How Hotels Can Embrace OTAs and Profit at the Same Time
July 17, 2017 1:38pm
By Dori Stein
A recent HOTEL MANAGEMENT column captured well the full story in the ongoing debate between hotels and online travel agencies. The story, however, is ready for a new chapter.
Everyone knows that OTAs are behemoths, with marketing budgets many times the size of even the largest hotel brands. We also know that there is a “love/hate” relationship: hotels object to OTAs when they are surrendering revenue to them and paying commissions; they appreciate them when they have unoccupied rooms to fill and OTAs are a valuable distribution source for doing so.
Here's the thing: It’s time to move beyond love and hate, and see reality for what it is. There is one main marketplace for selling rooms; that marketplace is online, and hotels and OTAs, together, are selling in that single marketplace.
Here are the facts: According to the Cornell University School of Hospitality, hotels are still losing the direct booking wars and still seeing their profitability continue to erode. Moreover, in today’s dynamic environment, room demand changes not week to week, but day to day and hour to hour.
It’s nearly impossible for a hotel or brand to keep tabs on changing demand as well as the OTAs can. Moreover, dozens of intermediaries are crowding the space to reach the consumer, making it incredibly difficult to see what offers a consumer in any market is seeing at any given time. And global markets are forcing hotels to compete in markets where they have little or no marketing budget.
Finally, prices are dynamic, not static. Consider a random day and time, July 20, 2017, at 6:00 PM EST, your branded property in a major U.S. market will be selling at one price on one OTA site, at a different price as part of a wholesale package and at another price altogether on brand.com.
At the same time, demand for your hotel from London or New York might be increasing, but demand from Toronto might be falling and there may be the potential to reach out to Chinese travelers who are willing to pay higher prices and spend a good deal more on food and beverage and on property retail.
How do hotels understand all these variables, get a handle on their pricing, maximize direct bookings when they can and maximize their relationships with OTAs? Here are a few tips:
1. Learn What You Don’t Know—Apply It In Real Time
Hotels invest a great deal in negotiating deals with OTAs, as they should. But in many cases these negotiations take place annually, but prices change much faster than that.
Hotels should begin by knowing what they don’t know, ie., getting insight into how their hotels are priced in every market, all the time. From there, they can adopt negotiating strategies that are more in touch with the dynamic distribution environment in which we operate, rather than the simplistic notion that “OTAs should give me more for less.”
Hotels need to understand the dynamics surrounding demand, all the way down to the micro-level, and then build a macro-distribution and pricing strategy they can implement quickly.
2. Control Your Distribution
Typically, hotels do not even know how they are ranked on the OTA sites, and it’s the rankings above all else that drive sales. Hotels should seek resources to help them understand their place in the market, and control their distribution, including how they are ranked on the sites that can drive the most business. You need to understand how you are ranked on a day-to-day-to-day basis; how your hotels stack up against competitors; and how the rankings change in real time. And you need to understand the true costs of your marketing, and when your pricing is being undercut by OTAs or wholesalers. Today, all that data is available. Hotels need to find it, consume it and apply it in a simplified way to make better decisions—quickly.
3. Use the Tools OTAs Have Available
Every hotel wants direct bookings—and rightfully should. But how can an independent property, or even a small brand, in a secondary U.S. market, compete effectively for direct bookings from travelers from China or Dubai?
Direct booking rates are not effective in faraway markets where your hotel has little visibility; and at least at present, they cannot be used to personalize offers on specific dates. New tools from several of the bigger OTAs help make that possible. Analyze what these partners have to offer and treat them as partners and not as the enemy. The analysis will go a long way in helping your hotel improve yield and manage distribution effectively.
Today’s distribution environment is even more complex than I have outlined and as new technologies come to market, it is changing with every passing day, week and month. It’s time to start thinking about your marketplace as a single, consumer-driven, dynamic environment and not as a zero-sum game between hotels and OTAs.
With the right tools, you can rise above the outmoded distinctions, and sell more aggressively and effectively. Today, there is the opportunity to keep hotel revenues in largely hoteliers’ control; it’s time to start making that opportunity actionable.
Tags: dori stein
Dori Stein is the CEO of Israel-based Fornova, whose intelligence-based technology drives dynamic online distribution for the hotel industry. Its tools help hotels ensure they will not overpay for guests when they do not need them and pay the right amount to get them, when they do.
Contact: Michael Frenkel
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