While OTAs may seem like competition, they are, in fact, important distribution channels that move hotel room inventory and increase the hotel’s visibility in the market. But what is the best way to manage these channels? The Rainmaker Guide to Revenue Management identifies two management strategies: understanding customer acquisition costs, and encourage direct bookings.
Understand Customer Acquisition Costs
The rising popularity of OTAs has put them in the position to be able to charge large commissions to hotels. As OTAs such as Expedia.com continue to dominate the online space, it is increasingly difficult for hotels to negotiate favorable distribution agreements. However, unwillingness to partner with OTAs can mean the difference between gains and losses for a given property. Understanding the cost of each channel is imperative, including the cost of getting customers to book by calling a property directly or visit its website.
Managers should evaluate what they are paying franchisors for sales and marketing, including digital marketing. Many hoteliers are adding Net Revenue Per Available Room (NetRevPAR) metrics to measure the true cost of acquiring a customer. NetRevPAR is the revenue per available room minus the cost to acquire a guest. Once the cost of each channel is determined, managers can make informed decisions on how to distribute inventory. This does not mean they should close a channel in favor of adding inventory to another channel. But if they understand the demand on any given day for the entire inventory spread across all of the channels, they can make informed decisions about how best to distribute it for maximum profitability.
Encourage Direct Bookings
A revenue management strategy should focus on driving as much business as possible directly to the hotel, thereby avoiding third party costs and commissions. But driving traffic to a hotel’s website is not enough. The user’s experience, also known as site usability, should not detract from a well-executed web traffic promotion. Converting those visitors into buyers should be the ultimate goal.
Once visitors arrive at a hotel’s website, those visitors should be given a reason to book direct with that hotel. For example, Apple products are sold in Apple stores and also by retailers such as Best Buy and Walmart. However, there is added value for a customer who goes to an Apple store to purchase. The personalized attention, technical support, and ease of checkout and returns offered at Apple Stores are enough to create a preference for buying products there.
Hoteliers must offer the same type of added value for booking direct. Offering customized discounts is one way to do this. When consumers book directly with a hotel, there is an opportunity for hotel management to gather information about them that can be used to segment them and offer targeted promotions and other discounts. Consistently offering the best online rates and offers, compared with other online channels, is essential.
Hoteliers can also foster loyalty and goodwill by helping customers throughout their experience, including the research, buying, and traveling phases. Hotel managers can provide useful content about the property and location, answer questions promptly, provide information about what a customer’s stay at the hotel will be like, and what other activities they can do in the area. If a customer’s needs can be met with a personal touch, they will have less incentive to go through a third-party site.