Maximizing Your Relationship With OTAs

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Maximizing Your Relationship With OTAs

The relationship between hotels (particularly major international brands) and Online Travel Agencies (OTAs) may sometimes seem an uneasy alliance. Major hotel companies, such as Hilton, Marriott and IHG, are adding policies on price match guarantees to encourage direct bookings and detract from the perceived value of OTAs. Meanwhile, OTAs push even harder for competitive pricing and invest hundreds of millions of dollars in Search Engine Marketing (SEM) to increase their market share.

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Due to acquisitions and mergers over the last two decades, most OTA brands are a part of, or work with the two largest players in the space: Booking Holdings & Expedia Group. This may come as a surprise to many hotel operators and managers, who are used to seeing reservations come in for dozens of different OTAs.

As a result of this consolidation, it appears that OTAs have gained market share and bargaining power in order to compete more effectively against branded “direct booking” campaigns. This has resulted in disputes constantly being worked out in short-term agreements between the hotel companies/brands and the OTAs. As such, the OTA strategies a hotel can or cannot engage in continuously change and can be confusing for GMs or Revenue Managers.

Beyond providing feedback on the rules of engagement to their respective brand, there is very little a branded hotel or group of hotels can do to influence the terms of OTA web marketing. Frustration regarding the terms of engagement is one of the most common friction points in the OTA-Hotel relationship, and it can prevent hotels from taking advantage of some of the free tools and services that OTAs offer.

Some hotels would prefer to do business 100% direct, and in an ideal world, that might be possible. In the interim, there are market inefficiencies and shortfalls in brand platforms that will necessitate online centralized marketplaces for lodging, where bookers can easily compare options across brand, and bundle their experiences with other travel components, such as flights or rental cars. OTAs are an important part of a hotel’s business mix in the modern age.

In these circumstances, the most productive thing a hotel can do is engage with OTAs in a mutually beneficial way and exert control over their marketing/revenue management strategy. in this article, we offer three ways hotels and hotel groups can take advantage of working with OTAs.

  1. Establish a relationship with your account manager: A working relationship will help hotel management navigate and understand the ever-changing landscape of the back end of OTA platforms, and how they’re allowed to interact with your hotel. For example, the OTA can provide training materials and support for hotel staff. Additionally, an OTA account manager will have access to a host of analytical tools that they can share that will explain your market segmentation, monthly and annual performance, and identify valuable customer segments for retention.
  2. Keep track of analytics: In addition to monitoring your performance, rate, and revenue produced, OTA analytics offer insights into guest segmentation. Hotels tend to view OTA room nights in the same bucket, as transient leisure business. However, most OTAs have tools that enable hotels to analyze the type of guest they send, segmented by website, country of origin, corporate vs. non-corporate, sometimes even broken down by length of stay or ADR. By identifying the highest value guests coming into the market and targeting them through OTAs, hotels are more likely to drive rate on that channel. Lastly, a hotel groups can sometimes receive portfolio level data to help with budgeting or a marketing plan, or general revenue strategy.
  3. Utilize flexible pricing to yield revenue: In pursuit of ADR growth, most hotels are hesitant to provide discounts. OTAs may provide tools for attracting last minute demand and targeting specific customer segments with booking windows and higher ADRs, such as International guests or corporate travelers. While most revenue management tools are automatically designed to incentivize guests to book early and lay base business that allows them to yield rate when compression hits the market, OTAs have options on timing and segmenting price reductions, allowing savvy revenue managers to complement their existing strategies. For example- length of stay discounts, booking window discounts, timed discounts, or discounts that only appear if conditional customer segment criteria are met.

With occupancy and ADR growth slowing on a national scale, hotel management should utilize as many tools and channels as possible to continue to grow top-line revenues. While appropriate discounts on OTAs can offer opportunities for upside, hotels must also understand that excessive discounting in addition to commission can represent a significant marketing cost. As the landscape surrounding the hotel company-OTA relationship continues to shift, hotels should make the best of their current situation, and leverage the tools they have available if it makes sense.