Return to our Home page Search
Click here for the hotel and hospitality news from around the globe Hotel, Travel and Hospitality Articles Videos and in-depth Interviews
CONCIERGE DESK
Read more now
Read more now
Read more now
A Ten-Step Program for Easing Your Hotel's OTA Dependency.
By Daniel Edward Craig
Friday, 27th August 2010
 

These days, bashing online travel agencies has become a popular sport; the likes of Expedia, Travelocity and Priceline are being blamed for commoditizing hotels, for decimating rates, and for training travelers to demand deep discounts.

We can probably find a way to blame them for that oil spill in the Gulf of Mexico too.

Not that OTAs need defending, but the reality is, we as hoteliers share the blame. It’s our signature on OTA agreements. We give them access to inventory at heavily discounted rates. And we’ve taught travelers to look for the best deals on OTA sites.

Case in point: While reserving a hotel in Chicago last month, I found six different rates for the same room. The lowest came from Expedia at $180. Inconceivably, the highest rate came from the hotel’s in-house reservations department at $229. Such “rate disparity” is rampant.

What started as casual use has become an unhealthy addiction. Meanwhile, while hotels are staggering toward recovery, the OTAs are boasting enormous growth. It’s time to take back some of the control we relinquished during desperate times. To that end, here’s a ten-step program for easing your hotel’s OTA dependency.

1. Admit you have a problem.

The OTAs are not the cause of the discounting problem, but they are enablers and your competitor hotels are codependents. By advertising heavily that they offer deeply discounted rates, OTAs have contributed to the firesale mentality among travelers. Hotels have exacerbated the problem by being always on sale, by offering discount rates on discount rates, and by treating all inventory as distressed inventory.

2. Do the math.

Yes, OTAs can move a lot of inventory, but at what cost? The terms of OTA agreements vary, but typical commissions range between 15% and 25%, with big-box chains paying the least and small independents the most. At $200 per night for a three-night stay, an independent pays $150 in commissions. Compare that to the low-to-zero costs of direct bookings. How could you use the difference to attract more lucrative direct bookings?

3. Don’t overestimate the billboard effect.

No question, OTA business is an important part of the market mix. As Mike Nelson, president of Partners Services at Orbitz, explained on Tnooz.com, “In any economic climate, online travel companies are a strategic resource for hotels that want to stimulate demand, access a global distribution platform and benefit from vast marketing and promotional investments.” But to rank high on OTAs you must offer deep discounts. As powerful as the “billboard effect” is the “OTA effect” of training travelers to book via third parties.

4. Make direct the best option.

Travelers should get the best deals by booking direct, period. Honor your rate parity agreements, but implement a best rate guarantee and clearly state the advantages of booking direct, like Marriott’s Look No Further™ promise. As an added incentive, offer value-adds not available via non-direct booking methods.

5. Be strategic.

Instead of discounting across the board, forecast demand in each market segment and develop separate strategies. Reward travelers for advance bookings and build rate on that base rather than offering the best deals on last-minute bookings. In an interview with EyeforTravel, Kurien Jacob of Highgate Hotels argued that opaque sites “should be used only if the hotel needs to protect its overall retail rate to maintain brand image, prevent group room dilution or maintain corporate negotiated rate protection.”

6. Use social media to connect with travelers.

Private sales via members-only sites like Jetsetter and Vacationist allow you to bypass OTA rate parity requirements, but the terms can be even less favorable than those offered by OTAs. Use them sparingly to create base and sell off distressed inventory. Focus your efforts on social media and reputation management to build your email database and Facebook and Twitter followers and save your best deals for them.

7. OTAs are partners and competitors.

OTAs don’t care which hotels travelers book as long as they book through them. Traditional travel agents charge 10% commission and provide personalized service in bricks-and-mortar offices. How can OTAs justify such high commissions, and where does the money go? Seen the TV ads, the cost-per-click ads, the print ads and banners? They’re driving up your advertising costs and luring travelers from direct channels. Goldman Sachs estimates that OTAs generate 8% to 10% of Google’s gross revenue worldwide.

8. Leverage your power.

Competition among OTAs is fierce, and they need access to your inventory at competitive rates to compete. In an interview with the Chicago Tribune, Priceline CEO Jeffrey Boyd said, “You've got to have the best rate, and the hotel has to be available when the customer is searching on it." Leverage this power by negotiating the terms right for you. According to revenue management consultant Jil Larson, that means “either block space or last room availability but not both.” If the OTA won’t come to terms, find one that will.

