Online Travel Agencies (OTAs) And Hotel Revenue Management

Online Travel Agencies (OTAs) have revolutionised the way travellers plan and book their trips – they offer a vast selection of properties, often at competitive rates and make booking hotels easy and rewarding. Consequently, OTAs and hotels have a complex and interdependent relationship, but there is little doubt that OTAs are a necessary distribution channel, for most hotels, to maximise occupancy and revenues.

OTAs and hotel revenue management are also intertwined and the rise in popularity of OTAs amongst travellers presents significant challenges for hotels.

In this article, I explain what an OTA is and how they have changed the hotel industry, the key benefits and drawbacks of OTAs for hotels, who the major OTAs in the UK are, the benefits of OTAs to customers, why most hotels often need reservations made via OTAs and how to generate more direct bookings.

What Is An OTA?

An OTA is an Online Travel Agency. It’s a centralised platform that allows users to search, compare and book car rentals, flights, hotels and other travel services worldwide online. Many OTAs also offer package deals whereby you can combine these elements and some have loyalty programs that reward frequent travellers with discounts or loyalty points.

OTAs have extensive databases of hotels, ranging from budget-friendly options to luxury resorts and users can refine their search using filters for amenities, guest reviews, location and price. In most cases, OTAs act as intermediaries between travellers and hotels and when a booking is made via an OTA, reservation details are sent to the hotel electronically.

Travellers typically receive a reservation confirmation instantly and can pay using a variety of different methods, such as Credit or Debit Cards, or even PayPal. OTAs also provide customer support via email, live chat and phone to assist with cancellations, enquiries and modifications and in case of dispute, often mediate between travellers and hotels.

In short, they are one of the most convenient and cost-effective ways for travellers to book every element of their trip. For suppliers, such as car rental companies and hotels, they boast access to millions of potential bookings, albeit for a sizeable fee.

How Have OTAs Transformed The Hotel Industry?

Prior to the internet and emergence of OTAs, travellers made their reservations through traditional channels such as in-person visits, mail and phone to the hotel or via Corporate Travel Management Companies or Travel Agents.

OTAs have since become a crucial distribution channel for most hotels, particularly for independent properties and small hotel groups, because they have taken market share away from traditional Travel Agencies and forced hotels to adapt their distribution strategies and invest in online marketing. However, commission to OTAs is a significant cost to hotels and whilst commission rates vary due to several factors, they can typically range from 15-30% of the value of each reservation.

OTAs have also created a highly competitive landscape for hotels, which has forced hotels to be more price-conscious and offer better deals to attract customers. Simultaneously, they have empowered independent hotels to compete with hotel chains by providing them with a platform to reach a wider audience – something which has also contributed to a growth in the number of independent hotels.

What Are The Key Benefits Of OTAs For Hotels?

OTAs and hotels are dependent on each other and OTAs can help hotels to significantly boost their occupancy and revenues. Here are five key benefits of OTAs:

1. Cost-Effective Distribution: OTAs can offer hotels cost-effective distribution options and often have established relationships with marketing channels.
   
2. Customer Convenience: OTAs provide a one-stop shop for travellers, making it easy for them to compare amenities, prices and reviews of different hotels. This convenience can lead to increased bookings.
   
3. Data Insights: OTAs can provide valuable data on customer behaviour and preferences, which hotels can use to improve their own marketing, offers and strategies.
   
4. Global Reach: Many OTAs operate on a global scale, connecting hotels with travellers from all over the world. This can be particularly beneficial for hotels in less appealing tourist destinations.
   
5. Increased Visibility: OTAs offer hotels a wider audience, making them more discoverable to prospective guests. This too, can lead to increased bookings and greater brand awareness.

What Are The Drawbacks Of OTAs For Hotels?

Whilst OTAs and hotels are intertwined, this does create several issues for hoteliers. Here are five key negatives of OTAs:

1. Commission Fees: OTAs typically charge hotels a commission fee for reservations, which can significantly reduce the hotel’s net revenue.
   
2. Competition: The competitive nature of the OTA market can lead to price wars – potentially driving down prices for hotel rooms.
   
3. Data Control: Hotels may have limited access to customer information, which can limit their ability to use this data to optimise their own marketing efforts and operations.
   
4. Dependency: An overreliance on OTAs can make hotels vulnerable to changes in the OTA landscape, such as platform policy changes or updates.
   
