Direct Booking VS. OTA, What Hotel Need To Know in 2017

The relationship between hotels and OTA has always been complicated. Nobody can deny the impact and influence OTA has had on global travel and hospitality, connecting millions of travellers to hotel rooms online every year. OTAs became powerful and efficient by making the journey of booking a hotel less of a hassle for travellers.

In this article we will talk about:

  1. The Power And Influences Of OTA.
  2. What It Means to Hotel.
  3. How Major Hotel Chains Are Reacting.
  4. What Can Small and Medium hotels Do (including those in Asia)

But before we get started, some statistics on travel industry:

  • The world’s travel industry is worth more than $2.5 trillion USD and is currently the fastest growing sector.
  • There are more than 10 million searches related to travel are carried out in Google Search per month.
  • Based on 10 million searches, an estimated 3 million web traffics are going into top 10 OTAs alone.
  • com is the leading travel site and OTA for the industry. In 2016 year alone, it generated almost 1.1 billion visits to its site.
  • Expedia spent 4.3 Billion USD in advertising alone in 2016, an increase of almost 1 billion USD from 2015.
  • Priceline Group spent 3.5 Billion USD on marketing. Priceline Group consist of Booking.com, Priceline, Agoda, Kayak and many more travel related companies.
  • 85% of travellers said Price is the most important factor when determining where to book according to a survey by Google.


The Power And Influences Of OTA
 

Priceline Group

  • Biggest online travel agency in the world.
  • Started in 1997.
  • $88 billion market capitalization.
  • Brands include Booking.com, Agoda, Kayak, Momondo, Booking Suite.
  • Dominant in Europe and Asia, controls about 62% of Europe market.

Expedia Inc

  • Started in 1996 as a division of Microsoft.
  • $22 billion market capitalization.
  • 20 brands under its name including Hotel.com, Trivago, Travelocity, HomeAway, Expedia.com and Orbitz.
  • controls about 75% of the US market.

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Image from FredericGonzalo

Anyone who is not familiar with the online travel landscape may be under the impression there are tens, if not hundreds of websites to go to when booking for hotels. The truth is many websites are owned by the same company and the two dominant companies are Priceline and Expedia. The two largest OTA in the world are Priceline and Expedia and they have been around for 20 years.

OTA was seen as a convenient distribution channel where hotels and airlines could sell extra inventory.

Back in the days, online distribution was not really a priority. In the early days, hotels sold to wholesalers, who sold to tour operators who sold to travel agents and finally to travellers. The problem with this system is the transparency, nobody knows how much was being paid. When OTA entered the industry, it gave control back to the hotel and guest how much was they were getting.

Fast forward to current days, technology has shifted the pattern of how travellers made a booking while travelling and this is where OTA’s shine. They have been focusing on leveraging the power of technology where it is consider too costly and complicated for small and medium hotels. OTAs help hotel and homestay owner to solve distribution problem by helping them to sell certain percentage of rooms on their platform.

Good news to hotelier and homestay owner? Not entirely

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Before you (a hotel/ homestay/ lodge owners who list your property in OTAs) rejoice. Let’s take a look at why you should be cautious of putting too much egg in one basket, or depending too much on OTA to bring business for you.

1. OTA Are Spending Money To Market Their Own Brand

OTAs invested heavily in digital marketing and digital advertising to lure web users to their sites. This creates a Billboard Effect that works in OTA’s favour. Most travellers search accommodation by going through the huge list of hotel and homestay collection in OTA website, this habit is shape by the huge marketing effort done by OTAs throughout the years. That is why OTA brand are so well-known and acknowledge by travellers because it gives them options to choose the accommodation that is most suited to them.

“In short, hotel brand name is not being recognized by travellers.”

2. OTA Can Change The Rule Of The Game

As the numbers of merchant grow and OTA became increasingly dominant, they began to alter their business model. According to Hotelogix, Large hotels were offered lower booking commissions while smaller independent hotels were paying higher. The reason is larger hotels have more rooms to sell and can negotiate with OTA to lower their commission so that they allocate more rooms to sell on OTA. Besides that, commission made to OTA by hotels will not remain forever, the higher the commission your hotel pay, the better ranking your hotel position will be in OTA website.

