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OTAs or hotel direct bookings: How to optimize for ROI

There’s a battle raging. And it’s raged for decades.

Ever since the introduction of online travel agencies (OTAs) in the ‘90s, hoteliers have struggled to achieve the optimal distribution mix between OTAs and hotel direct bookings. Some even perfected it.

But then the pandemic happened. And everything changed.

In the wake of it, ongoing staffing shortages, volatile inflation rates, and crumbling third-party cookies are wreaking havoc on the travel industry. These factors, among others, have significantly impacted the age-old battle, creating a dilemma for hoteliers on how to best balance both forms of booking.

Here we take an in-depth look at both OTAs and direct bookings – examining their pros and cons in light of today’s marketplace – to help you to make the best decision for your business.

What you will see here

What are hotel direct bookings?

Direct bookings are simply hotel reservations a guest makes directly with a hotel, without using an OTA or any other third-party booking platform. They’re typically made through your hotel website, email, social media, walk-ins, and via your reservations department or hotel call center.

What are OTAs?

OTAs are online travel agency marketplaces that act as middlemen for hotels, airlines, car rental agencies, and more. The 3 main industry players are: Booking Holdings (booking.com), Expedia Group, and HRS. They make it easy for travelers to research and view multiple hotel options, and compare prices. When guests book a  hotel through an OTA, hoteliers pay them a commission that often runs as high as 30%.

The state of OTAs and direct bookings

The pandemic transformed the booking behavior of today’s travelers. Prior to the pandemic, OTAs held the majority of the market share for bookings. But a recent study shows things have shifted. While hotels’ reliance on OTA bookings has remained relatively flat since 2019, hotel direct bookings have increased 55% – an 8-point increase from 2019.

Travelers are more prone to book directly because they recognize they can get discounts, perks, and complimentary offerings that make it a better deal. In addition, they appreciate the ability to communicate directly with a hotel, getting reassurance that their personal needs and preferences are being taken into account.

A recent American Hotel & Lodging Association survey reports 97% hoteliers are understaffed. Yet, the surge in travel continues to grow.

With rising wages and staffing issues, hotels often struggle to hire and train the staff they need to effectively manage the increased number of direct bookings, while still delivering an elevated, personalized experience to each guest.

The key to solving this dilemma lies in technology and automation.

With the right technology, you gain greater control over your first-party guest data, helping you more efficiently and effectively serve guests. It also simplifies marketing efforts that drive those lucrative hotel direct bookings. Modern tools allow you to segment guests based on specific criteria, such as demographics, location, and/or purpose of stay. So, you can effortlessly automate customized campaigns and upsells to further grow direct revenue,

In addition, advanced communication solutions integrate with your CRM, helping you keep conversations personalized. It lets staff maintain a single flow of communication with guests as interactions move from email, to text, to voice.

Which booking channel is better for hotels?

OTAs and hotel direct bookings share a similar goal: putting more heads in your beds. However, they accomplish this goal in very different ways, and with very different impacts on your profitability.

OTA benefits

  • Expands audience reach to generate bookings you may not obtain otherwise
  • Acts as an online brochure for your property
  • Optimized for mobile devices and helps you accept bookings around-the-clock

OTA drawbacks

  • High commission rates, often reaching up to 30%
  • Undesirable discounts hotels wouldn’t otherwise voluntarily offer
  • Pressure to spend money for better OTA rankings instead of investing in more profitable direct channels
  • Hotels are unable to build direct relationships with guests because OTAs hide guests’ personal information

Hotel direct booking benefits

  • Bring in more profit without any commissions
    • According to STR, hotels spend 40% of their revenue on average on marketing and distribution expenses to attract, acquire, and retain guests. Reducing this is pure profit gained to your bottom line.
  • Provide holistic view of your guests’ data and built-in aftermarket support
  • Direct communication with guests makes it easier to personalize stays, build relationships, cultivate loyalty, and facilitate omni-channel activation
  • More opportunities to upsell and highlight services and amenities
  • Access to first-party data helps hotels effectively nurture relationships and earn repeat business through customized marketing campaigns

Hotel direct booking drawbacks

  • There really aren’t any!

Direct booking is the better choice

Hotel direct bookings and OTAs both help drive revenue and allow guests to make reservations. However, direct bookings are without a doubt more beneficial for your business. They offer increased revenue opportunities, and easy access to the treasure trove of customer data you can use for future marketing efforts and to enhance guest satisfaction.

How to use OTAs to leverage direct bookings

Despite the conclusion that direct bookings are the best choice for hotels, OTAs aren’t going anywhere soon. So, how can you use them to your advantage?

Leverage the “Billboard” effect

The extensive advertising budgets of OTAs provide hotels with a powerful billboard effect, letting you reach potential guests you otherwise wouldn’t. This is a huge opportunity you don’t want to miss. Treat OTAs as an extension of your brand by optimizing your OTA listings with high-quality photos, detailed descriptions, and by responding to guest reviews.

However, once you connect with those guests, use technology to capture crucial guest data to fuel future marketing initiatives that encourage guests to book directly next time.

How Revinate can help you boost your hotel direct bookings

Revinate offers a hospitality-specific data platform and guest communication solutions to help you capture and make the most of your first-party data. Our technology collects, deduplicates, and cleanses data in real-time, ensuring you always work with the most accurate information. You can easily segment your guests at a granular level, empowering customized communication and newsletter campaigns that help significantly boost your direct revenue. Automated tools bring you higher conversion rates. And the icing on the cake, Revinate solutions keep you compliant with the latest international data privacy regulations.

Let’s take a look at a few examples of how Revinate solutions help hotels connect with guests and grow hotel direct bookings.

  • Paradise Point Resort & Spa, a luxury resort in San Diego, used Revinate’s Reservation Sales, RezForce, Shopping Cart Abandonment, and Guest Feedback solutions to reduce reliance on OTAs, and increased direct revenue $2.5M in 2022.
  • The UK’s Billesley Manor Hotel & Spa also found hotel direct booking success through Revinate solutions, increasing direct bookings by 77% YoY and achieving a 198% increase in revenue.
  • The Other House used Revinate Marketing to create a targeted newsletter campaign for April 2023. They achieved an impressive 50% open rate, and drove 425+ room nights in hotel direct bookings.

Direct revenue leads to better profitability

It’s clear that driving more bookings via your hotel’s direct channels helps you increase your margins and positively impacts your profitability. At the same time, you have more control over your guest data, helping you boost loyalty and lifetime value.

So, are you inspired to start increasing your own direct revenue? Learn how you can drive hotel direct bookings with Revinate. Get a demo now.

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