The Hidden Cost of OTAs

As OTAs fight for market share, they are getting increasingly competitive to ensure guests book with them while they’re browsing on the site. In addition to FOMO warnings that hotels are ‘in high demand’ or ‘booked four times in the last 24 hours for your dates,’ another popular tactic is to offer free cancelation.

A new report published by D-Edge states that the average cancelation rate on OTAs was 39.6% in 2018. (Booking Holdings, which owns Booking.com, has the highest cancelation rate at 50% in 2018.) In addition to making it hard to manage inventory, free cancellation makes it harder for hotels to compete, since OTAs typically offer guests the hotel’s non-refundable rate. In other words, for the same price, a guest can book with the OTA and get free cancelation.

Interestingly, the report also notes that cancellations from direct bookings on a property’s website are the lowest at 18.2%. This disparity indicates that guests that book on OTAs are often still researching travel options when they book, but don’t want to lose out on a reasonable rate. When guests book on a hotel’s site, they are more confident in the decision to stay there and less likely to cancel. The hotel, meanwhile, can better manage their own inventory and forecast occupancy.

So how can hotels compete with powerful OTAs? As we continue to advise, hotels need to build more strategies to drive direct bookings or they will forever be at the mercy of OTAs. Since OTAs have far larger marketing budgets and can outspend hotels on AdWords and organic search, we suggest that hotels work with what they have and where they can win—personalized email marketing using their guest database.

Email is such a profitable channel because the only cost involved is the CRM software. You use your own data, your own email and your own marketing acumen to segment your customers and ensure that the message and offer you send is relevant.

Because Revinate doesn’t limit you to specific segments, you can get very creative in your offers, which is essential because OTAs might limit your ability to offer your database a special rate, but you can create unique packages that entice your customers to book directly. For example, you could offer past spa guests 50% off spa services or a free product with service. Golfers might appreciate free lunch with golf. Families might love free breakfast or valet parking during their stay.

And, of course, just because guests booked with an OTA on their first visit, it doesn’t mean that they have any loyalty to the OTA. Train (and retrain) your front desk staff to capture your OTA guests’ emails as they are checking in so you can ensure that the next time they stay with you, they book directly. How can you make this happen? Provide them with great service and let them know that you offer specials for guests that book directly, such as your highest tier wifi for free or the packages described above. These are just ideas to get you started, you know your guests and your property better than anyone and can likely think of some highly enticing deals to drive guests to book directly and compete more effectively with OTAs.