Domination of OTA within hotel distribution has changed today’s landscape of hotel industry. With its worldwide coverage, major OTA like Booking.com or Expedia have gained majority of market share in travel industry. Furthermore, it is also usual these days to find hotels that highly depend on OTA to sell their rooms. With huge portion of OTA, it also means that hotel needs to pay high commission to OTA. And sure, this is a serious problem for hotel revenue management because they can’t achieve optimum revenue.
In addition, most of hoteliers might not realize that their business strategy might have been influenced by OTA. For example, it might be common for you to receive advice and information about the market conditions. It can even get deeper when OTA gives advice on other things, such as room rate, cancellation policy, and refund policy. Actually it is good for hoteliers to get insight from OTA. However, when it comes to revenue management of your hotel, it should be on your own decision.
These are Caption Hospitality‘s highlights about essentials actions to drive more hotel revenue, as well as how to deal with OTA for your hotel revenue management.
Analyze core issue of your hotel performance
It is better for your hotel to develop your own hotel revenue management strategies to turn around your hotel revenue. The basic of hotel revenue management is to manage your room inventory based on several insights. These insights can be the competitor pricing, marketing effort, positioning, market segmentation, and booking patterns. By doing analysis towards those insights, you will get valuable insight about issues and which actions need to be taken to overcome those issues to drive more revenue
In this phase, getting as much as valuable insight is important to develop good revenue management for your hotel. You can collect information and insight from your internal database to get market segmentation, guest preferences, and booking patterns. These data are important to gain more understanding about your business itself. In addition, you can also get information from your competitor to know their pricing strategies and their positioning strategy in the market.
Don’t be trapped in the price war
One of the issues faced by many hotels are oversupply and price war between hotels in specific area. These condition certainly are not the ideal condition for hotel to manage their revenue. If you’re on a price war situation, you would find out that each hotel would try to give the lowest rate compared to competitors. This situation is a dangerous trap for hotels, as they will only focus to sell their room and missed to manage their revenue properly.
Reflect your current revenue management
If you already analyze and found core issues which faced by your hotel, then it is time to overcome those issues. First of all, before we make important business strategy changes, it is better to reflect how is your current revenue management strategies. Lets start with your distribution channel forecast. If you still not do forecasting on which channel driving most revenue, then you are basically clueless. By knowing and do forecasting you would know which channel is more profitable during either peak season or low season. For example, it is less profitable for hotel to get lot of booking from OTA during peak season. It because hotel revenue actually are cut off to pay commission for OTA, while in other side you could drive booking directly from your own website or from walk-in guest.
Another thing that you should reflect is your pricing strategies with OTA. Is it as same as published rate on your website or it much lower than rate in your website. These pricing strategies hold crucial role to influence your flow of revenue. Most hoteliers are unaware that they their pricing at OTA website actually hurt themselves by reducing direct booking to their properties. Some hotels are highly depends on OTA actually caused by their room rate on OTA which is more appealing for customers. It include some practice like have lower price on OTA site than their own website and give big discount on OTA site. These action might give hotel revenue, but the truth is they are driving revenue for OTA, rather than their hotels.
In addition, you also should reflect on how many distribution channels currently used to distribute your hotel inventory. It is good to have distribution channels that drive lot of booking for your hotel. However, having lot of distribution channels at same time is not effective. In this case, you should able to identify which OTA that gives good contribution and which one is not. It not effective to have your hotel listed in 10 OTAs, but only 3 of them that contribute to drive bookings. Therefore, focus on your own website to distribute your room inventory is the logical solution for this.
Be competitive and differentiate yourself
Improved website is important
When you already reflect and know what are your issues, then lets start to improve and overcome it. If your hotel revenue management is still not optimal due to dependency to OTA, you can start making your direct distribution more appealing. For example you can improve your website, so it becomes more user friendly and could be optimized to drive more direct booking. It is also important to set best available rate for your direct distribution channel. By offers discount or give lower price than OTA, it will make your website more appealing for potential guest.
Furthermore, you also could boost your revenue by offer competitive advantages over competitor. For instance, within OTA usually hotel are given standard cancellation policy from OTA side. This means most of hotel within same OTA platform would have same cancellation policy, including your competitors. One of ways being competitive in this case is by offer more flexible cancellation policy. For example if most of competitors cancellation policy is non-refundable when it passed three days to arrival, then you could take brave decision to set it to be refundable prior to 24 hours before arrival. This action surely would bring you have
But this action is worth to try, as it offers competitive advantage of your service. Surely, you would see lot of cancellation due to this policy, but in other hand people would more prefer to book on your hotel as it offer more flexibility for them.
The bottom line
Complete insight and information about current hotel selling performance, guest preferences, competitor marketing efforts, as well as market condition are important to develop good revenue management strategies. These insight and information would help you to analyze, reflect and evaluate your current revenue management. It also would help you to spot issues and challenges that faced by your hotel. These might uncover truth that your current pricing strategy gives more advantages to OTA rather than for your hotel.
To be able to drive more revenue, you need to optimize your direct distribution channels. It means you need to optimize your current hotel website and add more competitive value to your service. This competitive value is to influence our potential guest could decide to stay in your hotel rather than competitor. The key to develop this competitive advantages is differentiation from competitors. It is not only about service and product differentiation, but also strategies to drive more revenue in tough competition of hospitality industry.