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Online travel agencies (OTAs) have been around for nearly a quarter century, but many hoteliers have yet to master their relationship with this key booking channel — most are thankful for a steady stream of business, but burdened by the high fees associated with the partnership.
The battle for bookings is increasingly about convenience, price, and visibility. OTAs offer convenience and visibility in spades, but without a strategy, the high commissions per stay could hurt your profit margin. Here are the latest strategies for leveraging the power of online distribution for your hotel.
When OTAs first appeared, travelers made reservations by phone, used brick-and-mortar travel agents who had access to the Global Distribution System (GDS) channel, or (gasp) walked in. Not only did OTAs survive the dot-com bubble burst, they flourished as the internet grew and the convenience of online booking and promises of the “best deal” forever altered how people plan trips.
Since then, the GDS channel has become synonymous with business travel bookings. Loyalty programs now fuel direct bookings, and phone reservations … well, do people even call places anymore? The latest evolution: Airbnb. In response, Expedia and Booking.com now also source and list short-term rentals.
Along the way, hotels and OTAs became frenemies. In 2021, hotels reclaimed valuable direct bookings, securing 52% of the online booking market for the first time. Yet, hotels cannot ignore other vendors that still hold a massive part of the pie: US-based OTAs generated more than $100 billion in 2023, driving 21% of all U.S. travel bookings last year.
Hotels often find themselves weighing the pros and cons of working with OTAs. While some unique properties can thrive by cutting out third parties and going direct, most hotels rely on OTAs, especially during the low season.
To make the partnership work for your hotel, focus on the following strategies.
Charging commissions up to 30%, OTAs are one of the most expensive ways to gain business. Before ditching them, determine whether the amount of business you earn through the channel is something you can easily earn back in other ways.
You can do this by assessing if you have a “fair share” of business in your market. If 20% of bookings in your region come from an OTA and that OTA also makes up 20% of your bookings, you have a fair share. Anything less than 20% suggests that you’re missing out on revenue streams; anything more suggests you’re relying too much on OTAs — and that you can attract guests through potentially cheaper channels. Your goal is to create a fair share.
Then, offset commissions by reclaiming (or exceeding) your expenses during a guest’s stay through timely upsells. Off-site OTAs can’t create tailored experiences, but your in-house team can easily offer things like in-room bottles of wine, airport transportation, early check-ins or late check-outs that elevate the experience and drive revenue.
An intuitive upselling tool like Canary Upsells can present relevant add-ons and amenities to guests at several points throughout the stay, helping your team recoup the money spent on the OTA booking while also pleasing guests.
How much OTA business is too much? Consider this: if one of your channels disappears due to downtime or restrictive legislation, are you prepared to weather the storm?
There are two ways to avoid overreliance on any single booking channel:
OTAs excel at marketing because they have vast amounts of customer data, from browsing habits to property preferences. Unfortunately, they rarely share those insights with you, often limiting your view to the essential details needed to confirm a reservation. Sometimes, they even obscure email addresses.
To bridge this gap and build a robust guest database, use your existing technology to uncover valuable, revenue-generating insights. Hotel guest experience platforms like Canary offer tools like Mobile Check-In and Tablet Registration that gather accurate contact information upon arrival. When this data lives in your tech stack, you don’t have to rely on OTAs to engage guests. Instead, you can offer guests acquired through an OTA a special rate for a repeat stay when they book direct.
These days, your competition extends far beyond the other hotels in the area. With large OTAs like Expedia and Booking.com now displaying short-term rental options alongside local hotels, guests can now choose between several types of lodging. Competing with alternative accommodations is no longer optional.
Know your market and research the competition listed on each OTA you partner with. To determine how you’ll differentiate from other lodging options, consider these questions:
Let’s say your research determines that guests in your area have the option to choose between two hotels and one short-term rental. The rental is a studio with a microwave, but the hotel offers rooms with full kitchens. In this instance, the hotel should leverage its unique amenity when pricing these rooms compared to the short-term rental.
OTAs invest heavily in visibility. In 2023, Expedia Group and Booking Holdings spent $6.8 billion and $6.9 billion on marketing, respectively. Competing with their budgets isn't feasible, but you can still stand out.
Your listing is prime real estate on the traveler's map. Here's how to rank high and be seen:
Keep in regular contact with your Market Manager, your contact at the OTA, who can be a good source of information and tips. They regularly communicate with all hotels in their territory, so let them help you leverage the latest strategies to boost ranking.
And of course, ensure your listings are consistent across all channels so guests can make their decisions based on accurate information, no matter which OTA they choose to browse. It's an all-too-common mistake for hotels to advertise a refrigerator and microwave in one listing but not the other — which can confuse guests and drive traffic to your most detailed listing only.
You can always count on guests to compare rates. While OTAs often promise the lowest rates (by mandating hotels cannot offer a lower rate directly), you should aim to keep prices identical across all platforms, ensuring rate parity.
For one, it’s easier to convince guests to book direct when rates are consistent across channels. If the price is the same on every OTA, but booking direct includes a $20 restaurant credit, guests are more likely to choose the direct option. An additional benefit: not everyone uses their gifted credit, which reduces your cost. And those who do will likely spend more than the credit. A win-win.
Achieving rate parity across channels can be challenging due to the need to continually manage inventory, room types, and prices. Allow your channel managers to help you simplify this process.
Reviews drive decision-making — you know this. Thankfully, OTAs collect their own reviews, but that just adds another platform (or four) for you to monitor and respond to feedback. Plus, if you have a large amount of OTA business, you might struggle to generate reviews consistently on other popular review sites.
Here are a few ways to manage your hotel reputation:
By efficiently managing reviews and encouraging cross-platform feedback, you can build a robust online reputation and attract more guests.
Schedule Regular Meetings With Your OTA Contact. Here are topics you should cover when you meet:
Online distribution is a fragmented space, and your success on the platform requires you to pay equal attention to each partner. The more partners you have, the tougher this becomes. With the right hotel management solution, you can build a better system that incorporates all the benefits of your OTA partnership and your direct booking processes in one central location.
Whether you want to upsell your OTA guests, encourage them to book direct for their next stay or prompt them to leave a positive review on your preferred channel, a robust hotel platform can help. Schedule a demo today to learn how Canary’s #1-rated Guest Experience Platform unites these functionalities and more in one place.
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