Can I be completely honest with you?
I’m not a fan of OTAs. I’m turned-off by how much money these concentrated companies make by working as middle-men in guests’ booking process.
It’s definitely frustrating as a small business owner.
That said, there’s no getting around including them in your online hotel distribution strategy. In only a about a decade, they’ve developed massive followings and the revenue to match.
But a solid strategy requires diversifying and avoiding getting stuck dealing with the whims of just one of these corporations.
So, how do you incorporate OTAs into a hotel distribution strategy?
What does a hotel distribution strategy even mean?
A hotelier or innkeeper plans a distribution strategy to determine through which channels to sell their rooms and when. They determine this strategy and enforce the self-discipline to keep to it by analyzing the cost of acquiring a guest through each channel.
There are a variety of channels through which hotels can sell their rooms and suites. The most common are:
- Hotel sales representatives and website (typically, these are lumped together as “direct” bookings)
- Tourist Offices and Convention Bureaus
- Word of mouth and community following
- Global Distribution Systems (GDS)
- Travel Agents
- Online Travel Agents (OTAs)
To keep this article from getting long, we’ll focus on the most important ones online:
- Hotel website
Direct Bookings on Your Hotel Website
Aside from word of mouth or repeat guests, this is usually the most cost-effective of booking channels. After all, once you’ve built your website, maintenance is usually inexpensive.
Capturing bookings on your website or over the phone also helps you maintain control of storytelling of the experience of staying on your property.
Within the direct booking channel includes online channels like:
- Search engine optimization (SEO)
- Pay-per-click advertising (PPC)
- Social media
100% of bookings coming from direct bookings is what the Hoteliers of the Round Table are constantly pursuing.
While there are a few outliers, the majority of hotels need some distribution beyond their website. One of the most cost-effective ways to increase direct bookings on your website is to review your booking process as compared to your competitors.
And in this case, the hotel across the street is a competitor, as well as all the OTAs selling rooms in your town. The OTAs spend a lot of their resources on making the booking process as simple and easy as possible for potential guests. So if booking a room online, either on a desktop, tablet, or phone; is at all frustrating for potential guests, you can almost guarantee they’ll walk away and book the same room on an OTA.
Or worse, go book a competitor’s room on an OTA or on their hotel website instead.
What is an OTA?
An OTA, or online travel agent, is a travel website that potential guests can use to plan their trip.
They specialize in the sale of travel products to customers. The variety includes:
- Car rentals
- Hotel rooms
- Activities like tours and attraction tickets
- Travel packages
In the lodging industry, we focus on travel websites that help consumers book a stay at a hotel or bed and breakfast.
The list of OTAs is endless, but examples of the most commonly known OTAs are:
- The Priceline Group (Booking.com, Priceline.com, agoda.com, KAYAK, OpenTable)
- Expedia, Inc. (Expedia.com, Hotels.com, Hotwire, Trivago, Travelocity)
- TripAdvisor Inc (tripadvisor.com)
A lot of innkeepers have an emotional reaction whenever OTAs are mentioned, and it’s always negative.
And many hoteliers and innkeepers, as mentioned before, strive to remove their dependency on OTAs to gain bookings.
While reducing dependency is a fantastic goal, removing yourself entirely from the OTAs is no longer realistic. And removing yourself from the OTAs when you don’t have other channels to replace those bookings is akin to cutting off your nose to spite your face.
But there are definitely better ways to incorporate OTAs into your hotel distribution strategy than others.
How to Use OTAs in Revenue Management and Your Hotel Distribution Strategy
The small hotel I recently bought partial ownership has a strong, bitter, feeling about OTAs. In fact, they used only one of the OTAs in their online booking distribution, and preferred not to even use that one.
So on paper, only having about 10% of their bookings coming from OTAs is impressive. The rule of thumb in the hospitality industry is to have a maximum 40% of bookings coming from OTAs.
But when occupancy is low, increasing exposure on more OTAs was an easy way to increase occupancy and ADR (average daily rate) quickly.
The OTAs charge a commission per booking they land for your property. And while paying an online travel agent 15-25% of a booking may seem painful, it’s better to take-in 75-85% of a room rate than $0 because that OTA booking went elsewhere.
What’s a Typical OTA Booker Like?
Most OTAs have cornered the market of people planning last-minute getaways or trips. More often than not, OTA users (including this writer) plan trips last minute compared to other travelers. They know from previous experience that the booking process is simple, easy, and on a platform they know and trust.
Another thing to consider about OTA bookings is that they’re typically shorter than you’d probably like in terms of number of nights.
But that doesn’t mean you should sniff at an OTA booking. They can be useful, depending on your revenue management goals.
Inns and hotels with a clear revenue management strategy use OTA bookings to fill room-night gaps between larger bookings that were made for longer periods of time and farther in advance. They’re also great for filling last-minute availability on your property.
But you don’t want to be stuck with a house full of OTA bookings.
