Hoteliers Big Challenge begets a No-Brainer Solution

Last year, on separate calls, a number of hoteliers, who happen to also be clients, shared with us a concern they all had in common, and taking their word for it, many more hoteliers share:

The persistent decrease in margins on their online channel.

One thing led to another as it often does, and before we knew it,  a Challenge followed:

- Develop a solution that can help

ONE: Increase Direct Bookings on our hotel’s website,

TWO: Reduce commission payouts to OTAs in the process.

This challenge put us on fact-finding journey I thought was worth sharing, because my team and I learned some interesting facts about the hotel online booking business, facts many hoteliers I spoke with, have not known prior to our conversation. So here we go,

We learned the cup is half Empty:

A. OTA Commissions keep Rising

The hospitality industry is experiencing shrinking margins on the online channel, due to the persisting increase in OTA commissions.

B. OTAs are the 800Lbs Gorillas in the hospitality online booking space

Increasing dominance of the OTA’s in the online booking space, as a result of mergers, consolidations and steady increase in advertising spend:

Expedia 2014 marketing  spend was $2.8 Billion [Tnooz], up from $2.2 Billion in 2013 [Statista]. Booking.com’s parent company Priceline spent nearly $2.6 Billion in 2014 [Skift] up $1.8 Billion in 2013 [Bloomberg].

We learned it is half Full too:

A. OTAs are introducing your hotel to online shoppers:

Many online shoppers learn about your hotel for the 1st time on an OTA like Expedia, Booking.com etc.

B. Most will visit your website:

52% of online shoppers introduced to your hotel on an OTA, will visit a hotel website [Google research]

C. Vast majority of online shoppers rely on Price as main decision factor 

85% of online shoppers admit price is the main factor influencing their decision on which hotel to pick.[Google research]

Armed with the knowledge that at 85%, Price is the most important decision factor in online hotel bookings we proceeded to check what the leading OTAs have to say about this topic:

Booking.com: “Hotels: Booking.com – Lowest Price Guarantee‎” - WELL THAT’S A BLUFF!

Expedia:“Secure incredible value with Expedia’s Best Price Guarantee” - THAT’S ANOTHER BLUFF!

With Rate Parity contingencies enforced by OTAs, prices on OTAs and Hotel websites should be identical. If that is the case, as demanded by OTAs, why do OTAs claim to offer “Lowest Price Guarantee‎”? and  “Best Price Guarantee”? Because they feel they need to Bluff to convince online shoppers to choose them, a resellers, over buying from the source = the hotel website.

Next step was a No-Brainer:

We designed our solution, BookingDirection, providing online shoppers the price transparency they need to support their buying process, right on the hotel website, where buying decisions are being made, showing online shoppers the Hotel’s price, side-by-side with the OTAs prices.

We launched Q1 2015 and are busy helping hoteliers increase Direct Bookings on their websites. Due to the overwhelming demand and positive response, we have a small backlog.  >>> Add your hotel to the implementation queue and we’ll get back to when your turn is up.

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Images by: Stròlic Furlàn – Davide Gabino    Loren Kerns 

Hoteliers are calling out the OTAs ‘Best Price’ Bluff

Top 2 value propositions OTAs have been selling to shoppers are :

1. OTAs offer most variety and options….maybe
2. OTAs offer Best Price….. now that’s a Bluff!

Shoppers, at least for the most part, are NOT aware of Rate parity provisions imposed by OTAs on hoteliers, putting hotels prices across channels, from the hotel’s own website to the OTAs websites in parity, offering hotel accommodation at the Same exact Rate = Price.

Some say Rate parity helps hotels avoid confusion over price points across different distribution channels. That might have been a positive point IF the cost of securing bookings across these channels was similar.

Problem is, with OTAs commissions ranging from 15-22%, their impact on revenue margins makes the OTAs distribution channels very expensive.

Rate parity is indeed an obstacle for a hotel that wants to differentiate between distribution channels, for example favoring a particular channel likeDirect Bookings on it’s own website, training shoppers to go there for the best price.

It is not a surprise that one of the hottest topics for Hotel Revenue managers now is, Increasing Direct Bookings on their hotel websites, and relying less on OTA bookings to improve revenue margins.

