Are direct bookings better than OTAs?
The relationship between hotels and OTAs has always been complicated, sometimes even a little bumpy. OTAs, otherwise known as Online Travel Agencies, are websites containing all the relevant information any savvy traveller needs to book his latest holiday getaway, be it to a luxury hotel overlooking the beach, a quaint homestay in the country. Many of these OTAs are very easily accessible, with apps like Airbnb, TripAdvisor, Expedia and Trivago at one’s fingertips. With a simple click of a button and little else, booking holiday journeys becomes that much more hassle-free. Travellers can also look up reviews of their potential lodgings, interesting places to visit nearby as well as photos taken by other travellers via OTAs before locking down their final travel decisions. In light of the convenience offered to travellers by OTAs, this might cause hotels to notice a reduction in their direct bookings numbers. However, are hotels really concerned with the rise of OTAs? Or better yet, are direct bookings always better for independent hotels?
Discussions at Triptease’s Direct Booking Summit in early October would suggest that direct bookings are not an ‘obsession’ of hoteliers. In fact, hoteliers acknowledge that OTAs are not only here to stay but form a necessary part of their marketing mix. In sum, it would seem that hoteliers view OTAs as yet another platform for travellers to make their ideal travel plans. Alex Nota, the VP of VRM Intel, had the opportunity to discover how the hotel world includes OTAs into their industry. She concluded that hotels sought a more collaborative approach to their relationships with OTAs. To put this into greater context, the executive director of Bay Gardens Resort in Saint Lucia, Sanovnik Destang, was against 100% direct bookings as he believed that OTAs play a vital role in delivering new customers hotels could not reach otherwise. Therefore, it appears that the relationship between hotels and OTAs is one that is symbiotic in nature.
From a costs point of view, perhaps direct bookings may not make the best financial sense. Hoteliers’ acceptance of OTA bookings is facilitated by weighing different considerations like the primary and secondary costs (like marketing and website maintenance) of direct bookings, their limited budgets and staff bandwidth. According to the Hotel Distributions Costs report, commissioned by the European Technology and Travel Services Association (ETTSA), the difference in net profit contribution between direct and indirect channels (i.e. OTAs) was only around 0.03%, which really is not much in the grand scheme of things. The study considered not only headline costs such as agents and OTAs’ commissions but also at the costs of customer acquisition, customer services and technology development. Report author Ian Lowden suggested that “when cost, revenue and consumer behaviour dynamics are accurately modelled, it’s clear that the cost of moving indirect bookings to ‘direct’ is marginal and possibly even negative for the hotel”. The report also highlighted what they referred to as “the billboard effect”, whereby “up to 35% of hotel bookings can be attributed to guests finding out about a particular hotel [via OTAs] than booking directly with that hotel”. To put it differently, OTAs actually give hotels greater visibility even in cases where the final booking is not completed on the OTA platform itself. Without OTAs, the report suggests that hotels will need to increase their spending on search engine optimisation (SEO) by €7-10 per booking. This additional cost alone naturally begins to offset against any commissions paid to OTAs.
Of course, the benefits brought about by OTAs does not mean that hoteliers can do away with direct bookings completely! Because OTAs are effectively third-party platforms, they sandwich themselves between the traditional hotel-guest relationship, which, according to the CEO of Duetto Consulting (Patrick Bosworth), is a critical loss on the hotels’ part. With the involvement of OTAs, hotels lose the opportunity to provide their guests with a travel experience enhanced by their personal touch as they rarely have any knowledge of their guests prior to arrival. He views the onboarding of guests as the first step in the provision of hospitality, suggesting that “hotels can and should fixate on – to the point of obsession – every touch point of the on-property experience”. Simply passing off this important process to OTAs is a “flawed idea”, in his eyes. Even panellists at the Direct Booking Summit sought to encourage hoteliers to maintain direct bookings as these are important for four main reasons: guest data, operational silos, expert content on properties and destinations as well as guest experience and customer service. Thus, it is clear that hoteliers ought to get the best of both (direct and OTA booking) worlds in order to improve upon their guests’ travel experience.
At Amistad Partners, we are aware that both direct bookings and OTAs have their roles to play in the hotel industry. This awareness is very much something that we’d like to pass on to our partners. Our team is always happy to speak to you about how we can provide you with the best, bespoke advice suited to your hotel’s brand, needs and goals.