The Complex Relationship Between Hotels and OTAs: Frenemies in the Hospitality Industry
And How To Achieve a Balanced Distribution Blend
By: Dustin Caromano
In the dynamic landscape of the hospitality industry, hotels and Online Travel Agencies (OTAs) have forged a unique and intriguing relationship. This connection can often be likened to that of "frenemies" – simultaneously friends and rivals. In this article, I will delve into the fascinating interdependence between hotels and OTAs, exploring the aspects of OTA commission costs and ownership of guests. I will also highlight the significance of hotels investing in digital marketing to reduce customer acquisition costs by winning guests directly while acknowledging the importance of maintaining a healthy distribution mix that includes OTAs.
The OTA Landscape: Commission Costs and Ownership of Guests
OTAs have revolutionized the way people search for and book hotel accommodations, offering convenience and choice to travelers worldwide. However, this convenience comes at a cost. Hotels often pay hefty commissions to OTAs for each booking, sometimes ranging from 15% to 25% of the room rate. These commission costs can significantly impact a hotel's profit margin, especially for smaller properties or independent hoteliers.
Moreover, the ownership of guests can become a point of contention between hotels and OTAs. When guests book through an OTA, their data and information are controlled by the OTA itself. This limits the hotel's ability to establish a direct relationship with the guest, impacting their ability to personalize the guest experience and foster loyalty.
Investing in Digital Marketing: Winning the Guest and Lowering Customer Acquisition Costs
To mitigate the reliance on OTAs and reduce customer acquisition costs, hotels must invest in robust digital marketing strategies. By establishing a strong online presence, hotels can attract potential guests directly and drive direct channel bookings. This not only circumvents the high OTA commission costs but also enables hotels to build direct relationships with guests, nurturing loyalty and enhancing the overall guest experience.
Digital marketing initiatives such as search engine optimization (SEO), pay-per-click (PPC) advertising, content marketing, and social media engagement are crucial for hotels to maximize their online visibility and reach their target audience effectively. By leveraging these strategies, hotels can position themselves as the preferred choice for travelers, capturing direct bookings and reducing dependency on OTAs.
Striking a Balance: The Role of OTAs and Brand.com
While hotels strive to win guests through direct channels, it is vital to acknowledge that OTAs continue to play a pivotal role in hotel distribution. Instead of viewing OTAs as adversaries, hotels should embrace a balanced approach that combines OTA and Brand.com production. This enables hotels to benefit from the unique advantages each channel offers.
Driving Direct Guests: The Benefits of First-Party Data Capture and Remarketing
One of the key advantages of driving direct guests is the ability to capture valuable first-party data. When guests book directly through a hotel's website, the hotel gains access to essential information about their preferences, behavior, and contact details. This data serves as a powerful tool for personalization, allowing hotels to create tailored experiences that enhance guest satisfaction and loyalty.
In addition, direct bookings facilitate remarketing opportunities. Hotels can leverage this data to implement targeted marketing campaigns, re-engaging previous guests with personalized offers and incentives. By nurturing these direct relationships, hotels can not only lower customer acquisition costs but also increase repeat bookings and drive revenue growth.
The relationship between hotels and OTAs is a fascinating and intricate one, characterized by both cooperation and competition. While OTA commission costs and the ownership of guests have posed challenges for hotels, investing in digital marketing provides an avenue for reducing customer acquisition costs and winning guests directly. Striking a balance between OTAs and Brand.com production is essential for hotels to optimize their distribution mix. By driving direct guests, hotels can benefit from first-party data capture, and remarketing opportunities, and ultimately build stronger guest relationships. As the hospitality industry continues to evolve, embracing these strategies will be crucial for hotels to thrive in the highly competitive digital landscape.
Remember, in the realm of frenemies, collaboration, and strategic decision-making are key to achieving a healthy and successful distribution mix that benefits hotels, OTAs, and most importantly, the guests themselves.
About Première Advisory Group
Première Advisory Group is a trusted commercial strategy advisory group for the hospitality industry. We help independent and boutique hotels around the globe drive profitability through a unique approach that combines experts in Distribution & Sales, Revenue Management, eCommerce & Marketing, and Hotel Technology, so they can maximize revenue and increase market share. With offices located in New York and Paris, Première Advisory Group supports over 125 independent and boutique hotels across the globe and was recently awarded Top Revenue Management Company by Travel and Hospitality Tech Outlook.