The Billboard Effect: What should hoteliers do about Online Travel Agents?

Posted on by Alex Tkacovs

Online Travel Agents (OTAs) like Booking.com are often seen as the bogeymen of the industry by hoteliers due to their outsized commissions, huge marketing budgets, and sticky customer loyalty programmes.

But we have discovered canny hotel owners can turn the power wielded by OTAs to their own advantage.

The Hoteliers’ Dilemma

Today 35% of all hotel bookings are made online, and a growing proportion of these are made through OTAs.

OTAs are popular with travellers because they provide the ability to compare prices, packages and user reviews to find the best deals available – all in one place.

Individual hoteliers struggle to compete with OTA marketing budgets, technological advances, and sophisticated loyalty programmes.

Expedia Group (which also owns of Hotels.com, Trivago) and Priceline (owner of Booking,com, Agoda and Kayak), by way of example, together spend a staggering $6.4bn on advertising.

With OTA commissions as high as 20% many hoteliers are understandably working hard to encourage guests to book direct.

To try and achieve this goal hotel groups are pushing their own loyalty programme and smaller hotels are proactively presenting potential guests with lower rates, free add-ons, and better packages when they book direct.

Some hotels are even considering withdrawing from OTAs completely.

But a recent report by the European Travel Technology Services Association (ETTSA) suggests they should think twice before doing so.

This is because many travellers use OTAs to discover the hotel of their choice – and then go on to book direct.

This ‘billboard effect’ – where OTAs help travellers discover a hotel – can drive significant revenue hoteliers would otherwise miss out on.

The Billboard Effect

An estimated three-quarters of travellers who make reservations with a hotel directly visit an OTA first. In fact, research shows that consumers visit OTAs not once but an average of 7.2 times before booking directly.

The billboard effect enables hotels to increase their visibility and reach a wider audience than would otherwise be possible.

And the results are extraordinary. In a recent study by Cornell University it was found that hotels with an OTA listing increased direct bookings by 5% to 35%.

But what happens if hotels do go ahead pull the plug on OTAs?

One obvious consequence of losing visibility in the OTAs is that hotels must find new ways to reach prospective guests – and invest in search engine optimisation (SEO), Google Ads, and other forms of marketing.

ETTSA estimates that the increase in direct marketing spend required to make up for losing the billboard effect provided by OTAs wipes out any commission savings – and could leave hotels worse off than before.

How To Drive More Direct Bookings Using OTAs

Having a listing on the main OTAs is important but not enough.

First and foremost, hoteliers must look at their OTA listings and think about how best to optimise them for the best results. This is all about managing expectations.

Here are some questions to consider:

  • Are your OTA photos good quality?
  • Do they showcase your rooms, space and venue accurately?
  • Are the descriptions, links and prices accurate and kept up to date?
  • Do you respond to reviews personally and promptly?
  • Do your operational systems ensure there are no double bookings or other complications across your OTA profiles?

By addressing these questions you will be able to effectively improve your local ranking and indirect bookings. If there are problems, however, they’ll quickly become evident in your OTA ratings and in your reviews.

Customers will always share their experiences, good or bad. Your customers will give you plenty of actionable data. This data will help you address specific problems, reviews will often provide suggestions for improvement and tell you where you’ve done well. It’s a front-line gold mine of customer-centric data.

Responding to reviews thoughtfully will show potential guests that you are more active than local competitors and care about the image of your hotel, increasing the likelihood of winning potential bookings.

In summary, OTAs are an important part of the marketing mix for hotels, and their role in discovery is both hugely important and often under-appreciated.

But it is just one piece of the puzzle, and we advocate a “belt and braces” approach of using a range of different tactics to drive direct bookings including SEO, Google Ads, Facebook, Instagram and POS materials.

Contact our team to learn more about how we can help grow your hospitality business.

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