very common complaint among hoteliers and revenue managers is the high commission rates charged by the OTAs. Many hoteliers feel that they are being ripped off and that the OTAs are “stealing” their business. I’m here today to tell you that, while their commission rates can be high, having your property listed on the top OTAs is actually one of the best things that hoteliers can do for their business and revenues.
Here’s Why… The Billboard Effect
According to a 2009 report done by Cornell University’s Center for Hospitality Research, the billboard effect is “a boost in reservations through the hotel’s own distribution channels (including its website), due to the hotel’s being listed on the OTA website.” While it is a term that is bandied about by many hospitality marketers, I believe that the value of the billboard effect is often underestimated.
The truth is that the exposure that is created by being listed on OTAs can have a HUGE impact on the number of bookings generated through a property’s non-OTA sales channels. In the same study, Cornell Professor Chris Anderson found that a hotel’s direct bookings increased from 7.5 to 26% when listed on Expedia, perfectly illustrating the impact that the billboard effect has on a property’s direct bookings.
Today, many customers use OTAs as a search engine to find out what properties are available in a destination, the average prices, etc. and then continue their research on a property’s own website. Independent properties will never have the marketing dollars necessary to secure the same level of visibility to potential customers that flagged properties do, so it is especially important that they use the most effective marketing tools available. The top OTAs spend millions of dollars on advertising every singe month and through that advertising, they are increasing your property’s visibility to potential guests. And the best part – you don’t have to pay for all of this free marketing until you generate a booking from the OTAs – even though you may be getting many more direct bookings because the OTA listing. Sounds like a win/win situation for everyone.
So now that you’re rushing to call your OTA market manager to get your property listed, let’s look at some tips on how to maximize the billboard effect on OTAs in order to generate as many direct bookings as possible.
Content is King
If the OTA is your advertising platform, then your listing is your ad. When you think about it this way, you can see that it’s important to plan your listing very strategically to make your ad as effective and engaging as possible. The first part of an effective ad (or in this case, OTA listing) is the content. Besides the pictures, this is the part of your property’s listing that will get the most scrutiny. The words that you choose to describe your property and the info that you include in your listing can make the difference between a customer booking with you or moving on to the next listing.
First, figure out what specific info you would like to convey to potential guests. Think about what will make your property most attractive; is it your location, your high-end amenities, personal service or great rates? What is included in the room rate? What additional fees and/or charges are applied to bookings at your property? What is your cancellation policy? All of these details should be very clearly explained in your OTA listing.
Some Important Tips to Remember:
Focus on value - One of the most important factors for consumers when picking a hotel room is value so make sure that your listing shows how you are providing as much value for their money as possible. If you are offering a special package or anything complimentary, make sure that this message is communicated very clearly in the listing copy.
Create an emotional connection - One of the most effective ways to secure bookings with potential customers is to create an emotional connection. To do so, your OTA listing must do everything possible to make the potential guest imagine him or herself at your property. Use enticing adjectives to describe your property, your location and the destination. Include info about nearby tourist attractions that might appeal to potential guests. If you’re located near attractions that they want to see, they will be more likely to want to book with you because it will be convenient. Overall, you should always be communicating what makes your property the best choice for potential guests.
If you have effectively communicated your property’s appeal to potential customers, most will go to your own website to do more research on the property before booking. This is the perfect time to convert this potential OTA sale into a direct sale.
Incentivize Potential Guests to Book Directly
By offering a special rate or package for customers that book directly, you can encourage potential guests to use channels that won’t cost you a hefty commission. Consider offering a value-add like free breakfast, parking or airport transportation to all customers who book directly – either through your own website or the phone. Make this message very prominent on your home page and ensure that it is mentioned on all of the main pages of your site, along with a link to your online booking engine and a phone number for your reservations team.
Another good incentive for guests to book directly is pricing. While you may not be able to offer lower rates through your own website (because of rate parity agreements), it is important that your OTA rate is the same as your direct rate. Many hotels make the mistake of offering better prices through the OTAs and doing so makes it highly unlikely that the customer will book direct.
When you do have a guest call to see if you can beat/match an OTA rate, always give them the rate so that they will book immediately over the phone with your reservation agent. It is completely counterintuitive not to give your reservations team the ability to match (or even beat) OTA rates to encourage direct booking because you are earning an extra 15-35% by allowing them to book directly at the same OTA rate (over what you would earn by selling the same room through the OTA).
The billboard effect is most effective for properties that have a higher page position (not based on the default search results – it’s important to be on the first or second page of the results after filtering for price, as that is how most consumers search). Most consumers will consider the properties that are on the first, second and maybe third page of search results; therefore, your rates must be competitive.
But that doesn’t mean that you should be rashly discounting in order to be on the first page. In actuality, the top of the second page is the page positioning that earns the most revenue from each booking. In general, consumers associate higher prices with higher quality because we know that, most of the time, we get what we pay for. By positioning yourself as the cheapest property, many customers will automatically assume that they won’t be getting as good an experience staying at your property (even if you are just slashing prices to move inventory). Remember customers don’t know what your property is actually “worth”; they only know the rate that your property is currently listed at. So most customers will look through two or three pages of results and will choose a property that is somewhere in the middle (in terms of price) and that offers a good selection of amenities and value for their money. That place is most often found on the top of the second page so hotels should be using a sophisticated RMS that can continuously calculate and update rates to keep your OTA listing in this prime position on OTA search results, even as market conditions change.
Having a strong, appealing OTA listing is the first step in leveraging the billboard effect to increase your direct bookings. Focus on steering potential customers to your own website and make it advantageous for them to book direct – and you’ll be able to put the money that you would have spent on OTA commissions right back into your wallet.