In a competitive environment where hotels are pushing direct booking and OTAs are offering the possibility of reaching new customers, how do hoteliers find the distribution answer that’s right for them? In the final installment of HOTELS’ four-part series on the direct booking debate, SnapShot’s David Turnbull focuses on what the what a beneficial hotel-OTA relationship looks like – and catch up on Part 1, With Marriott International’s Drew Pinto; Part 2, with RLH’s Bill Linehan; and Part 3, with consultant Simone Puorto.
At a conference in London, David Turnbull, co-founder of SnapShot, a Berlin-based hotel demand management company, said: “If I was starting an independent hotel from scratch, I’d give all my distribution to OTAs and just concentrate on the guest and their experience.” While somewhat tongue-in-cheek, Turnbull says there is some truth to the quote. He writes about the hotelier’s struggle between driving bookings through direct channels and OTAs.
Imagine being an independent hotelier in a well-supplied market like London. Your first-year room sale objectives would be to acquire customers as quickly as possible and score the highest reputation possible on as many “visible” booking channels as possible. How do you achieve both objectives?
Customer acquisition
No one can have the same velocity impact on demand generation as an OTA, especially for those hotels that rely heavily on transient segments of demand. Yet the industry collectively shouts, “Direct is best; OTAs are bad.” This is too simplistic an argument, as most hotels cannot compete with the US$4 billion-plus advertising budgets of the likes of Priceline or Expedia.
Hoteliers would be better served to update their mantra to “repeat direct is best” because acquiring customers quickly and delivering great travel experiences leads to phenomenal reputation scores, which creates opportunities to convert repeat customers and drive new demand organically.
I would also challenge the notion that direct is more profitable, especially if the strategy is to focus on short-term profit, rather than solely long-term asset maximization. If this is the case, the 20%-plus commission paid to the OTA looks high in the P&L, but is fully transparent, unlike the more-opaque costs of acquisition associated with direct such as SEO, SEM, labor costs, hosting fees, photography, marketing automation, etc. And this is before taking into account the additional costs associated with brand representation.
Once compared with corporate segments, often with 30% to 40% discounts from the best available rate, plus switch and transaction fees, T&E or agencies fees, the net profit of “good business” can be lower than their lowest price wholesaler.
Reputation and guest feedback
It is sad that in 2017, as hoteliers further complain about the OTAs and the growing disparity between stay brands and booking brands, that they keep focusing on the reservation, rather than the guest.
The “booking brands” are edging into the customers’ attention while on-property, contacting guests within minutes of arrival to ask to rate the check-in experience and their plans during the visit. Compare that to the hotelier who inquires about an experience days after checkout and by email.
The remaining asset the hotel has to control during the customer journey is the time spent on property. While retail gets 15 minutes to analyze its customers’ behavior, after 15 hours, most hoteliers don’t know if the guest had breakfast in the hotel or not.
Onsite guest experience is one area where hoteliers technically own the guest, and yet we see no significant shift in how hotels plan to collect, store and effectively use data collected on property to drive real-time service delivery and guest experiences.
This is where reputation scores, premium rates, increased repeat demand (via direct channels) and ultimately higher profitability will derive from.
Changing sentiment
So what is the ultimate hotel-OTA relationship? Mutual admiration. Hoteliers should also learn to get their data under control.
OTAs need to provide more meaningful tools and services beyond the core reservation transaction. Red Lion’s decision to shift the management of the loyalty scheme to Expedia means, most likely, Red Lion is much more focused on managing guests than managing points and redemptions. The best relationship allows both parties to shine.