How to ease your OTA dependency

Hotelmarketing.com recently published a very good article by Daniel Edward Craig. I am republishing it here on his behalf as this is information that many hoteliers should have. I have been doing these steps with my hotels for a while with lots of success.

A Ten-Step Program for Easing Your Hotel’s OTA Dependency

By Daniel Edward Craig

These days, bashing online travel agencies has become a popular sport. The likes of Expedia, Travelocity and Priceline are being blamed for commoditizing hotels, for decimating rates, and for training travelers to demand deep discounts. We can probably find a way to blame them for that oil spill in the Gulf of Mexico too.

Not that OTAs need defending, but the reality is, we as hoteliers share the blame. It’s our signature on OTA agreements. We give them access to inventory at heavily discounted rates. And we’ve taught travelers to look for the best deals on OTA sites.

Case in point: While reserving a hotel in Chicago last month, I found six different rates for the same room. The lowest came from Expedia at $180. Inconceivably, the highest rate came from the hotel’s in-house reservations department at $229. Such rate disparity is rampant.

What started as casual use has become an unhealthy addiction. Meanwhile, while hotels are staggering toward recovery, the OTAs are boasting enormous growth. It’s time to take back some of the control we relinquished during desperate times. To that end, here’s a ten-step program for easing your hotel’s OTA dependency.

1. Admit you have a problem. The OTAs are not the cause of the discounting problem, but they are enablers and your competitor hotels are codependents. By advertising heavily that they offer deeply discounted rates, OTAs have contributed to the firesale mentality among travelers. Hotels have exacerbated the problem by being always on sale, by offering discount rates on discount rates, and by treating all inventory as distressed inventory.

2. Do the math. Yes, OTAs can move a lot of inventory, but at what cost? The terms of OTA agreements vary, but typical commissions range between 15% and 25%, with big-box chains paying the least and small independents the most. At $200 per night for a three-night stay, an independent pays $150 in commissions. Compare that to the low-to-zero costs of direct bookings. How could you use the difference to attract more lucrative direct bookings?

3. Don’t overestimate the billboard effect. No question, OTA business is an important part of the market mix. As Mike Nelson, president of Partners Services at Orbitz, explained on Tnooz.com, “In any economic climate, online travel companies are a strategic resource for hotels that want to stimulate demand, access a global distribution platform and benefit from vast marketing and promotional investments.” But to rank high on OTAs you must offer deep discounts. As powerful as the “billboard effect” is the “OTA effect” of training travelers to book via third parties.

4. Make direct the best option. Travelers should get the best deals by booking direct, period. Honor your rate parity agreements, but implement a best rate guarantee and clearly state the advantages of booking direct, like Marriott’s Look No Further™ promise. As an added incentive, offer value-adds not available via non-direct booking methods.

5. Be strategic. Instead of discounting across the board, forecast demand in each market segment and develop separate strategies. Reward travelers for advance bookings and build rate on that base rather than offering the best deals on last-minute bookings. In aninterview with EyeforTravel, Kurien Jacob of Highgate Hotels argued that opaque sites “should be used only if the hotel needs to protect its overall retail rate to maintain brand image, prevent group room dilution or maintain corporate negotiated rate protection.”

6. Use social media to connect with travelers. Private sales via members-only sites like Jetsetter and Vacationist allow you to bypass OTA rate parity requirements, but the terms can be even less favorable than those offered by OTAs. Use them sparingly to create base and sell off distressed inventory. Focus your efforts on social media and reputation management to build your email database and Facebook and Twitter followers and save your best deals for them.

7. OTAs are partners and competitors. OTAs don’t care which hotels travelers book as long as they book through them. Traditional travel agents charge 10% commission and provide personalized service in bricks-and-mortar offices. How can OTAs justify such high commissions, and where does the money go? Seen the TV ads, the cost-per-click ads, the print ads and banners? They’re driving up your advertising costs and luring travelers from direct channels. Goldman Sachs estimates that OTAs generate 8% to 10% of Google’s gross revenue worldwide.

8. Leverage your power. Competition among OTAs is fierce, and they need access to your inventory at competitive rates to compete. In an interview with the Chicago Tribune, Priceline CEO Jeffrey Boyd said, “You’ve got to have the best rate, and the hotel has to be available when the customer is searching on it.” Leverage this power by negotiating the terms right for you. According to revenue management consultant Jil Larson, that means “either block space or last room availability but not both.” If the OTA won’t come to terms, find one that will.

9. Loyalty means loyalty. Loyalty program members who book via OTAs must understand that they’ve forfeited their perks to the OTA in the form of a hefty commission. Stipulate that members must book direct to qualify for privileges. This is especially true of opaque sites; booking blind isn’t brand loyalty.

