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OTAs Deliver Business. Can Hoteliers Do Better?

As COVID-19 roiled the globe, hoteliers, like 9/11 and the Global Recession before it, found online travel agencies (OTAs) throwing them a lifeline. Through extensive TV and online advertising, booking engines pull in heaps of business, but at typically high commission costs that eat into profit margins.

According to HotStats data, rooms cost of sales, a metric that measures commissions and reservations expenses and fees, year-to-date 2021 were down 37% to $2.08 on a per-available-room basis compared to the same period a year prior. In Europe, it was a similar trend, with rooms costs of sales at €1.31 year-to-date 2021, a 62.6% decrease over the same period in 2020.

The data show a slightly higher dependency on OTAs and other middle men straight after the pandemic’s outset and lesser reliance the farther removed.

The use of OTAs can be a Faustian bargain for hotels. That’s especially the case now, when total revenue and profit are well off from pre-pandemic levels. As business slowly wakens from hibernation, how should hoteliers address OTAs? According to some, it’s time to beat them at their own game.

Make the Most of Them

Hoteliers should leverage the booking channel strategically, said Sarah Bartlett, SVP of Revenue and Distribution, at asset manager and advisory firm hotelAVE.

They can be used for local, short-term advertising campaigns where “you can control the messaging and delivery with a call to book,” she said. “Post a photo of your pool and say ‘book now’.”

And the performance of those ads needs to be closely monitored, Bartlett said. “Try a new headline or photo and see if the ROI goes up. Those who have good ads invest time and make adjustments.”

She also noted the importance of working with both OTA users and personnel.

“There’s a place on the OTAs for customer reviews of hotels, so maintaining a good review score is important,” Bartlett said. “Evaluate the reviews to see if there are opportunities for training, product or service improvements, and act on them.”

Further, Bartlett advised, “Keep in contact with the OTA market managers. They can coach you on whether your marketing is effective and share trends they see on the horizon, they’re invaluable for perfecting your strategy.”

Adding to the Mix

Next, hoteliers need to look at other ways of driving business, said Michael Doyle, Managing Director and EVP for CHMWarnick, a hotel asset management company and owner advisory service, with its main headquarters just outside Boston.

“Hoteliers need to leverage social-media channels, using Facebook and Instagram not only to create awareness, but also to include links for guests to book stays.”

Additionally, as markets open up, Doyle advised properties to make the most of happenings in their area. “For example, in Chicago, Lollapalooza starts next month. If you’re a hotel there, you want to have a related package on your site, with your own narrative. Send out a press release and even work with the event organizer to secure a link to the hotel and its booking engine on their site.”

Like the use of OTAs, these strategies cost money, but those are dollars with a higher ROI than the cost of doing business with OTAs, Doyle said. “The costs are generally better because you are getting the individual directly to your own website and booking engine.”

He also recommended offering AAA discounts and strategically deploying hotel staff. “We even have workers in the lobby trying to get departing guests to rebook or to get their email to be in touch. The accumulation of many strategies should materialize in the results you want.”

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