Book Direct: A Profitable Strategy or a Daydream?
Book direct strategies: can you pursue one profitably, or are they nothing but wishful thinking? We’d like to argue strongly that not only are they profitable (managed properly), they are essential.
As distributors of rooms, hotels must control when, where and how that distribution happens. If you aren’t in control of your inventory strategy, your profitability exists at the whims of third parties.
It’s true that these third parties have their own incentives to sell rooms. However, they don’t necessarily have the incentive to prioritize selling your rooms. They also don’t need to charge you reasonable commissions for doing so, unless you’re a big brand with the negotiating power that comes with that. So what can you do? OTA’s have huge marketing budgets and resources that independents can’t compete with. So, independents must find ways around them.
Below, Mirai gives a guide on keys to hotels succeeding at promoting direct business. They argue that rate and inventory parity are foolish strategies for hotels trying to drive direct business, and that changing those lets you change the playing field. Check out the full article for their excellent advice.
Secondly, we’ve included a dissenting opinion. Trefis, who provide software that shows what drives the value of a business, claim that hotels promoting direct bookings are fighting a futile war and OTAs will only grow stronger in time. While we feel they’ve misunderstood the ways in which hotels can drive direct business, and perhaps underestimated traveller’s eagerness to do research, it’s worth a read.
Lastly, check out 3 broader perspectives on the hotel industry. Sojern has partnered with Google for a cool, interactive report showing paths to purchase across the globe for hotels and airlines. Meanwhile, Sabre and Phocuswright give advice on how to position your hotel in an increasingly multi-channel distribution landscape.
Finally, for a genuinely wide look at the industry, Ravneet Bhandari takes us from the days of hotels being found by roadside signs to the age of smartphones. He addresses the need for nuanced revenue optimisation.
Read the articles below:
Distribution has always dominated its relationship with the producer. Macy’s, Marks & Spencer and Amazon are what Tourico, GTA and, lately, Expedia are in the hotel industry. Meanwhile, the product’s owner, in our case the hotel, sees its profits increasingly reduced without knowing what to do about it.
The keys to the distributor’s success are not easy to replicate yet still simple. Here’s what you need to do.
Online travel agencies (OTAs) and hotels seem to have somewhat of a love/hate relationship. Though OTAs bring more customers to hotels because of the increased exposure that they offer, hotels need to pay a certain percentage of commissions to the OTAs, thus reducing their share of the revenues. Therefore, it is common for hotels to keep promoting their own loyalty programs in order to incentivize travelers to directly book on their own websites. Many chains also provide attractive discounts for direct bookings, thereby dissuading users from booking through OTAs.
Despite all of this, hotels remain more dependent on the OTAs than they’d like to be. The size and scale of the OTAs, their significantly bigger hotel networks, superior marketing, and technological strength are some of the reasons why customers prefer OTAs to direct booking.
In this report, Sojern teams up with Google to explore and explain the modern traveler’s path to purchase. The project combines Google’s deep insight into hospitality and hotel search trends with Sojern’s unique data set of 350 million global traveler profiles, including billions of booking and search signals from data partnerships across the travel industry.
The new research report offers a state-of-the-art view of the hotel consumer’s extremely complex path to purchase, including:
- The relationship between hotel and flight searches
- The impact of hotel segments and traveler motivations on the purchase path
- How mobile trends are changing the hotel industry
Online travel agencies remain the dominant booking force for hotels around the world – although some regional quirks illustrate the popularity of apparent old school methods.
A paper to be released later this week by Sabre and Phocuswright, giving hotels advice on how to position themselves in an increasingly multi-channel distribution landscape, is backed by primary research into the booking habits of consumers.
The survey of consumers in eight major markets found that OTAs is the preferred method in every market for the last booking made on a leisure trip. So what should hotels be doing?
The only consistent aspect in the way people plan travel is that it’s constantly changing. Each decade brings new ways for customers to connect with the hospitality experience because of both changes in technology and customer behavior.
Think about it this way. The industry has come a long way since a sign out front touting air conditioning and color TV were enough to attract a customer – if they could find you. It wasn’t all that long ago when finding a hotel meant pulling off the road because you saw a sign, or by researching a potential stay by utilizing thick books published each year by Mobile or AAA.
To transition those days to the days of smartphones and instant bookings, hotels have reinvented how pricing is achieved. They have moved to an era of nuanced revenue optimisation.
Words by Tayor Smariga