5 hotel e-commerce tips to balance direct bookings and OTAs
This article is intended to give you some tips to have more sale opportunities through direct selling channels (hotel direct bookings) and not only from indirect channels like OTAs (Online Travel Agencies).
Many times we focus so much on the sales phase. That we lose sight of other stages within the sales process. That begin with the generation of awareness in the market, or being present in websites on the internet where potential clients look for us.
Selling through hotel direct bookings requires investment of time, knowledge, staff and money. Many times it is easier to entrust the responsibility of the sale to a platform external to the hotel such as an OTA, but by doing so we are also renouncing control of our sales. In this article we will see some tips to rebalance our direct sale.
Sales through indirect channels such as OTAs gained strength in the last 10 years and has not stopped growing as the strongest sales channel for many hotels. This sales power has been the result of large marketing investment from tech giants such as Booking.com and Expedia Group and its penetration in many countries.
For many hotels, OTAs account for more than 50% of their sales and many hotels can claim that they have seen their sales grow as a result year after year. OTAs represent an important channel not only for sales but also for marketing. So the name of your hotel can appear in the first Google results thanks to the advertising investment of many OTAs.
Then, what is the problem?
As the popular saying goes: “don’t put all your eggs in one basket”. By relying solely or mostly on indirect channels we are assuming the risk of these channels. If sales fall due to OTAs problems with Google, your hotel sales also fall. If there is a technological problem that temporarily disables these platforms or if the governments of the countries restrict their sale or reach, your sales are affected.
Also, if you don’t have the reservation technology on your website, many people who could or would like to book direct with you will end up booking with an OTA. That for you means not only paying a higher cost of sale (the sales commission) but also promoting the loyalty of your client with other brands and not the brand of your hotel. So you will have to pay more and with clients who are not loyal to you. Then hotel direct bookings are highly recommended.
If you want to better balance your distribution of online sales channels, here are some tips:
1. Prepare your website to generate reservations.
Your website should be the most important sales tool you have on the internet. For this you must have a hotel system that allows you not only to have a PMS but also a booking engine where customers can choose travel dates, number of guests and view the list of available rooms.
But it is not only about having a website with a booking engine installed. Hotel direct bookings require strategy and marketing actions to attract future customers. So you should include actions such as web optimization, advertising and a loyalty program. Every great goal requires effort and time of dedication, your website does as well. The advantage is that you will have control of the sale and customers more loyal to your hotel brand.
Maybe many years have passed and you haven’t updated your website. Just like a house, the website needs maintenance and renovation. The technology of 10 years ago is no longer what it is today. So you want to not only improve the visuals and usability of the website and give it a new face, but also improve it on the inside and make it look fresh according to new trends and add the technology you need.
2. Convert indirect sale of OTAs into future direct sale on your website.
If you are looking for your hotel to reach new customers then you require marketing actions. But you will be limited to the amount of money and knowledge that you currently have. Another way to reach new clients is through OTAs, as each one of them invests millions of dollars to promote the hotels in its portfolio.
Bringing in new clients can be up to 5 times more expensive than generating new sales from our current clients. So we have to identify the potential of current guests to return to your hotel who arrived through an OTA and invite them to book your hotel again but through your website.
This is known as the move from indirect to direct selling, and it is something we recommend. Keep in mind that many people are already loyal to OTAs membership programs. So you will have to convince customers why they should book with you again using your website and booking engine. One way to do this is to offer additional benefits for booking directly with you or a rate discount, although the latter will cost you more.
3. Calculate the net cost of online sales for your hotel reservations
Learning how to calculate the cost of sales for each sales channel will help you decide which channels are better than others and give you a clearer idea of the potential of your website.
When you work with OTAs there are frequently two payment models:
- The guest books in an OTA, but only pays once they arrive at the hotel. Then the hotel has to send the commission money to the OTA. This is the case with Booking and Expedia’s hotel-collect model.
- The guest books and pays in an OTA, then the OTA sends the money to the hotel, discounting its commission. This is the case of Expedia in its merchant model and of most indirect online sales channels.
Accountingly, the hotel usually records the income of the OTAs for the amount they receive in their bank account from the reservation. Here is usually the confusion of the cost of sale calculation. In case 1 above, the income is reported in full and then an outflow of money is recorded for the payment of the commission. The problem is that this income reported in the accounting sheet is not ideal for calculating the real income or average rate of the sales channel for your hotel. What we recommend is to subtract the commission amount from it before recording the average revenue or fee from the sale of channels as case 1 in a different spreadsheet. That way you will have the real data and you can compare the channels more precisely and make essential decisions for the hotel business.
4. Create a night sale campaign on your website
We already know that the sale on our website requires greater marketing actions. One of them is to determine dates and special moments to sell, such as the night sale. It could be a time of year where you know that the client will have more money available to spend on a hotel stay, or special dates created by the company to seek to capture more reservations. The latter is the case of the night sale.
The night sale, like any sales event, must have a limited duration of time that allows the client to understand that if they do not reserve it now, they will not be able to reserve it with those conditions later. This is known as generating purchase urgency.
If you allocate the night sale to be exclusive on your direct channel (your website) you will also help improve sales results and at a lower cost. For this reason you will need to use those customers who once bought from you and now do not, who have the potential to be frequent customers and thus capture their attention and help them trust your brand again through this temporary offer.
You will need the appropriate technology such as a booking engine and a PMS to help you automate this type of campaign.
5. Invest in advertising to create demand for your direct channel
Once we have a powerful website with all the online sales tools and trust building, we can now move on to advertising as a tactic for generating new customers.
The first thing we must consider is the advertising objectives, what we want to achieve with it. In this case is new customers who book on our website.
Based on where your potential customers are, the next thing now is to look for the ideal channels to invest and place our advertising campaign. If we talk about digital channels then two media sound obvious: Facebook and Google.
Facebook has the advantage of being in people’s daily lives at leisure and even work. So it is an ideal channel together with Instagram to capture the attention of new potential customers and seek to direct them to our website.
Google is closer to the intention of purchase. When someone uses Google it is because they intend to find something, in this case to find a hotel to book. So search advertising is something that generates better sales results than Facebook, but at a higher price.
The recommendation is to have a combination of ads on Facebook and Google that allow you to attract attention and then work on an offer that generates value for the potential guest.
With these tips, your hotel will receive more opportunities to better balance sales in hotel direct bookings and OTAs. Both are important for your reservation generation strategy from the hand of a PMS reservation system and platform such as Lobby PMS as an ally of your hotel. Technology accelerates conversion and automation.