Independent Hotel Revenue Management Trend – Direct Booking

The latest Revenue Management Trend in Hotel Industry – Direct Booking. Direct Booking could increase your hotel profit margin. But why now but not earlier? Prior the Software-As-A-Service (SAAS) era, it’s very costly to own your instant booking engine (IBE) on your official website. An IBE could cost a hotel easily MYR 10,000 (approx USD 3,000) one-off and MYR 2,000 (approx USD 600) per year subsequently.

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Like any other hoteliers of international chain hotels, hotelier from independent hotels are always seeking ways to increase sales. Prior 2017, most of the independent hotels’ hoteliers rely on Online Travel Agencies (OTA) like Agoda, Expedia, Booking.com etc to distribute their inventories online but things have changed since.

Many hotels have pickup Instant Booking Engine (IBE) on their official website to accept Direct Bookings.

Why Direct Booking Matters?

As the OTA commission hike, profit margin will be greatly reduce; this is not a big issue for large international hotel chains where they have revenue management and income from direct bookings with better profit margin. But this is not so for independent hotels who relies solely on the bookings from OTA!

Refer below for the list of the commission charges by each OTAs on average to independent hotels:

  • Booking.com – from 15% onward
  • Agoda.com – from 17% onward
  • Expedia.com – from 25% onward

Some discussion of Booking.com’s commission on Quora – https://www.quora.com/How-much-commission-is-booking-com-charging-their-partner-hotels

Malaysia-Hotel-Scene-2015

[Percentage of Hotel In Malaysia with IBE against Hotel without IBE]

But, Why Now?

Prior the Software-As-A-Service (SAAS) era, it’s very costly to own your instant booking engine (IBE) on your official website. An IBE could cost a hotel easily MYR 10,000 (approx USD 3,000) one-off and MYR 2,000 (approx USD 600) per year subsequently.

But things has since change, thanks to the internet and cloud technology. Instead of one-off investment, independent hotels can now choose to subscribe to IBE via a subscription basis. The price of IBE ranged from MYR 45 to MYR 300 per month depends on the features provided.

Here are some of the SAAS IBE providers

[Read Tips on How to choose a good Instant Booking Engine]

Can Hotel (I) Fight Against OTA?

Obviously, an independent hotels would never win a game if they go into a fight with the giant. BUT, that doesn’t stop you from getting small wins around the fighting ring. This idea was highlighted in a Tnooz article – “Hotel Direct Booking is the biggest competitor of OTA”. It will required some extra efforts, in terms of online marketing of your official website, content writing, branding and inventory management BUT REMEMBER – every direct booking transact on your website saved you the commission paid to the OTA.

[Read Tips on How to increase traffic to Hotel Website]

And Don’t Forget The Billboard Effect!

Billboard Effect, is the phenomena where guests who discover your hotel via an OTA visit your website. If you have an instant booking engine, many will end up booking directly with you. I have seen hoteliers setting prices slightly cheaper on their official site or offer perks for direct booking as it increases their net profit by 4% month over month through direct booking!

[Read Tips on How to increase sales conversion on Hotel Website]

What Direct Booking Will Lead You To?

First off, as discussed earlier; direct bookings will increase your booking margin but more importantly (at least what I believe personally) are what Direct Booking will lead your business into. Imagine the below

  • Customer Loyalty Program – building your own customer database and eventually grow your direct booking volumes and fans.
  • Up-selling Program – hotel could offer ancillary services (e.g. gym subscriptions, cafe vouchers etc) on your booking engine which normally was not allowed on OTA.
  • Branding – you have will full control of your brand and the experience you wanted to provide to your customers.

[Read What is Promo Code and How It Can Help Your Business]

What you think? Would you consider Direct Booking? or it’s just a Hype?

 

**Above Article is Written by Softinn Solution**

Softinn Solutions Sdn. Bhd. is an emerging travel technology company that develops a cloud-based hotel reservation system for small and medium-sized hotels. Learn how we help hundreds of hotels better manage their business and increase sales.

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Softinn Solution’s Headquarter in Melaka, Malaysia

2 thoughts on “Independent Hotel Revenue Management Trend – Direct Booking

  1. At first, Idon’t have any idea about Independent hotel revenue management trend-direct booking. But now i understand well why is it important to learn some important details about it. Thank you and it was really a great help for a newbie like me.

    Like

  2. I had better understanding on what direct booking is all about with this wonderful post! Indeed, it has something to do with branding and to ensure the loyalty of customers. It could be very profitable for the part of the hoteliers.

    Like

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