DIRECT BOOKING HYPE
DEBUNKING for
INDEPENDENTS
As a former hotelier , Simone Puorto , now CEO and founder of Simone Puorto Consulting , Nogent-sur- Marne , Val-de-Marne , France , never felt at war with any distribution channel . But at some point , “ Why should I give 20 % to an OTA when I can sell my rooms directly ?” became the new “ Let ’ s sign with booking . com and increase our business to guests we won ’ t be able to reach otherwise .” Puorto writes about the hype and how independents can overcome it to yield the best rate . What if all this direct booking hype was not really the consequence of a rigid and scientific distribution cost analysis , but rather a smart marketing move by all those web agencies advertising themselves as the redeemer of the oppressed hotels fighting the anti-commission crusade ?
Every reservation has a cost : Sometimes it is clearly defined ( commission , markup ), and sometimes more hidden ( creation of website , hosting , adword investments , meta-search ads , booking engine transaction fees , branding activities , etc .). The cost per acquisition ( CPA ) for a direct booking is not always lower than the average OTA commission , but sometimes it ’ s higher .
A hotelier in Paris was complaining all the time about the high distribution costs and tried anything to get some more traction on his direct channels . He bought a price-checker , offered discounted rates on the website , gave free breakfast , launched a messenger chatbot and invested a ton of money on advertising . Sure , direct bookings started pouring in – but with a CPA of 42 % over an average OTA commission of 21 %. A “ direct ” client might be yours forever , but a lot of hotels have very low returning guest percentages ( if any ), so customer lifetime value is just another word that means nothing out of proper context .
I created a small focus group of clients and friends to substantiate ( or to deny ) my thesis . I grouped 50 independent and branded hotels around Europe , from 5 to 500 rooms , with different star ratings , and asked them :
• How would you describe your relationship with OTAs ?
• What are the needed and necessary gives and takes for a better collaboration ?
• What do you think the future of distribution will be ?
• Is your direct booking CPA lower , equal or higher than that of OTAs ?
Unsurprisingly , over 90 % described their
“ A ' DIRECT ' CLIENT MIGHT BE YOURS FOREVER , BUT A LOT OF HOTELS HAVE VERY LOW RETURNING GUEST PERCENTAGES ( IF ANY ), SO CUSTOMER LIFETIME VALUE IS JUST ANOTHER WORD THAT MEANS NOTHING OUT OF PROPER CONTEXT .”
— SIMONE PUORTO relationships with OTAs as a reciprocal collaboration . This answer came mainly from revenue managers and owners who tend to be more focused on profit and numbers .
Fully 70 % of hoteliers said they would like to get more transparency from OTAs , especially when it comes to guest email sharing . All hotels interviewed described mirror marketing ( mirror sites , misleading ads , reseller lower rates , etc .) as one of the main obstacles to a better collaboration .
The main discrepancy of opinion was on where distribution is going : Half the group voted for a future with more direct bookings and the remaining half for a landscape dominated by OTAs and metasearch / hybrids .
Oddly , over 20 % did not know exactly the CPA per direct booking or even how to calculate it . Around 10 % admitted that their CPA is lower for OTA reservations , while the remaining 70 % agreed that ( no matter what ) a direct reservation is always cheaper . Branded hotels tend to have lower CPA ( just like hotels with higher ADR and bigger room inventory ), while CPA for smaller independent hotels is not very different from the average OTA commission .
Having a lot of direct bookings does not necessarily mean higher profit ; and understanding the hidden costs of any reservation is crucial to achieve and maintain a healthy and profitable mix . OTAs are just tools ; use them accordingly . “ Stop Clicking Around ” is a great opportunity to cut distribution cost for Hilton , but not necessarily for smaller hotels , especially if with fewer rooms to sell at below average prices . For smaller hotels , stick to basic high return advertising campaigns and prefer commission model over CPC with metasearch ads to minimize the risk without being completely out of the meta game .
September 2017 hotelsmag . com 35