In Brief: Hannah Grossman and Jonathan Kreifels examine how hotel operators are reassessing their reliance on online travel agencies versus direct booking channels, highlighting the operational and financial implications of distribution strategy decisions for revenue management.
Finding the right mix between direct bookings and OTAs is a constant balancing act. Direct channels offer higher profit margins and ownership of the guest relationship, while OTAs provide global reach and help fill soft periods.
The recent Rising Marketing Leader Council discussion on distribution strategy focused on where each channel fits, when OTA use becomes dependence, and what hotels need to consider before trying to shift demand to direct booking.
Parity Comes First
Rate parity was a recurring concern that participants brought up. If an OTA is selling a room for significantly less than the hotel website, guests have little reason to book direct.
The group also discussed OTA promotions, membership discounts, and accelerators. These can provide a short-term solution, but layering additional discounts on top of commissions can make it difficult to understand what is driving bookings.
As one participant put it:
“There’s a time and place for all of it, but the minute you start going down the road of extra promotions and extra discounts, it’s hard to dig out of that well.”
Keeping the strategy clean also makes performance easier to measure.
OTAs Bring Reach
OTAs provide visibility, particularly for independent properties, converted hotels, certain markets, and international demand. OTA and direct business can also have different booking windows and lengths of stay. Removing a channel without replacing the visibility and demand it provides can create another problem.
The group discussed finding a balance rather than an arbitrary OTA percentage. Property size, brand affiliation, market, traveler mix, and available marketing resources all affect the appropriate channel mix.
Direct Demand Requires Investment
Moving business away from OTAs requires something on the other side of the equation. Participants discussed website content, paid media, retargeting, reputation management, reviews, and visibility within LLMs. Hotel information also needs to be consistent and clearly available online, including the experiences and amenities travelers may search for.
The guest experience matters after acquisition as well. Capturing direct guest information creates an opportunity to move an OTA guest into a direct relationship for a future stay.
Compare the Real Costs
OTA commission and direct marketing spend should be evaluated together.
Paid media, commission, ADR, ROI, cost per click, and the cost of generating the reservation all came into the discussion. How those expenses appear within the P&L can complicate the comparison further.
The group also discussed the need to understand whether promotions, paid media, pricing, or another strategy is responsible for demand. They found that when several tactics run simultaneously, attribution becomes much harder.
Questions for your team:
- Where do OTAs bring the most value to your hotel’s distribution strategy, and at what point does strategic OTA use become dependence?
- How do factors like property size, brand affiliation, market, and traveler mix influence the right balance between OTA and direct bookings?
- What strategies have been most effective in driving direct bookings, and how do you evaluate their cost and performance compared to OTA distribution?
Hannah Grossman, Director of Hotel Marketing, Gourmet Marketing, HSMAI Rising Marketing Leader Council Member
Jonathan Kreifels, Senior Partner Manager, Sojern, HSMAI Rising Marketing Leader Council member
Source: View the original article at HSMAI.