Why OTA's are not good for you

According to marketwatch.com, the global online travel market is expected to grow from US$ 570.25 billion in 2017 to US$ 1.134.55 billion by 2023, at a compound annual growth rate of 13.16% during the forecast period. That is quite some $$$ we are looking at.

OTA stands for: Online Travel Agent. Their websites allow consumers to book various related services directly via the internet. They are third party agents reselling trips, hotels, cars, flights, holiday packages etc. provide/organized by others.

OTA’s deliver. The sheer volume of business they generate come after a decade of developing and investing in their technology (which is highly fenced off). It also comes at a price: with (individual) hotels they take a commission which usually starts at 15% and goes up as high as 30%, usually depending on the competition within a certain area.

Who are we talking about? The biggest online OTA’s in 2018 according to statista.com – revenue in billion US$:

Note that above Trivago is also a part of the Expedia Group. Booking is leader in revenue probably because it mostly is in the selling of hotel rooms, which has the highest commissions/profits. Booking and Expedia have 90% of the market, with their only competitor being Chinese Ctrip.

Booking Holdings (the parent company of Booking) and Expedia, the two biggest OTAs, boast a combined market cap of more than US$100 billion, comparable to the four largest US airlines combined.

Are these companies big enough to fail? Probably not: we did see a fair share of collapses last year: 127-year old Thomas Cook, several airlines, not-so-old WeWork. And now things are getting messy at star newcomer OYO Hotels.

Apart from the high commissions of OTA’s there are other disadvantages to hoteliers. As the biggest OTA’s only seem to get even bigger – often buying competitors out of the market/integrating into their technology – the dependency on them rises. And dominating the market only means one thing: the ability to raise their commission rates even higher. Smaller businesses are therefore prone to OTA’s “running” their business.

Are there alternatives?

The mantra the last few years has been selling direct. Luring consumers to the hotelier’s own website and persuading them to book direct saves paying these high commissions. Many, what I call, “booking boosters” (for example Triptease or Hotelchamp) jumped into the gap. They persuade the customer into direct booking with specialized and individualized technology. Which too, comes at a price – this technology is not cheap. And how do consumers find you on the net? According to these same booking boosters 70% visit an OTA first. Some stiff competition to take into consideration.

Other alternatives include becoming a franchise of a major chain (especially “soft” brands are on the rise), but these too are costly. It often means complying to guest loyalty programs and mostly your inventory is still sold through third-party OTA’s, alas at slightly lower commission rates. Most loyalty programs don’t work. They seldom change customer behavior and many actually irritate loyal customers. Almost all of them are stuck – either with dormant points, inactive members or as a liability on the balance sheet.

Then there are the review sites like Tripadvisor and Holidaycheck. Their income stems from advertising, though Tripadvisor has a commission based program with still has high commissions and which is rather confusing depending on the reach. The usual system is PCP (pay per click) which requires expertise or hiring a revenue manager.

Metasearch engines usually use similar PCP technology. Google of course is the most famous and used one, but there are also the likes as Trivago (owned by Expedia) and HotelsCombined, Kayak and Momondo (all by Booking Holdings). A metasearch engine is an online information retrieval tool that uses the data of a web search engine to produce its own results. Metasearch engines take input from a user on one end (like rates and availability) and gathers, ranks, and presents to the users on the other end, the consumers. Here too, hoteliers compete with OTA’s as the search results always includes availability through the OTA’s.

Did you know that Booking is the biggest advertiser on Google? 3% of Google’s advertising revenue comes from Booking.

Although forbidden in some countries due to competition laws (like in the UK, and currently being investigated in Russia), OTA’s used to commit hoteliers not offering a lower rate on their own website then on the OTA’s. That’s why usually you don’t see any or little difference in rate comparity displayed on metasearch engines sites amongst various channels.

So then, a true alternative?

Yes, bookhotels.direct! At bookhotels.direct we combine the strength of an OTA with the connectivity of metasearch to deliver direct bookings.

Reduce cost per booking

bookhotels.direct charges an industry disruptive commission on sales of 5% (10% if you give a preferred direct booker another 5% off on your best rate). How do we do that? Firstly, the commissions charged by OTA’s simply seem to be unfair. Of all the travel related businesses, hotels pay most commissions. But why? The technology used is similar or even less complicated (Booking even uses an outdated programming language, Perl) than say, the airline industry. Hight costs are certainly involved with customer service. At bookhotels.direct we do not offer a customer service, as we are strictly an intermediary. Clients book directly with you, and in the case of complaints, cancellations, or rebooking turn directly to you too.

Direct customer relationship

The OTA’s control of oceans of data (which they keep firmly to themselves) – and the relationship with your customers. By making customers book direct you own the booking channel and its data. And as customers are directed to your own website, they can see all your offerings (not limited to the OTA pages) and get a “feel” of your property, which makes them far more likely to convert. 

Be found on the net

Our general booking site, http://www.bookhotels.direct, works like an OTA. It lists all our members to search criteria by our customers – with a little more. Ofcourse we have real-time price and location search options, but we like to inspire. Boutique hotel? Design hotel? Hip hostel? That family-run guest house hidden on the Amalfi Coast? A lodge on Namibia’s Skelton Coast? Overwater bungalow in Switzerland?

You can also use affiliate marketing, now only used by -again- the OTA’s and major chains. Advertise your property on other (niche) websites and reward these with a commission on generated bookings. Hello influencers!

Easy to use

bookhotels.direct is easy to use. There is no software to be installed by you, no extranet to upkeep, no allocations to be given, no extra work on yet another sales channel to do and no expertise needed on PCP and bidding. We integrate with your website’s booking engine or channel manager. Nothing needs to be done on your part, you just keep working the way you do with your booking engine. All traffic is tracked and generated and consumed bookings and are charged with commissions once a month. We like to keep it simple.

End domination/competition of OTA’s

As we only display the (lowest guaranteed) rates of your website, not of competing OTA’s, we encourage customers to book direct with you. We make it easy for them without endless surfing or clicking around. Together we can beat the OTA’s. So stop paying high commissions and grow your revenue with bookhotels.direct.

Gepubliceerd door Chiel

Hotel aficionado.

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