Scenario 1: Hotel A gets 70% of bookings through OTAs. Due to such dependency
on OTAs, it pays an exorbitant commission fee from its earning. At the same
time, Hotel A has to deal with higher rate of booking cancellation, which is
again bad for its financial health. Moreover, Hotel A does not even get to
maintain its customer database as its OTA partners don’t provide guests’ mail
ids and other contact details.
Now let’s look at the scenario 2: Hotel B receives a sizeable amount of
bookings via its website. The booking engine integrated into its brand website
now delivers around 60% – 65% of booking. Due to less dependency on OTAs, now
Hotel B saves big on its commission pay-out. Moreover, it has to deal with a
much lesser percentage of booking cancellation. Most importantly, Hotel B now
maintains its own customer database to use the same for further communications
with its guests.
So, what exactly has worked well for Hotel B?
The answer is simple – Hotel B clearly understands the importance of
direct booking and it has taken all possible steps to generate maximum direct
bookings while methodically lowering its reliance on OTAs.
Impact of direct bookings –
Higher direct booking, higher
Just imagine, with an average of 20% to 25% commission rate, the kind of
amount a hotel pays when it gets over 70% of its bookings from OTAs. Now, how
it would look when the same hotel generates around 70% bookings directly and
for rest 30% still comes through OTAs. The entire revenue earned via direct
channels goes to the hotel.
In other words, with direct booking your hotel’s acquisition cost per
guest also goes down. Additionally, direct booking leads to 2X average increase
in booking value compared to OTA. Additionally, according to SiteMinder,
average booking value on direct hotel website is nearly double compared to that
on third party channels.
Now, does not it add to your hotel’s bottom line?
Less booking cancellation, less
Hotels have to deal with around 40% – 50% cancellation of bookings that
they get from OTAs. Reason – guests tend to book with multiple properties while
booking via an OTA. They generally do it as they wait till the last minute
until they finalize the destination. Ultimately, they have to keep one booking
and abandon the other.
This translates into ‘lost revenue’ and this gets more serious with the
absence of a well-planned revenue management strategy. It can also throw a
hotel’s occupancy forecast off the track.
However, for a hotel that acquires maximum direct bookings, things can
still improve. Researches show that a hotel faces around 18% to 19%
cancellation of bookings that it gets from its direct channels.
Grow your customer database, talk
to them directly
Many OTAs have this policy of not providing guest mail ids to hotels.
Now, this move prevents hotels from communicating with their guests post-stay.
In a guest service industry, it’s a must for hotels to know and understand
their guests to serve them better. When a hotel draws maximum direct bookings,
this issue is automatically resolved. With every booking, a guest has to
furnish personal details like phone number, mail id etc.
With such gold mines of information at hand, you can communicate
directly with your past guests. Send them targeted communications/promotions. Tell them how you keep trying to make their next
stay memorable. They like it all and more likely, they would keep coming back
directly to you.
Higher brand recall
If impressed with your services, guests coming to your property via
direct booking will remember your brand. They would say ‘the bar is amazing in
Hotel B, it has all the single malts in it’, or they might say ‘rooms are tastefully
decorated in Hotel B’. They are more likely to book with you directly.
But, it would not be same with guests coming via OTAs. They keep looking
for multiple cost-effective options and OTAs offer them what they want. Thus it
prompts them to book with another brand resulting in a loss for your hotel.
In the next blog, we will discuss about various way to improve direct
booking capabilities for hotels.