“This translates to lower profit margin for hotels.”

3. Hotels Do Not Own Their Customer Data

OTA contract often stipulate that hotels can’t market to customers that booked directly with the OTA. Last year, Booking.com stated that they will no longer provide hotels with customer emails. To have a piece of customer information is important for hotels as the best customer relationships come when you are able to engage with them sooner rather than later. The customer experience started long before a traveller check-in to the hotel to create a memorable holiday experience. Losing the control of the customer’s data means losing the connection and relationship that is unique to hotels.

“In the end, OTA will emerge as the winner in the online hotel booking industry.”

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Image from morgan socialities

 Hotels are overly dependent on OTAs. With each passing year, hotels pass more and more money to Expedia, Booking.com, Priceline and the others.” – Forbes

OTA vs Hotel Brand (direct online booking) ratio fell to 51:49 in year 2016, compared to 46:54 in 2012 according to PhocusWright. They also stated that hospitality is the ONLY travel sector in which OTAs are gaining share at the expense of independent hotel brands. Direct online revenue from airline, car rental and cruise sectors are all increasing at the expense of OTA. 

Major Hotel Chains Around The World Are Taking Matters Into Their Own Hands

  • Hilton Worldwide

Hilton Hotel made sure the message were passed to the public by putting their video advertisement in front of 25 million viewers during the 2016 Grammy Awards. The company said the “Stop Clicking Around” campaign is its biggest yet in the company near-100-year history.

The company said 1.6 million free nights went unearned in 2015 because of bookings made through third party sites. They aim to offer benefits such as lower price, free wifi, digital key, and points for those who book direct with them.

  • Marriott Hotel Chain

Marriott launched an entirely new campaign in 2016 called “It Pays To Book Direct”. The hotel chain has spent more than $1 million in 2016 in marketing this campaign and their ultimate aim is to influence users to book directly through their own hotel website instead of OTA to get better rates or benefits.

  • Starwood Hotels & Resorts

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Starwood (parent company of St. Regis, Westin and Sheraton) stated in their own direct booking hotel website that the hotel will match any rates that is lower than their own website, as well as free internet and other benefits that is not offered if guest book through OTA or third party website to maintain or increase their hotel profit margin.

What can small & medium hotels with limited budget do?

1. Embrace Technology – Have Your Own Hotel Website

76% of online bookings happen through OTA. However, 50% of the internet users will visit the official hotel website after discovering them through OTA. This is where opportunity comes in. The cost of building a website is so much cheaper now and also easier to manage. Besides that, hotel can let company like Softinn Solutions handle the task by building your official hotel website complete with booking engine for free.

2. Provide Special Benefits For Direct Booking

This method is to create an awareness to travellers by giving them an impression that booking through official hotel website will have something different compare to booking through OTA. Besides that, a guest who stayed at your hotel who received this the perks will leave positive comments on social media which will again influence other web users to book through the official website.

Read More on the guide for hotels to bring direct booking through the hotel website.

3. Run Online Marketing Promotion

Major hotel chains like Marriott and Hilton have both funded marketing campaigns aimed directly at consumers to start educating them by telling them direct booking is better. Small and medium hotels should start doing the same. While small hotels with very little budget cannot run advertisements on television and billboards, the cost of running digital marketing on Google is relatively cheap. Spending few thousands USD on Google Advertisement will reduce the reliance on OTA marketing in the long run.

Read More about the benefits of promotion and how promo code can help increase your business.

4. Provide incentives for returning guest

By giving special treatment for seasoned guest for your hotel, you are strengthening your relationship with a satisfied customer. Re-marketing to the same person who has already been to your hotel require less effort and less financial spending. Since only major hotel chains have a loyalty program, small and medium hotels can provide special promo code specifically target at returning guest to encourage them to come back to your hotel.

5. OTA is still important

Yes, you read that right, even though ultimately what hotels and homestay owners desire is to not pay commissions to any intermediaries, relying on OTA is still an acceptable option for hotels. The influence of OTA will be as strong as ever, having a listing on OTA is still a way for less popular hotels to be noticed by online users.