2 Important facts we know about online Shoppers for hotel accommodations:

A. Price is King: With 85% of travelers surveyed saying that PRICE is the most important factor when determining where to book. [according to a Google research]

B. They [Online Shoppers] are on YOUR website: 52% of shoppers will visit your hotel’s website after seeing you on an OTA [according to a Google research]

How do we make A+B above work for hoteliers: Call the OTAs Best Price Bluff!
We will show those 52% of shoppers that saw your hotel on the OTA a price comparison, proving rates are the same or higher on OTAs [remember Price Parity], removing their motivation to return to the OTAs to book with no savings. Why buy from a distributor or a re-seller when you can buy from the source, when you’re right there, on the hotel’s website, especially if the price is the same?

Solution:
BookingDirection’s technology works on your Hotel’s website to increase direct bookings by providing online shoppers the OTA web experience and price transparency they have grown to like — e.g. showing them “all” the prices in the marketplace, and proving that the hotel has the lowest price. In so doing, the need to comparison shop is eliminated.

Bottom line, EARN MORE by, increasing the percentage of website shoppers booking directly with you and reduce commission payout to OTA’s.

We’re in closed beta, helping hoteliers to get more direct bookings. Join the waiting list and we’ll contact you once additional hoteliers are added.

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Image by: Play Among Friends Paf

OTAs, Friend or Foe? How are They Killing your Direct bookings?

OTAs are dominating online travel booking, in many cases accounting for 76% of hotel bookings online and in some cases a lot more.

In this reality, many hotels rely on OTAs for booking rooms, which raises 2 questions:

What is the cost?
Is there alternative?

-Before answering these questions, for those who don’t know, let’s take a closer look at a some OTA facts:

Booking.com, owned and operated by US based Priceline. 
Booking.com offers online accommodation booking. It claims to have over 540,000 properties globally under contract and that it deals with more than 700,000 room nights reservations per day. In 2013, it accounted for more than two thirds of Priceline’s revenue. Booking.com is available in more than 41 languages [Wikipedia]
Some more figures:
Booking.com’s parent Priceline.com, with a US$ 52.79 Billion market cap, has an estimated annual revenue of US $8.5 Billion for 2014 [businessweek.com]
Expedia: with a US$ 10.56 Billion market cap, has an estimated Estimated annual revenue of US $5.7 Billion for 2014 [businessweek.com]
Orbitz, with a US$ 1.01 Billion market cap, has Estimated Estimated annual revenue of US $937 Million for 2014 [businessweek.com]

-Looking at these numbers, it is clear OTAs are highly specialized and effective online booking machines, backed by the financial strength a few hotels posses. Competing head to head with them on online traffic, at least in most cases, would be in the worst case scenario a suicide, otherwise a sum zero game.

Industry Facts:

Most shoppers BEGIN their shopping for hotel accommodations at the OTAs, who happen to control a substantial percentage of travel and hotel traffic online [=fill top search results] At 85%, PRICE is the most important factor in selecting a hotel.[according to a Google research] 76% of online bookings happen through OTAs leaving only 24% who book directly. [according to a wihp reserch] 52% of shoppers VISIT the Hotel’s website as part of their research, PRIOR to booking [according to a Google research]

Looking at both the OTAs and Industry facts, brings me back to the 2 questions at the top of this post,

Q: What is the cost?

A: OTA’s charge between 15-22% (And sometimes even more) commission for every booking, that translates to a big monthly check hotels cut and send to the likes of Booking.com, Expedia, Orbitz etc.

Q: Is there an alternative? 
A: Yes, Get More Direct Bookings
76% of online bookings happen through OTAs however 52% of shoppers will visit your hotel’s website after seeing you on an OTA and before making their reservation elsewhere. Why not stop them on your website and make them buy directly from you? Why pay commissions to OTAs for indirect booking?

Solution:
BookingDirection’s technology works on your Hotel’s website to increase direct bookings by providing online shoppers the OTA web experience and price transparency they have grown to like — e.g. showing them “all” the prices in the marketplace, and proving that the hotel has the lowest price. In so doing, the need to comparison shop is eliminated.

Bottom line, EARN MORE by, increasing the percentage of website shoppers booking directly with you and reduce commission payout to OTA’s.

We’re in closed beta, helping hoteliers to get more direct bookings. Join the waiting list and we’ll contact you once additional hoteliers are added.

Image by: haley7