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Reducing OTA dependence

What is to be done with guests who book through the OTAs? They arrive on our doorstep through a third party. Unlike a traditional travel agent referral, we know next to nothing about them; there are no data guideposts to assist the hotelier in pre-arrangement. All the hotelier knows on pre-arrival is this: Mr. and Mrs. X are arriving sometime on Day Y, requesting a room style of Z. And, as is often the case with an OTA, they have booked the cheapest room on the books. Making matters more frustrating, the net yield to the hotel after commissions for the arriving OTA guest makes them the lowest-paying customer. It’s a guest-service challenge with limited rewards.

The plain and dire truth is that the OTAs have out-marketed the hotels. Give them credit for provocative advertising dished up at high media levels. Give them credit for a better web experience. And, recognize their evangelical approach to our industry. Scan every hotel conference agenda. It is hard to find one that does not have a speaker from one of the OTAs preaching their gospel.

How can the hotelier really combat the OTAs? If you are an owner or manager of a limited-service property, some of my recommendations are not entirely feasible, but for those of you who want to sell more than just a quick night’s rest, here are some thoughts:

1. Make your own website experience fantastic.

Sell your property and its virtues. If, per chance, a potential guest visits your site while also checking availabilities on their favorite OTA (not uncommon with new browser tabs, new browser windows or dual computer monitors), make sure you clearly identify a “best rate guarantee.” I also have seen several hotels offer unique non-monetary inducements to direct-shopping customers, such as breakfast or as-available room upgrades.

2. Never lose a customer through your res center.

Sometimes, a guest will phone instead of utilizing your website. Make sure you handle phone reservations 24/7 expertly. When your reservation center closes for the night/weekend, rather than diverting calls to the front desk or an answering machine, hire a professional firm to take over so customers will always have the opportunity to hear a reassuring, human voice on the other end. The voice channel typically represents 6% to 10% of business. Make it work for you.

3. Remember the traditional travel agent.

This once critical segment now accounts for a much smaller slice of your business, but they know their customers, who typically are booking better rooms and suites. They work hard for their 10% commission. Give them respect and help them with their unique customer requests, and this will be repaid with tremendous loyalty. And remember to pay those commissions promptly.

4. Retain your loyal, direct-booked customers.

Flag every guest dossier with a marker as to how they booked. At check-in, thank them for booking directly and reinforce this with a small gift of some sort. Communicate with them through an e-newsletter. One of my clients thanks each property.com and phone-in booking with a $50 F&B or spa credit immediately upon check-in. While this may be a token amount in light of a $300+ ADR and 2.5 nights average stay, their guest comments have improved measurably since implementation, and overall revenue per occupied room hasn’t fallen.

5. Analyze your business segments based upon NET contribution, not just ADR.

Your revenue manager has the tools. By focusing on rates net of commissions, you may alter your approach to the use of OTAs. The goal is profitable occupancy, not just occupancy at all costs.

6. Consider eliminating OTA availability during anticipated sellout dates.

When are you full year after year? You have historical trended data. Run the numbers. It may be more profitable to operate the house at 80% with a 20% higher net rate than 90% with a large OTA contingent.

7. Create demand through advertising.

Start with a targeted Google Adword campaign to generate base-level volume. Limit your costs to a percentage that matches traditional travel agents, which could be as much as 20 points less than the OTAs. Next, look at Facebook advertising. I am not outright recommending this approach for all properties, but it is an option. Lastly, merge your promotional activity with targeted traditional advertising, such as radio, print or television. Advertising has generated demand for the past 100-plus years.

8. Consider an incentive to OTA guests, but only if they book next time directly with you.

While we have tested this, the results have been inconclusive. You may think that an incredible $100 bounce-back coupon (that’s the technical term) will generate solid demand. The fact is that the frequency of visits to most hotels is measured in months or years. It is hard for people to remember they have a coupon, let alone cash it.

The challenge of the OTA is not going to be solved simply by building a better mousetrap (website). If you want to reduce the OTA component of your business, you must develop an infrastructure that replaces this segment. Easier said than done, I know. But remember, you ultimately manage the amount of inventory you give to any segment. Have your revenue manager jointly sign the checks you send to the OTAs. Set the goal of lowering the dollar amount of that check while also increasing occupancy. See what happens when you tie the revenue manager’s performance package to those two often conflicting goals.

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