We’re in the age of information and technology where everything is literally at your fingertips. The way we travel, everything from how we select destinations, to how we explore flights and down to the very way we choose to book our accommodations has drastically changed since the days when we were kids and this heavily affects hotel direct bookings.
Do you remember getting so excited when our parents were on the phone with the travel agent and said the word “Disneyland”? They would typically tell the agent where they wanted to go, how long, and with how many people and then were provided a few options from which to choose. Now, consumers dictate how, when, and how long they want to travel with the endless options online to accommodate their preferences. But what does this mean for hotel direct bookings?
Hotels have seen a surge of other online mediums and channels in which to get bookings in the last decade. This seems like a good thing right? Being on multiple channels is great because it increases the exposure and opportunity of getting in front of people’s eyes. However, these mediums come at a price, and a heft one at that especially for smaller and newer hotels popping up. In today’s article, we’ll dive into the different channels affecting hotel direct bookings, and tips on how to increase direct bookings and keep more of that money in your hotel’s pocket.
What are hotel direct bookings and why are they desirable?
Hotel direct bookings are a distribution channel in which hotels receive their reservations directly from the guest and without any third party or OTA. As stated in the name, direct bookings mean that the consumer has either booked through an front desk agent at the hotel or directly through the hotel’s website. This method is the most favourable for hotels because it cuts on any middle men, and associated with that, any distribution fees meaning the total revenue goes directly to the property.
The main advantage of hotel direct bookings is that the hotel doesn’t pay any commissions or fees to the third parties and the hotel maintains a direct relationship with the guest. By building greater brand loyalty with your customers, this reduces customer acquisition costs and improves your bottom line. However, direct bookings don’t come completely free. Hotels will have to have an online booking engine or system on your website to facilitate reservations. Hotels will also have to spend more on digital marketing to remain competitive.
Nowadays, it’s tough for hotels to thrive on just direct bookings alone. While third parties and OTAs take a cut of your revenue, this is revenue you might not have ultimately gained without having been featured on their site. These third party sites have massive marketing budgets and there’s a reason why they are always the first few sites that pop up when looking up anything travel related. It would be a huge risk to not be on their sites, especially if you’re small and starting out and don’t have a high marketing budget. At the end of the day, even if an OTA takes a chunk of that nightly rate, profit is still profit. It’s one of those situations: can’t live with them, can’t live without them.
Before we tackle ways to boost your hotel direct bookings, we’ll first take a look at the main differences between the third party distribution channels: metasearch and OTAs.
OTAs vs Metasearch
A successful distribution strategy is made up of these largest sources: hotel direct bookings, online travel agencies (OTAs) and metasearch. Each booking channel has its pros and cons and knowing these will give you the foundation to build a dynamic channel strategy that you can adjust based on your hotel’s changing needs.
You know them well: Expedia, Booking.com, Hotels.com and Airbnb. No matter where you’re headed to, they are usually featured on the first page of your Google search and it’s no secret why they’re there. When a guest books through an OTA, most OTA bookings charge a commission fee. The OTA creates the reservation and processes the payments in their own site, they then keep a commission per booking (pre-negotiated) and then distribute the rest of the revenue to the hotel. Some OTA commissions can get as high as 15% per booking. OTAs in turn have massive marketing spend that allows them to consistently rate at the top of search engines, way larger than most hotels.
The main benefit of using an OTA is that it is easily accessible for travellers globally. OTAs are typically used as a first stop in terms of research: what types of accommodations are available at that location and what budget ranges to consider. Users can then filter out specific criteria to match their traveling preferences. Things like: hotel rating, price per night, wi-fi, parking, air conditioning, spa, gym, close to city center, beach view. OTAs offer a one-stop shop for guests to spec out the details of where they’d like to stay and compare with other properties. A huge benefit of an OTA is that travellers may discover you as they may not have been aware of your hotel before searching. Additionally, many of the people doing research on OTAs end up booking directly with the property after their research.
The main cons with OTAs are the high commission rates on the more popular sites and rising commissions over time. You also don’t get much access to the information about the guests who book your property through an OTA. You have little control over the guest experience as the OTA is now the first point of contact. This also presents obstacles when guests need help with their reservation like making changes or cancelling. They need to go through the OTA, and the OTA ultimately needs to communicate with the hotel and then back to the guest. This creates huge delays and a lot of back and forth and sometimes, unfortunately, misplaced blame between the OTA and hotel for certain customer service issues.
If you’ve ever researched travel online, you’ll be familiar with these as well as they also are prominently featured on the first page of your Google search. Sites like TripAdvisor, Kayak and Trivago allow guests to compare prices across multiple websites. The hotels bid on ad placement and only pay when a potential customer clicks on the ad. The major difference between an OTA and a metasearch is that instead of a commission model, the hotel pays a cost per click (CPC). Your hotel can set a budget for how much you want to bid for a click and adjust bids to optimize your strategy.