10. Make the booking experience seamless. OTAs are brilliant marketers and are constantly improving the consumer experience. How does your booking experience measure up? Is your website mobile compatible? Make voice reservations accessible, efficient and personal – an area where OTAs can’t compete. And invest in a two-way PMS interface to decrease time spent managing rates and inventory and free up time for strategizing.

As for that hotel in Chicago, I asked them to match the Expedia rate. They agreed, so like a good hotelier I booked direct. Don’t make your guests jump through the same hoops.

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French hotels sue Expedia

The french hotel’s union Synhorcat filed a suit against Expedia, Hotels.com and Tripadvisor on the 15th April. The main points of the suit are:

1. When clicking on a hotel’s photo in Tripadvisor the browser is immediately directed to Expedia whether the hotel has signed with Expedia or not. The hoteliers argue that it should link directly to the official website of the hotel.

2. Expedia sometimes promotes wild discounts such as 75% off without agreement from the hoteliers. And if there is no availability on a hotel. Expedia will still promote the hotel but direct the browser to another hotel thus using the hotel’s popularity to sell other properties.

3. Hotels.com seemingly dissuades users to book directly at the hotel’s website.

These are some of the main points I could understand from the article (see the original article in french here: http://www.zdnet.fr/actualites/internet/0,39020774,39750958,00.htm).

If this case will win or not is uncertain however a few points are clear. Expedia’s model of taking 25% of a hotel’s revenues isn’t appreciated much longer and despite their size, more and more hoteliers aren’t willing to give that type of money to a third party.

Secondly, Tripadvisor will need to open up and become a fully fledged social media. The fact that it is owned by Expedia isn’t going to do Expedia a favour anymore as it may just soon be faced with an anti-trust problem. It is only logical that Tripadvisor favours hotel’s official website. There was a step in that direction this year with the sale to hoteliers of a link to the official website.

Thirdly and most impotantly, websites like Expedia, Booking.com and others all the third party booking systems have a limited future unless they really start to help hoteliers. At the end of the day all they are doing it offer information to the internet users, but charging a huge price for it. Shouldn’t the information be free? Google seems to be making an entry into the field with rates noted on the Google Maps.

Expedia already makes no money on flight tickets… so their only real solution now is going to be to work out a way to give some real added value to hoteliers.

When I built WIHP there was one thing that I knew I had to do from day one and that was HELP hotel’s increase their profits. It has worked wonders so far making us the incontestable leaders in the Paris market. Let’s see how this pans out.

Launching Lookotel.com

Carte invitation Lookotel.com

Carte invitation Lookotel.com

On the 17th November we are happy to launch Lookotel.com, if you are in Paris that evening or can come – then call us and reserve. It’s free and it’s going to be fun.

We’ll be going over what we are doing with Lookotel.com to give hoteliers a fighting chance in the current internet reservation space.

It couldn’t be more appropriate, with the recent Expedia news.

Vincent and Serge Ramelli, and the entire WIHP team are happy to invite you to the launch party of Lookotel.com

Come and discover around a cocktail how Lookotel is changing the online reservations in an innovating way.

RSVP: +33 1 53 46 10 60

If you are a hotelier, you can sign up on lookotel.com right here: http://www.lookotel.com/adminHotel

A small revolution in the Hotel Industry?

If you’ve been following the hotel industry news lately you may have noticed the little feud going between Choice Hotels and Expedia. If not, here’s a synopsis. Choice and Expedia couldn’t come to an agreement on the terms and as a result Choice pulled out all of it’s hotels from the Expedia website.

There’s a lot more in this article in Hotels Mag http://www.hotelsmag.com/TalkBack/Comments?article_id=6702984&articleid=ca6702984&talk_back_header_id=6630527

Ask an independent hotel what he thinks about OTAs (Online Travel Agents) and you should be happy if he doesn’t spit at you.

The point is an OTA takes about 25 to 30 percent of the income from a hotel, and once they have done that they demand a certain number of rooms to be allocated to them permanently, whether they fill those rooms or not (at the hotel’s cost) and then they demand that nobody be given better prices than them.

Sound crazy? Well it’s the hotel industry.

Now if you wonder why hotel prices have gone up about 300 percent over the last 15 years then start looking in that direction. Because 30 percent mark-up is a lot!

So back in the end of the 1990s we started making websites for independent hotels to give them a fighting chance on the online world. This worked quite well and hotels have managed to give their direct customers a lower price.

This year we decided to take this one step further, we created lookotel.com it’s all their websites combined into one site where travelers can find better prices and hoteliers can sell without the 30% markup that OTAs demand.

So is a revolution started in the hotel industry? Well, we think it started long time ago but now the chains have realized that it’s gone too far and they are getting on the bandwagon.

It’s only a matter of time before they will need to either change their ways or hotels will find other solutions.

And go check out http://www.lookotel.com, if you’re a hotelier try it out and log your hotel. If you’re a user, book your hotel and compare prices. You could see a difference (if some major OTA hasn’t clamped down on the hotels yet).

Feel free to comment.