5. Reviews: Negative reviews posted via OTAs can damage a hotel’s reputation and take time for the hotel to respond to constructively.

Tip! Hiring a Hotel Revenue Consultant can help to reduce reliance on OTAs by leveraging data analytics, optimising distribution channels, pricing strategies and more!

Who Are The Major OTAs For UK Hotels?

There are many small OTAs operating in the UK hotel market, but the key OTAs utilised by most UK hotels are:

Booking.com: A global leader in online hotel reservations, known for its user-friendly platform and wide range of properties.

Expedia: Another major player in the OTA market, offering a variety of travel services including hotels, flights and car rentals.

Hotels.com: Owned by Expedia, Hotels.com is perhaps most known for its rewards program and loyalty discounts.

Agoda: A popular OTA in Asia, especially for budget travellers, but with a growing presence in the UK market.

TripAdvisor: Originally and still primarily a review platform, TripAdvisor has since expanded into booking services too.

What Are The Benefits Of OTAs To Customers?

OTAs offer a range of benefits for travellers, but the three primary benefits are:

1. Choice: OTAs provide a vast selection of travel options, which gives customers more flexibility in choosing the perfect trip in accordance with their preferences and requirements.
   
2. Competitive Pricing: OTAs are often given access to exclusive deals and discounts from airlines and hotels, which can help customers save money on their travel bookings.
   
3. Convenience: OTAs offer a one-stop shop for travellers, allowing customers to compare amenities, prices and reviews of different flights, hotels and other travel services, all in one place.

Why Hotels Need OTA And Direct Bookings

The relationship between OTAs and hotels is complex, but the reality for most hotels is that they will need OTA and direct bookings to achieve optimal distribution and revenue strategies.

OTAs have a vast reach and expose hotels to a much wider audience than they could reach on their own, particularly for less well-known or smaller properties. OTAs can also help hotels to diversify their revenue streams and attract guests looking for specific amenities, experiences or deals.

Direct bookings help hotels build their brand, establish a stronger online presence, foster strong customer relationships and encourage repeat business. Hotels can also have full control over data collected from direct bookings, enabling them to personalise marketing efforts and tailor offers to customer preferences. Hotels typically also earn higher margins on direct bookings as they avoid paying commission fees to OTAs.

By effectively managing OTA and direct bookings, hotels can reduce reliance on any single distribution channel, improve financial stability and mitigate risk. Furthermore, by understanding customer preferences through both channels, hotels can offer personalised experiences that drive loyalty and use data from both channels to fine-tune pricing strategies and maximise revenues.

How To Generate More Direct Bookings:

OTAs and hotels often compete online for the same bookings and whilst a hotel’s marketing budget is only likely to be a fraction of that of OTAs, there are ways to increase direct bookings. Here are 5 tips to generate more direct bookings for your hotel:

1. Email Marketing: Use abandoned cart reminders to follow up with guests who start, but do not subsequently complete, the booking process. Segment your email list to send targeted offers and promotions based on guest preferences. Use surveys to gather feedback and offer personalised recommendations for future stays.
   
2. Leverage Social Media: Include direct booking links in your social media bios and posts. Share engaging content that showcases your hotel’s unique amenities and features and encourage guests to share their experiences on social media using relevant hashtags.
   
3. Offer Exclusive Benefits & Deals: Offer incentives for guests who book directly, such as free parking, late check-out or room upgrades. Create a loyalty program that rewards repeat customers with exclusive discounts and perks and create attractive packages that combine rooms rates with additional experiences or services.
   
4. Optimise Your Website: Make it easy for visitors to book directly, use prominent “Book Now” buttons and have clear navigation. Optimise your website’s speed to improve user experience and reduce bounce rates. Ensure your website is fully responsive and looks great on all devices. Implement effective SEO strategies to improve your website’s visibility in search engine results.
   
5. Provide Excellent Customer Service: Tailor your services to meet the individual requirements and preferences of each guest. Encourage satisfied guests to leave positive reviews on your website and third-party platforms. Ensure your staff are available to answer guest enquiries promptly and provide helpful assistance.

Partner With A Revenue Management Expert:

At MavREV, we specialise in providing an outsourced revenue management service at a fraction of the cost associated with employing a revenue manager to independent hotels, inns and serviced apartments in the UK. We create optimal distribution strategies to help your property maximise profitability and reach its true revenue potential.

Interested? Contact us now!