The main benefit of a metasearch is the visibility and exposure of your hotel during research. A CPC model promotes travellers to reserve directly on your website, therefore increasing your net revenue per booking and giving you full ownership of the relationship. The CPC model also allows you to scale demand when appropriate because you pay for performance.
The main disadvantage of metasearch is that you’re competing on an open auction. You have to pay to play so those with bigger budgets often get rewarded more. CPC bids are constantly fluctuating based on market demand so that means you need to closely monitor your performance without overspending.
How to Increase Direct Hotel Bookings
Now that we understand the value of each channel, we’ll share some tips on how to increase your hotel direct bookings. This is a long-term strategy, meaning that results don’t show over night and any incremental improvements get amplified over time. Using a mix mode of channels for your distribution strategy is healthy but if you want to become less reliant on third parties and make your direct bookings a bigger piece of the pie, continue reading.
1 – Commission-free booking engine
Reducing your expenses by looking for a commission-free booking engine that is also mobile friendly will be beneficial for your property. Many people are transitioning over mobile bookings and having a mobile-friendly experience will ensure you stay competitive. Also, simplify the booking process entirely by limiting it to two or three steps and include a rate checker so that guests can compare prices right from your website. You can show them that you do indeed have the best rate and this mitigates the risk of them leaving your site to browse on an OTA site and potentially booking through here.
2 – Simple and engaging website
Your website acts as your store front and is the first impression guests will have your property. Ensure your website is simple, with high-quality images and videos, and optimized to load fast – people’s attention spans are short and will leave if it takes a second too long. Simplify the booking process by using a modern and seamless experience to encourage visitors to book. And ensure that an obvious CTA is used like “book now” is used on every page to make it that much easier for you visitor to get to where they need to be.
3 – Up your digital marketing game
This one is definitely a long term strategy. The main benefit of OTAs is their marketing spend and ability to get in front of the eyes of travellers. Digital marketing is worth investing in at your hotel and you can scale your budget dependent on what works for you. Begin with your guest data, your hotel CRM can help you with this. Start by identifying customer personas and defining them by segment. Then craft targeted offers and messaging to each segment and run tests to learn what works, and then optimize. This is an ongoing process and takes practice and many experiments, but if you can nail this, eventually you won’t have to rely as much on third parties.
4 – Customer loyalty
Re-engaging past guests by using email marketing campaigns with enticing promotions and offers is a great place to begin when it comes to customer retention and increasing hotel direct bookings. Repeat business is always cheaper than acquiring a new customer. Another way to increase loyalty are rewards programs. Loyalty and rewards programs are not like they used to be. Customer preferences have changed due to the overwhelming amount of information available to the public nowadays and loyalty programs aren’t as widely adopted as before. Rule of thumb for loyalty programs these days are focus on: ease of use, and discounts. If a loyalty program has too many rules, stipulations and hoops to jump through to earn anything, many people will stop reading after the first sentence. It needs to be as easy as ABC and should be able to be conveyed through one brief email. In terms of rewards, consumer behaviour has shifted towards discounts towards future stays, instead of things like room upgrades so keep these in mind when crafting a rewards program or refining the one you currently have.
5 – Engage on social media
If you haven’t already, it’s time to increase your online presence with social media. This is where your hotel can really share its brand voice, engage directly with guests and potential guests and engage the online community. For more on how to do this, check our guide on hotel social media marketing here.
6 – It’s all about personalization
Personalization is one of the 3 pillars to great hotel customer service. It’s what travellers state as one of the main reasons they had a great experience. Use your CRM to obtain details like birthdays, anniversaries and special requests and use it to build your relationships with guests. Offering personalized services, and customized experiences during their stay will be something they remember. Personalized guest service increases customer loyalty which in turn, increases repeat visits and direct bookings.
7 – Manage your online communication
This is something that hotels didn’t have to worry about a mere 10 years ago. Your hotel’s online reputation is something that needs to be monitored, maintained and managed. Online reviews of your hotel, along with photos, are among the top things people look for when researching whether or not to stay at a property. What past guests say about you heavily influence your future business. Be sure to understand where your property listings are, and consistently respond to reviews and feedback as part of your marketing strategy. Things like negative customer experiences and misunderstandings are just the nature of business, but a well-tempered, professional and reasonable explanation or comment from a manager is respected by guests and improves your brand perception. Set up Google Alerts to notify you when someone mentions your hotel’s name online. It’s free and it will help you keep up with any new online mentions (good or bad) about your hotel.
By reducing your reliance on OTAs and third parties, your hotel direct bookings can raise the bottom line. A mix of all channels contributes to a successful strategy so it’s important to consider that the best booking is the one that pays the property most in value (total revPAR) that is obtained through the lowest cost of acquisition. For example, sometimes a commission cost paid to OTAs is actually less than the cost of running a marketing campaign. Understanding these numbers and data will help you make the best decisions for your business and will allow you to run different tests to drive direct bookings. What works for one property may not work for yours so it’s time to get creative.