Learn About how Softinn has partnered with OTAs like TripAdvisors and Tuniu from China to broadcast hotels and homestay without extra charge on the merchant.

**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.

Head over to Softinn Solution homepage to learn how Softinn helps small and medium hotels and also homestays save more by having all the essential functions in the Softinn Extranet. The best part is there is no upfront payment needed.

Softinn helps hotel or homestay build a website with booking engine and payment system so that merchants can focus on running their business without much hassle.

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Softinn Solutions is Headquartered in Melaka, Malaysia.

WideBed is using Softinn Cloud Reservation System

Widebed Sdn Bhd is a Malaysia hassle-free vacation rental / AirBnB / BnB / homestay management service provider. With Widebed, property investors can now venture into BnB business without taking on the extra works like – key handling, cleaning, revenue optimizing etc.

When you first heard of the term “wide bed”, what comes to your mind? Some people may relate the term Wide Bed to IKEA, since IKEA made some of the best furniture and prices very competitively in the market.

You are not wrong.

Wide Bed is in the vacation home rental business to help property owner solve the hassle of having to deal with customers. WideBed offers some of the best services to property owners at an affordable rate with excellent quality, similar to IKEA.

living room

Wide Bed is in the house renting business in Malaysia.

Wide Bed is in the business of helping property owners to generate short-term rental income with zero stress by taking care of the full process from a team of professional. The team works 27/7 around the clock to ensure the guest will always have the assist whenever they require it. Wide bed is able to help company skyrocket homestay owner’s rental yield in just 3 easy steps.

All the property owner has to do is follow the 3 easy steps to get onboard of Wide Bed. First, you sign up with WideBed with the required details about your property. Widebed will then handle all the house-keeping task for you by doing house rentals. Widebed support owners by helping vacation rental owner to set up and create a profile, communicate with guest, maintenance, help you check-in and check-out the guest, optimise booking as well as cleaning your vacation home.

If you have fully furnished apartments for rent, check out their website to know more how WIDEBED operates, how it can help you as homestay owner earn more income without much hassle. The advantage of using Widebed to sell vacation home is that it is easier for guest to look for homestay or property on a single website. Besides that, Widebed user are reporting to have gained the same amount of income after using Wide Bed but with only 50% occupancy compare to selling the homestay themselves.

WideBed is using Softinn’s cloud reservation to speed up their vacation home rental system and making their transaction more secure. Softinn is in the business of building booking engine for small and medium hotel and homestay. Currently, there are more than 1000 hotel and homestay listing under Softinn.

Some of the listing submitted by Widebed Sdn. Bhd. on LetsGoHoliday.my marketplace

 

**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 Headquartered in Melaka, Malaysia.

 

SME Solution Expo 2016

The SME Solutions Expo 2016 is a trade-show established specifically for the interest of Small and Medium Enterprises (SMEs), allowing both exhibitors and visitors alike to forge new business opportunities. In-line with the objectives of the organizer, Softinn participated in the expo (at Booth 20) to showcase our cloud solution to SME hotels and travel businesses.

Given the current market sentiments in Malaysia, many small businesses owners attended the expo to search for solutions, services and strategic partners to grow their businesses. We were glad to learnt that some of the hotel owners and homestays owners who visited our booth were introduce by our existing users (the power of word of mouth)!

The crowd that showed up at the Expo were quality attendees (mainly business owners) but I was told by some of the exhibitors there were less attendees this year. Not sure why, I would guessed it’s because there’s a few expos running in the subsequent weeks (both before SME Expo 2016 and after).

We had also presented some tips on how to optimize your hotel bookings / homestay bookings on stage on second days of the expo. For those who had missed it, here’s a summary of “How to increase direct bookings”

  • Build a great hotel branded website. Focus on content, photos (at least 8 photos per room type) and include customer reviews.
  • SEO. Make sure your hotel website is ranked No.1 when a guest search your hotel brand on Google. You don’t want to lose your guest who search your brand to OTA.
  • Create “Instagram-able” space at your hotel so your guest would take selfies and share on their social networks.

Below are some of the photos taken at the Expo. Thanks to all of those who showed up at our booth and says ‘Hi’ to us! We met some of you who has been our users for years and have yet to meet the team in-person.