9. Loyalty means loyalty.

Loyalty program members who book via OTAs must understand that they’ve forfeited their perks to the OTA in the form of a hefty commission. Stipulate that members must book direct to qualify for privileges. This is especially true of opaque sites; booking blind isn’t brand loyalty.

10. Make the booking experience seamless.

OTAs are brilliant marketers and are constantly improving the consumer experience. How does your booking experience measure up? Is your website mobile compatible? Make voice reservations accessible, efficient and personal – an area where OTAs can’t compete. And invest in a two-way PMS interface to decrease time spent managing rates and inventory and free up time for strategizing.

As for that hotel in Chicago, I asked them to match the Expedia rate. They agreed, so like a good hotelier I booked direct. Don’t make your guests jump through the same hoops.

Daniel Edward Craig is a former general manager turned hotel consultant and the author of the Murder at the Universe. His articles and blog about issues in the hotel industry are considered essential reading for hoteliers, travelers and students alike.

Visit www.danieledwardcraig.com or email dec@danieledwardcraig.com. Twitter: dcraig.

Advertise with 4Hoteliers.com ...[Click for More]

~ Important Notice ~
Articles appearing here contain copyright material. They are meant for your personal use and may not be reproduced or redistributed. While 4Hoteliers makes every effort to ensure accuracy, we can not be held responsible for the content nor the views expressed, which may not necessarily be those of either the original author or 4Hoteliers or its agents.

Learn more about DigiJames - in room technology
Advertisment  
 Related Articles  (Click title to read)
In Hospitality, Not All Internet Bookings are Created Equal.
WWED - What Will Expedia Do?
The Importance of OTAs.
Why Social Media Won't 'Nudge Ahead' of Travel Booking and Planning Channels.
 Latest News  (Click title to read article)
MGM Resorts and Hakkasan Group create JV to pursue global growth in hospitality
Wednesday, 16th April 2014

Waldorf opens luxury hotel in Jerusalem
Wednesday, 16th April 2014

Meet & Seat: Be social in the sky
Wednesday, 16th April 2014

Chinese market to lead continued strong beef demand globally
Wednesday, 16th April 2014

Luxury's got a brand new style
Tuesday, 15th April 2014
 Latest Articles  (Click title to read)
Does Your Hotel App Reflect Your Hotel Experience?
Wednesday, 16th April 2014

Global Update: Who's Where and Doing What - March 2014
Wednesday, 16th April 2014

Four Multi-Faceted Ways that Meta-Search Can, and Must, Help Hotels Take on the OTAs
Tuesday, 15th April 2014

The New Experience of Incentive Travel
Tuesday, 15th April 2014

Gay-Friendly Hotels on the Rise
Monday, 14th April 2014
 Most Read Articles  (Click title to read)
Global Update: Who's Where and Doing What - Jan 2014
The Top Trends in Search for 2014
The Do's and Don'ts of Boutique Hotel Interior Design
The Digital Direction Part 1: Fundamentals of Digital Marketing and Why it is Vital Hotels Understand
Global Update: Who's Where and Doing What - Feb 2014
 Useful Links  (Click company to visit)
A-Listings - Exclusive Links Section @ 4Hoteliers
www.4hoteliers.com/4hots_mshw.php?mwi=9

Book Hotels & Travel
www.hotelscombined.com/?a_aid=105951

Connect with us at LinkedIn
hk.linkedin.com/in/4hoteliers

Customized Hotel & Restaurant Equipment
www.forkandchopstick.com

Follow us on Twitter!
www.twitter.com/4hoteliers

Hospitality Consultants ~ Lifestyle Concepts
www.lifestyle-concepts.com

Hospitality IT & Technology
www.nonweiler.com

Hotel Opening Processes: Exploring better ways to open new hotels.
www.hotelopeningprocesses.com

ITB 2015 Marketing
www.4hoteliers.com/news/story/9725

Private, luxurious holiday villa in Valbonne
www.villa-valbonne-biot.com/en

Sayang - For True Wine Lovers
www.sayangwines.com

TV4Hoteliers.com - Live Interviews
TV4Hoteliers.com

Wynamics ~ Working the Dynamics of Wine
www.wynamics.com

ZIXI - Your Asian Partner: Advisory - Sourcing - Project Management - Market Entry
zixi.hk


© Copyright 4Hoteliers 2001-2014 ~ unless stated otherwise, all rights reserved.
You can read more about 4Hoteliers and our company here

Use of this web site is subject to our
terms & conditions of service and privacy policy