Working with OTAs: The Indirect Distribution Dilemma - 0 views
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OTAs GDS direct bookings indirect commissions distribution strategy
shared by artandmer on 25 May 22
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properties that work with Online Travel Agents (OTAs) perform significantly better financially than those that do not, with commissions being more than compensated for by the increased revenues, resulting in higher bottom-line profits
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the commission levels reaching 25%, sometimes even 30%, that was steep. The current situation is more within the 15-20% range
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The real question is: How much dependency on the OTAs is healthy for your property: 20%? 30%? 50% or more of of booked room nights?
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OTAs are a necessary evil, and they bring value most of all whenever they bring incremental revenue to hoteliers. The challenge is to strike the right balance in the distribution mix.
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play the role as a true partner — must offer independents and chain hotels alike greater flexibility around closing out dates, close to arrival/departure, MLOS, and related tools in their inventory management toolkit
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Few property owners or managers would object to paying higher margins on inventory that they can't sell on their own; but having to eat that cost on last room available, or even close to last room, during high demand periods is too high a price to pay
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hoteliers tend to think these bookings are "free." Well, bad news is that they're not: booking engine commissions, advertising on search/metasearch engines, website creation, promo-codes, hosting, SEO, etc.
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I believe a healthy distribution ratio is the one of 2.5:1 direct online vs OTA booked room nights, enjoyed by the major hotel chains. Marriott and Hilton are doing even better with 3:1 ratio.
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So what is a smart distribution channel strategy? Blended distribution strategy is the smart thing to do in hospitality
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OTAs are storms of computer engineers with a pack of money. Would you bet them at their own game? Not sure. Can you "use them" for your own needs only when necessary under particular conditions? I'm sure you can!
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OTAs can help hotels gain market insights and business intelligence by applying machine learning algorithms to analyze property-level data. Some OTAs might have already provided some of those value-added reports to their hotel partners. If that is the case, I encourage the OTAs to engage the hotel sales team and see what additional value/reports they can add to the partnership.
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In fact, we would advise hoteliers to take advantage of OTAs' online reach by listing on their platforms while, concurrently, strongly reinforcing their direct channels by adopting new technology solutions.
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The 2021 travel landscape has dictated that the leisure guest is all-important and that guest loyalty should be the prize, not channel loyalty.
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To put it simply, OTAs are perfect for a first-time visitor to your hotel destination. If a returning guest books via the OTA for their 2nd visit, then this is a complete failure on the hotel for missing the opportunity to create value or establishing a compelling reason for the guest to book directly.
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The relationship with OTAs should be about finding the right balance (or mix of business) for your specific hotel. A commonly held point of view is that OTA commissions are exorbitant (in dollars, or as a % of revenue), but shouldn't we be glad if they sold a room we were not going to sell otherwise?