The relationship between OTAs and hotels is a complicated one. While hotels resent the steep commissions on OTA bookings, most rely on OTAs for a large chunk of their bookings. And for OTAs, well, without hotel inventory they lose their most profitable business. For now and in the foreseeable future, OTAs and hotels need each other.
Like any relationship, though, the relationship between hotels and OTAs is evolving. OTA contracts are becoming more flexible, commission rates are slowly dropping, and rate parity clauses have been banned in France, Germany, Italy and Sweden — all of which are positive changes in favor of hotels.
There’s no denying the important role OTAs play in visibility and distribution, but decreasing OTA dependency and increasing direct revenue makes sense for any hotel. Simply put, direct bookings (if a hotel can get them) cost less than OTA bookings and are better for a hotel’s bottom line. Furthermore, when a guest books direct, the hotel has the opportunity to form a more direct relationship with that guest, positively impacting customer loyalty.
According to Hilton and Marriott, their respective “Stop Clicking Around” and “It Pays to Book Direct” campaigns are, indeed, paying off. Offering discounts and other perks to loyalty members who book direct, Hilton’s “Stop Clicking Around” campaign has generated an increase of nearly 90 percent in HHonors enrollments, and Marriott’s “It Pays to Book Direct” ads have well over 6 million views on YouTube.
A recent article by Software Advice, a hotel software research company, also highlights the effectiveness of incentive-driven direct-booking campaigns. Their research shows that a significant proportion of consumers would choose to book direct if they receive added value for doing so — in fact, a room upgrade would persuade 48 percent of those surveyed to book direct.
The Software Advice article features a seasonal “book direct and save” pop-up campaign as an example, where the consumer is offered a discount for booking direct on a hotel’s website. While OTA rate parity agreements may prevent some properties from offering discounts to the general public, discounted rates can be offered to limited audiences like social media followers or loyalty members. Otherwise, offering an added perk (like free parking or breakfast vouchers) can also make booking direct a better deal for your customers.
According to the Software Advice survey, other incentives that work to convince travelers to book direct (after room upgrades) are free room service, amenities (e.g. spa) and gift cards.
A free drink at the bar, a dining discount at your restaurant, free Wi-Fi (if you are still charging for it!), late check-out, discounted or free activities, loyalty membership and perks, free airport pick-up, or a welcome gift are further examples of added value that can sway guests to book direct at very little cost to the hotel.
It’s working for big hotel brands and it can work for independent properties too.
How a Modern Reservation System Helps Drive and Manage Direct Bookings
A successful book-direct campaign is backed by a modern, automated reservation system (or property management system). As most travelers prefer to book hotels online these days, it goes without saying that any efforts to boost direct bookings should be supported by a user-friendly and mobile-friendly online booking engine on a property’s own website. If customers can’t easily book direct online, chances are they will book through an OTA instead.
- Flexible Rate Management
A modern property management system like WebRezPro allows lodging operators to create various rates and packages, with easy override ability, for maximum flexibility. Different rates and packages can be set up for OTA channels, as well as book-direct campaigns. Discount or add-on rates can be based on rack or best available rates, and package components like breakfast or activities can be automatically tracked to appropriate revenue accounts.
Flexible yet easy-to-use rate management tools are essential for helping lodging operators optimize pricing and to ensure the best deal is always available direct.
- Channel Management
Managing distribution channels efficiently and intelligently is key to maximizing direct bookings and revenue. A reservation system that offers direct integration with OTAs, the GDS and channel managers enables lodging operators to manage rates and inventory across all channels from a single point of control, improving speed of reaction to fluctuating demand (and saving lodging operators a lot of time). Integrated channel management is an important part of developing a more effective direct-booking strategy as part of a complete distribution and revenue plan.
- Commission-Free, Integrated Online Booking Engine
As mentioned above, the quest to increase direct bookings won’t get very far without a direct online booking engine. But it’s also important to make sure your online booking engine provides functionality and ROI in alignment with your direct-booking campaigns and goals.
Let’s start with ROI. The whole point of increasing direct business is to reduce guest acquisition costs (namely, OTA commissions). If you are paying commissions on bookings coming directly through your website, consider switching to a commission-free online booking engine to maximize your ROI.
Your online booking engine should be able to sell various rates and packages and should be integrated with your property management system so that any applicable rate overrides or close-outs (and live room availability) are instantly reflected online. As well, your online booking engine should be capable of supporting book-direct campaigns. For example, any book-direct specials advertised via pop-ups on your website or other online advertising (like on Google and Facebook) should be directly hotlinked to the book-direct rate or package in your online booking engine.
To gain deeper insight into direct revenue and the success of your book-direct campaigns, make sure reservations coming through your online booking engine are trackable through your property management system (more on that later).
- Booking Options
One way to incentivize customers to book direct is to give them the option of customizing their stay during the room booking process. With WebRezPro, hotels can set up “booking options” within the booking engine that allow additional services to be selected and added to reservations. This feature is especially useful when guests are offered a choice of two or more options. For example, some properties use booking options to allow guests to choose from a selection of welcome gifts, or purchase discounted event or attraction tickets.
- Access Codes
Access codes are a simple and easy way to make discounted rates available online to a select group of customers only (like social media followers, loyalty members or corporate customers). Imagine you want to offer a promotional rate to your Facebook followers; by assigning a unique access code to the special rate, your Facebook fans can simply enter that code into the online booking form to access that rate.
- Loyalty Program
Customers can be persuaded to book direct by exclusive perks and discounts offered through loyalty membership. WebRezPro includes a points-based rewards program feature that allows loyalty members to enter their rewards number during the online booking process to collect points automatically. As well, WebRezPro offers integration with Stash Hotel Rewards and Preferred Patron loyalty programs.
- Market or Source Codes
Source and/or market codes are an effective way to track where your bookings are coming from to help identify your most profitable booking sources and guide marketing and distribution strategies going forward.
Market codes can be set up to automatically tag reservations coming through your direct online booking engine, through third-party booking sites, and from repeat guests. Market codes can also automatically track direct online bookings resulting from online advertising campaigns. Direct bookings coming in by telephone or as walk-ins can be tagged manually by reservation agents.
The ability to track bookings by source is important for gauging the success of marketing and distribution strategies that focus on increasing direct revenue.
Incentivizing customers with exclusive perks is a proven way to increase direct business. With the right incentives (that appeal to your customers and cost less than third-party commission charges), and supported by a modern reservation system, any property can successfully drive more direct revenue for a healthier bottom line.