Find Your Market Mix – OTAs vs. Direct

Mark Bedard

The market for online hotel bookings is projected to reach roughly $250B in 2019. With more potential revenue than ever hanging in the balance, many hoteliers continue to struggle in establishing the right mix of online booking channels that not only meet the growing demand for accommodations but also maximize profits. On one side, you have OTAs who are vital distribution partners to liquidate unsold inventory and put heads in beds. On the other side, you have the hotel’s direct channel, Brand.com, which is the most profitable for online booking. Establishing a better balance between bookings from third party distributors and direct bookings can help modern hoteliers maximize revenue and take full advantage of projected market growth.

OTAs Dominate the Booking Landscape

Some large chains have made significant strides in balancing direct versus OTA bookings in recent years. For example, Hilton launched new loyalty programs and book direct campaigns starting with its “Stop clicking around” campaign in 2016. However, OTAs continue their dominance in the overall market, with a nearly 2-1 share of bookings versus direct channels.

Source: Phocuswright

 

There are several reasons why OTAs continue to dominate the online booking landscape. They are nimble, well-armed with technology, and highly knowledgeable of online shopping tactics and strategies. They’re also leveraging their own loyalty programs to keep potential guests shopping on their channels. Thus, the 2-1 ratio of OTA vs. direct bookings has remained consistent in recent years — despite the healthy Compound Annual Growth Rate (CAGR) achieved by direct booking channels.

As shown above, the gap between both channels continues to widen annually. If these growth rates hold true, by 2025 the numbers could look something like this.

When you consider that hoteliers pay commissions to OTAs with each booking (assuming a standard 15% commission rate), you’d realize that every one of those bookings would amount to profits lost by hotels that OTAs will most assuredly reinvest in new technology, new tactics, and new strategies to maintain their competitive edge.

Balance Begins in Two Areas

To bring greater balance back to the online booking equation, there are two main areas hoteliers should focus to improve the performance of direct channels:

1.      Drive more traffic to your booking engine.

While this seems straightforward, remember that OTAs want to maintain the flow of shoppers to their channels as well. Luckily, there are several levers hoteliers can pull to shift shoppers to their direct channel. Combating issues with rate parity, employing a robust metasearch strategy, developing sophisticated keyword search and other SEO strategies, and launching omnichannel campaigns are all great ways to shift more potential guests to Brand.com.

2.      Maximize conversions on your booking engine.

Once you have a greater volume of shoppers in your direct ecosystem, your work isn’t over. Research shows that for every 100 visitors to Brand.com, on average only 2 will complete a booking. Increase this 2% conversion rate by delivering a more seamless user experience, engaging users with special offers or low inventory warnings, and remarketing to potential guests who have abandoned the booking process with personalized follow-up messages and offers.

Create Your Own Strategy

Establish a better market mix by creating a strategy that fits your unique needs and capabilities. To support hoteliers in their efforts to improve the performance of direct channels, we’ve developed a new eBook, “The Direct Bookings Playbook: Direct Booking Challenges, Success Drivers, and Variables”. It offers detailed advice on different ways to drive traffic to your booking engine and increase conversions. Assess the viability of the different tactics contained in the eBook to create a unique book direct strategy that meets your business goals, capabilities, and budget, and you’ll be well on your way to bringing greater channel balance back to your online bookings.

Click here to download your copy of The Direct Bookings Playbook.Download eBook Now