SYgle>Industry Information>OTAs build exposure for independents, but at what cost?

OTAs build exposure for independents, but at what cost?

Column: industry Tag: Independent hotels,OTAs,online travel agencies,bookings Published: 2017-07-27 10:51 Source: Author:

The Blue Waters Resort and Spa in Antigua (shown here are the Cove Suites) is one of a growing number of independent hotels that rely more on online travel agencies than proprietary websites for bookings. The hotel is garnering 75% of its bookings through OTAs and wholesalers. (Photo: Blackbird PR)

GLOBAL REPORT—At independent hotels both in the U.S. and abroad, many hoteliers are divided on just how much online travel agencies should be utilized to capture bookings.

At some indie properties, OTAs are a saving grace; at others, they are a necessary—and expensive—evil.

Opinions remain mixed regarding just how much money and manpower independent hotels should devote to developing and marketing their own direct booking engines, and how much business to cede to the OTAs instead. But independent hoteliers do tend to agree that an OTA presence of some type is crucial for both customer convenience and market visibility.

“I think the OTAs are probably better for independent hotels,” said Anna Wells, sales and marketing director at the Blue Waters Resort and Spa in Antigua. “For independent hotels, you’ve got much smaller visibility in the market, and with a small marketing budget, it’s a great way to build the exposure. If you spend enough time working with the (OTAs’) extranets, you can really enhance your business and make sure you’re front-of-mind to the customer.”

Wells said that over the last two years Blue Waters Resort and Spa?has increased its participation in OTAs, particularly on Expedia and Booking.com. Now, 75% of the hotel’s bookings are from OTAs and wholesalers, while just 25% are direct bookings through the hotel. The property is continuing to work on enhancing its own booking engine and other direct sales channels, but at the moment, the OTAs are serving a crucial need: primarily, presenting the Caribbean resort to U.S.-based travelers.

“We’ve seen a massive increase in our bookings, and it’s working with the OTAs,” Wells said. “It’s definitely increased our exposure in the U.S. markets, and I think we’re now seeing a better share of business coming through from the U.S. We can also see definitely a bigger shift to more late bookings coming through, which isn’t always the best thing if you like people to book in advance, but we can fill in gaps when we need to.”

Group bookings, other hang-ups

One noticeable gap OTAs aren’t filling, however, is group business.

Independent hotels seeking a significant amount of group bookings are less inclined to go all-in with OTAs. These types of properties still tend to favor a more multipronged approach, ensuring the hotel is a player on virtually all booking channels, including direct.

“In the independent hotels we currently operate, or have in the past, the group segment is a mission-critical segment, and that requires a very dedicated direct sales-and-marketing effort that the OTAs don’t deliver,” said Cory Chambers, VP and chief revenue officer at Hospitality Ventures Management Group. “If 20% to 40% of our business comes through the group segment, we can’t depend on the OTAs for that.”

Other OTA-related concerns include reduced customer contact/data-mining opportunities and the potential for the OTAs to change their rules of participation over time.

Save here, spend there

Still, there are other ways that working with the OTAs can help an independent hotel.

Aside from the marketing perks of having a presence on a big-name OTA, there’s the major capital investment savings a hotel enjoys when it forgoes building its own direct booking engine. Primarily, hotels that pursue the OTA-heavy route can theoretically skimp on their central reservations system, as well as its integration with property-management systems and revenue-management systems.

However, there are costs associated with both approaches. What an independent hotel saves on its own booking system and in-house marketing might largely be spent on sales commissions to OTAs—generally in the ballpark of 20% or more. This is where some independent hoteliers draw the line, refusing to sell more through OTAs than is absolutely necessary.

“(Relying heavily on OTAs) is the lazy person’s way out of it; (OTAs) don’t care about the bottom line. … Hire a management company and save the 10%,” said Michael Marshall, president and CEO of Marshall Hotels & Resorts. “Are you going to give up primarily all your inventory and pay, on average, 20% in commission? ... That’s a lot of money you’re leaving on the table. If you’re a smaller hotel and you can’t afford to have a salesperson, I could see that. But if you’ve got a decent amount of rooms, I think you’re shooting yourself in the foot.”

Finding the right balance

Hoteliers can attempt to negotiate better rates with the OTAs, but finding the right leverage could prove difficult, Marshall said. He added that he’s had better luck negotiating reduced inventory requirements with OTAs to give his company greater flexibility.

Generally, it’s the hotels that can bring an extensive inventory of properties and rooms to the OTA that get preferential treatment. But property type and market factors also come into play.

“It really depends on how the inventory in your particular market stacks up with what the OTAs have access to,” HVMG’s Chambers said. “If you have a highly desirable independent hotel on a highly desirable street corner in a highly desirable location, whether it’s a resort or suburban, then the OTA’s going to be more interested in negotiating on the margins. The opposite is true where it’s very competitive and they have lots of inventory and there are many options. In those cases, the OTAs may be less inclined to work with you on the margins.”

That’s a large part of why many independent hoteliers continue to employ a diversified sales approach over an OTA-heavy strategy. As they see it, it’s still cheaper to generate their own direct bookings than to pay higher commissions, which could conceivably be raised still higher by the OTAs in the future.

“If you’re doing a TravelClick campaign or something where you’re paying to be higher on certain search engines, and it’s 30 or 40 cents per click, we’d rather do that, because it pushes customers to our website,” said Marshall, who added his company?also invests in search engine optimization to further boost direct bookings.

“There are different companies that we go through that help to keep us out there and at the top of the search engines, but it’s cheaper to pay somebody a couple grand a month than to have somebody taking 20% of your revenue. I just look at the OTA expense, and that’s putting a lot of money out there that you could be realizing if you did your own direct sales effort.”

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