Why using OTAs costs you more than a commission fee.
Many accommodation providers feel it’s hard to compete with Online Travel Agents (OTAs) and other third party agents when it comes to getting bookings.
With OTAs wide reach, offers and clever tactics for tapping into every guest’s fear of missing out, it’s easy for business owners to feel that there’s no other option but to rely on OTAs for their bookings, seeing it as a necessary evil.
BUT what most don’t realise is that using OTAs costs them far more than just a commission fee!
When the majority of your bookings come via OTAs, you are missing out on a MASSIVE opportunity to seriously increase income and profits further.
Relying On OTAs = High Acquisition Costs
OTAs typically charge commissions between 15% and 20% plus tax which means that you have to regularly pay out a HUGE chunk of money to these guys in the form of fees, which all come off your bottom line! Believe me, I know how demoralising this feels!
Relying On OTAs = You Don’t Control The Guest Relationship
When a booking comes via an OTA you’re not in control of the guest relationship – the OTA is. Many OTAs have stopped sending the guest’s email address with the booking which means you cannot contact the guest directly. This prevents you from nurturing guest relationships with pre-stay and post-stay emails that drive guest satisfaction and repeat business.
Relying On OTAs = Lower Booking Values
Many reports show that the average value of an OTA booking is HALF the average value of a direct booking. When a guest books via an OTA, you don’t have the opportunity to maximise those bookings to boost your revenue further. There’s no opportunity to upsell promotional packages or an upgraded room or an extended-stay discount, let alone cross-sell extras that would increase your income and guest loyalty.
Relying On OTAs = High Cancellation Rates
Cancellation rates for OTA bookings average 40%, compared to cancellation rates of around 8% for direct bookings. We all know OTAs actively encourage guests to make a booking early in the booking process by highlighting the “No Cancellation Fees” and flexible nature of most rates available and by also applying FOMO tactics. This results in a high chance of guests cancelling their booking before arrival, meaning you suddenly have empty rooms and a lot less money in the bank!
Relying On OTAs = Lost Bookings
When potential guests are searching for somewhere to stay using OTAs, you don’t have the opportunity to answer any questions or queries that they have, helping to reassure them that your place meets all their requirements and encouraging them over the booking line.
And when you’re not able to provide the information they’re looking for they just look and book elsewhere. You also don’t have the ability to capture a potential guest’s contact details so you can’t follow up or offer an extra incentive that will convince the guest to choose you!
Until next time, remember …
With all this in mind, it makes sense to do EVERYTHING you can to INCREASE DIRECT bookings and REDUCE your dependency on OTAs.
Continually work on improving your marketing strategies and step-up your guest retention techniques because when you do that more and more of your bookings will come direct.