Last year, on separate calls, a number of hoteliers, who happen to also be clients, shared with us a concern they all had in common, and taking their word for it, many more hoteliers share:
The persistent decrease in margins on their online channel.
One thing led to another as it often does, and before we knew it, a Challenge followed:
– Develop a solution that can help
ONE: Increase Direct Bookings on our hotel’s website,
TWO: Reduce commission payouts to OTAs in the process.
This challenge put us on fact-finding journey I thought was worth sharing, because my team and I learned some interesting facts about the hotel online booking business, facts many hoteliers I spoke with, have not known prior to our conversation. So here we go,
We learned the cup is half Empty:
A. OTA Commissions keep Rising
The hospitality industry is experiencing shrinking margins on the online channel, due to the persisting increase in OTA commissions.
B. OTAs are the 800Lbs Gorillas in the hospitality online booking space
Increasing dominance of the OTA’s in the online booking space, as a result of mergers, consolidations and steady increase in advertising spend:
Expedia 2014 marketing spend was $2.8 Billion [Tnooz], up from $2.2 Billion in 2013 [Statista]. Booking.com’s parent company Priceline spent nearly $2.6 Billion in 2014 [Skift] up $1.8 Billion in 2013 [Bloomberg].
We learned it is half Full too:
A. OTAs are introducing your hotel to online shoppers:
Many online shoppers learn about your hotel for the 1st time on an OTA like Expedia, Booking.com etc.
B. Most will visit your website:
52% of online shoppers introduced to your hotel on an OTA, will visit a hotel website [Google research]
C. Vast majority of online shoppers rely on Price as main decision factor
85% of online shoppers admit price is the main factor influencing their decision on which hotel to pick.[Google research]
Armed with the knowledge that at 85%, Price is the most important decision factor in online hotel bookings we proceeded to check what the leading OTAs have to say about this topic:
Booking.com: “Hotels: Booking.com – Lowest Price Guarantee” WELL WE ALL KNOW THIS CLAIM DOESN’T HOLD WATER!
Expedia:“Secure incredible value with Expedia’s Best Price Guarantee” NEITHER DOES THIS CLAIM!
With Rate Parity contingencies enforced by OTAs, prices on OTAs and Hotel websites should be identical. If that is the case, as demanded by OTAs, why do OTAs claim to offer “Lowest Price Guarantee”? and “Best Price Guarantee”? Because they feel they need to Bluff to convince online shoppers to choose them, a resellers, over buying from the source = the hotel website.
Next step was a No-Brainer:
We designed our solution, BookingDirection, providing online shoppers the price transparency they need to support their buying process, right on the hotel website, where buying decisions are being made, showing online shoppers the Hotel’s price, side-by-side with the OTAs prices.
We launched Q1 2015 and are busy helping hoteliers increase Direct Bookings on their websites. Due to the overwhelming demand and positive response, we have a small backlog. >>> Add your hotel to the implementation queue and we’ll get back to when your turn is up.