Focus on training your guests to book farther in advance to get the room they want for the time they want. Then, use OTAs to fill-up availability when your preferred guest (in this case, someone wanting a longer stay or someone who stays frequently) has already reserved what they wanted.
If you follow this strategy for an extended period of time, you should be able to fill the house farther in advance with more of the bookings you want on a regular basis. You’ll also be able to avoid getting OTA bookings during periods of high demand.
But even when close to 100% of your bookings are coming from other channels, I still recommend keeping your hotel or inn listed on OTAs for other benefits.
Benefits to Your Hotel’s Search Engine Optimization Campaigns from Listing on OTAs
The top OTAs are easy to bring to mind: they advertise extensively. I can guarantee that more strangers you ask on the street will recognize those names than your property’s business name.
And Google rewards that brand recognition with a higher perception of authority, which translates into higher rankings in their search engine results.
So the companies owned by Expedia and Priceline and a few others are all OTAs, but human searchers and Google also see them as high-authority directories.
So getting your hotel listed on these websites is an easy and free (until a booking comes-in that you wouldn’t have gotten otherwise) way to add an extra signal to Google that you’re a trustworthy business.
How to Use OTAs to Boost Your Own Rankings
One of the simplest ways to boost rankings in a given keyword is to have your hotel or inn listed on pages that rank higher in results for that keyword.
For example, a hotel that wants to be associated with the term, “Charleston, SC, boutique hotel” would want to prioritize being on lists of boutique hotels in Charleston, South Carolina. Do a Google search for the above or a similar term and you’ll likely find lists created by well-known brands like Hotels.com, Expedia, and TripAdvisor. The lists that are considered the highest authority are going to be the ones at the top of Google’s search results.
And your website doesn’t need to have a link from these sites to reap the benefits. Provided your:
- Business name
- Phone number
Are consistent throughout the web as well as all the listings, Google and the other search engines will still know those sites are talking about your hotel, not someone else’s.
The same is true for other, non-OTA sites like Facebook and Yelp.
Having a presence on these sites is a way to demonstrate in which social circles you swim and whether you can be trusted with other people’s money. Since they’re high-authority and trustworthy, logic would imply that you are, too.
In addition, most if not all the OTAs have moved to the same pay-to-play format. That means your hotel will only pay money to those OTAs when the OTA scores a booking at their property. So you can be listed for free on top online directories, but only pay for the privilege when you get what you both want. That is, a guest staying at your property.
What About the Competition?
You may not list your inn on OTAs out of principle, but I can guarantee that your competitors are likely not as scrupulous.
So if a competitor across town is on Bedandbreakfast.com and you’re not listed, you risk people not finding your because they searched for a play to stay there, rather than a Google search or Facebook.
An even more painful scenario could be that despite your best efforts to be high in rankings in Google, a Google search led a potential guest to a page on Bedandbreakfast.com that booked with your competitor, not you.
To Use GDS in Your Hotel Distribution Strategy… Or Not
A global distribution system is a network typically used by travel agents to book trips for their own clients. Similar to an OTA, travel agents can find flights, hotel rooms, and car rentals on a GDS. Unlike with some OTAs, though, a GDS will lump these services together to make booking easier.
Some hotels and inns work with a GDS because it presents the opportunity to attract demand from around the world.
In practicality, though, it’s expensive. Each booking on a GDS will require you pay a commission to the travel agent as well as the GDS provider per transaction. The travel agent fee is a percentage of each booking, while the GDS commission is a flat fee per reservation.
As of Q1 of 2015, only 15.4% of all hotel bookings were from GDS, so you’re not exactly missing-out on a huge market.
Closing Thoughts on a Hotel Distribution Strategy
A couple more tips and tricks that I didn’t know where else to add in here.
Don’t Forget About Your Target Demographics
Don’t choose OTAs simply because they reach out to you, or it’s easy to sign-up, or their commission is lower.
Make sure that your decision to list your hotel somewhere is driven by your ideal guest and where they typically go online.
If your hotel hosts a lot of business travelers (or wants to host more), look for OTAs and directories that business travelers frequently visit to find a place to stay on their next trip.
Regardless of whatever OTAs or GDS you decide to work with, make sure it integrates directly with your property management system and booking engine.
If bookings roll into your database automatically, you can avoid the hassles and frustrations of double booking a room.
Does your current booking engine not have a direct connection, or API, with the channel or OTA you want to work with? Push them to add it or find one that does. Avoid tracking bookings using paper and increasing opportunities for human error at all costs.
For some reason, many hoteliers will only make rooms available about three months in advance of check-in date. A major argument for this is the risk of cancellations.
Really though, do you want someone looking to book decide against your hotel simply because you’re not taking reservations yet?
Of course, you need to keep availability open for longer-term stays. But not opening your rooms and suites up to a year in advance is a guarantee to leave money on the table, especially when those longer-term stays are usually planning way in advance of their arrival date.
With the above information, you should be able to develop a unique distribution strategy to book your hotel rooms.
Don’t forget that creating and implementing a hotel distribution strategy is both an art and a science.