Direct bookings – is it really profitable?

As a hotelier, how often do you talk about whether all the funds you spend on getting direct bookings are worth it?  Are direct bookings really profitable?  Or are you spending more on getting them than you would on OTA commissions? There are polar opposite views on this in the hospitality industry, and that’s without thinking about who ‘owns’ the guest and the long term value of a loyal guest.  CS Ramachandran, CRME, has written about OTA’s as partners.

OTA – Not just your partners or frenemies, but also teachers

Author: CS Ramachandran, CRME

I got a call asking if I knew some good Revenue Manager candidates, because the hotel wanted someone who can help them in managing rates on OTA’s like Booking.com. That made me curious and I asked him why they mentioned Booking.com specifically.. And the surprising answer was.. Booking.com produces more than any sites, including the hotel website and for no investment from our end… for free.. So that becomes the main channel. I dug in deeper asking a couple of more questions on their website and e-marketing activities, post which the below key learning points emerged.

The first key point to understand is selling via any OTAs is “not free.” Let’s assume that the hotel does 100 room nights at a rate of 100 USD from all OTA’s. In such a case, the average commission paid out per year would be$24,000 (100 room nights * $100 ARR * 12 months * 20% commission). Now that’s in no way free! Compare this with the average costs of distribution via direct website channels.

Read more…

Here’s what you can learn from the OTA’s, and this is in no way the final list

• You website is your biggest asset – Review your website. Is it a responsive How does it render on different screens ie; mobile friendly (desktop, tablets, phones). Is it multilingual and talks to your key geo? Review Website Analytics to see how you can make it better.
• Be Visible – How visible is your hotel across relevant online searches. Is the website SEO optimized? SEO is not rocket-science but a process to ensure that your hotel ranks optimally on the search engines. Your emarketing / website team can help you on same.
• Images and Videos – It may seem obvious to use the best image on your homepage. But not all hotels do it. It’s the first impression that matters. Showcase your rooms and facilities with high-resolution imagery on your website. If Content is King, then the Imagery is the Crown on top of the King.
• Offers – Give confidence to the consumer that the website offers the Best Rate. OTA’s do a great job on the Best Rate Guarantee. Promotional Offers and Value Additions are another way to offer discounts to direct customers while still following rate parity agreements, where applicable. Make your offer lucrative to the consumer with perks like wifi, breakfast, car transfers, event tickets etc. Targeted Closed Group Offers is another great way to convert direct business.

Invest in Online Marketing Spend – Bid on your key words in PCC ie; brand name, location etc. Target spends on Metasearches like Kayak, Skyscanner, TripAdvisor Check rates and Insta Bookings (Google is coming with one too). Metasearches are a great way to drive in direct bookings, and thats a topic of discussion for another day. Fore more details on the 2014 advertising spends by leading OTA’s, click here .

Some of the above steps require investment and some just require a change in your strategy. What % of the “free business” commission ($24,000 example above) is invested by the hotel to drive in direct business? Look forward to your views.