 10/7/16
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Part 2 of a two-part blog: Building a smart and profitable mix of online bookings. 

In Part 1 of this two-part blog I looked at how OTAs have created both opportunities and real risks for hospitality – especially independent properties. I highlighted four challenges: yield, control (of the guest and their information), pricing and tax. 

For these reasons, independent properties need to build a sensible mix of online business – a balance of both direct and OTA bookings depending on the market, guest and season. For most properties, a smart balance means OTAs representing 20-50% (and ideally no more) of their online bookings. 

Unfortunately, many independent properties are poorly prepared in skills, focus and budgets to build a smart and profitable mix of both direct and OTA online bookings.  

Building direct online bookings starts and ends with effective online marketing. However, basic knowledge, skills and resources are often lacking. From the biggest study ever undertaken across North America and Europe into what drives success for independent properties (Independent Lodging Market Study, Phocuswright 2015, which Miles sponsored), two main problems were identified: 

1. Lack of Digital Marketing Skills and Information

“Considerable confusion as to where bookings are coming from and how to drive additional revenue”

2. Lack of Marketing Resources

“OTAs are using cannon, while hotels are using pistols” (see full quote below)

Quote from industry expert interviews in the “Independent Lodging Market Study, Phocuswright 2015

The bottom line is that most hotels need to spend a lot more on online marketing. One rule of thumb is at least 10% of a properties’ revenue should be reinvested back into marketing. This investment must of course be smart, targeted and results focused. 

The Phocuswright research of independent hotels in North America and Europe, plus industry results, has highlighted these seven essential areas as most critical to building a smart balance of direct and OTA bookings:    

1. Invest in Content

Hotels must tell the story of why they are different and unique to differentiate their property from competitors. Without this, hotels are selling on price – not value. Therefore hotels should continually create and curate new articles, images and video, and then optimize this content for organic search and promote it through their website, paid and social media, email newsletters and other online and offline channels.  

The Modern Honolulu (a Miles client) has invested heavily in online content for distribution via their website, digital magazine (Modern Live), email, social channels and in print. Such content marketing builds reach and engagement with travelers who are looking for places to go and things to do – rather than just a hotel room.

2. Loyalty Marketing – CRM

Past customers and their information is any hotel’s biggest asset. Properties should invest in a robust Customer Relationship Management (CRM) database and communicate regularly with their past guests with relevant updates, news and offers. 

3. Mobile-Centric Marketing

A hotels’ website and digital advertising must be engaging, easy to use and mobile friendly – including online booking. Managing and continually improving an engaging, responsive website for their property is the central marketing platform for any hotel. 

4. Results Driven

Hotels should fully use Google Analytics and other measurement tools including trackable phone numbers to understand what marketing is working – and what isn’t. This includes setting up and using e-commerce tracking, other online goals and campaign tracking codes to continually review and improve the performance of your website, online advertising, email, etc 

5. Empower Guests to Tell Your Story

Properties need to encourage visitors and locals to tell their story. One simple but powerful step is to offer good quality, free Wi-Fi throughout the property and designated “Photo Opp” or “Selfie” spots for guests (which also feature your hashtag, web address, etc) to capture and share their on-property experience. Then monitor social media, engage and ask for permission to use the best of this user-generated content in your hotel’s marketing. 

6. Reputation Management

Properties must actively manage and reply to their online reviews (including those from international travelers). This includes encouraging guests to post on the major review platforms and using the reviews as a valuable source of feedback for staff training and property maintenance and investment. This process is made far easier with a Reputation Management Platform like ReviewPro, Revinate or TrustYou. 

7. Rate Parity/Best Rate Guarantee

One of travelers’ biggest concerns in researching a hotel is, “Am I getting their best rate?” Hotels should always offer rate parity for direct bookings (versus OTAs), incentives to book direct (e.g., enhanced Wi-Fi) plus a lowest rate guarantee for loyal, past guests (loyalty club members are not covered by OTA agreements). Most of the world’s major hotels have aggressive direct booking campaigns, such as Hilton’s “Stop Clicking Around.” 

Hilton is just one of many major hotel brands to offer a clear and compelling set of reasons – often ‘instant rewards, to book direct.

Industry organizations and governments around the world can do their part with better industry education and training plus providing a level playing field on tax and regulations (versus. online players). 

But in the end, the responsibility rests with the hospitality industry. In building a smart balance of online bookings, hotels need to develop a strong online presence; reach and engage with travelers; plus provide a compelling reason to book direct. Without this properties are resigning themselves to having more and more of their bookings controlled by OTAs – with the resulting impact on yield, ownership of the guest and their ability to control their future. 

OTAs can be powerful and valuable marketing partners – but as with all successful partnerships, hotels need to ensure they are valued, equal and nondependent partners in the relationship. 

For more great tips on hospitality marketing, check our my colleagues’ recent posts, Four Quick Strategies for Improving Conversion and You Can Have My Parents: Building a Smart Balance of Direct and OTA Bookings

Sources and Resources: 

Part I of this two-part blog, OTAs: Their Rewards & Risks in Hospitality 

U.S. Consumer Travel Report, Eighth Edition, 2016, Phocuswright

Independent Lodging Market – Marketing, Distribution & Technology Strategies for Non-Branded Properties, 2014, Phocuswright

“Four Quick Strategies for Improving Conversion,” Miles Blog, CA Clark

“You can Have My Parents: Building a Smart Balance of Direct and OTA Bookings,” Miles Blog, Camron Reid