OTAs generate a mountain of data. I am not talking about the visitor behavior data on their website. I am talking about what hoteliers do on their extranet.
Hoteliers are enticed by the same tactics that allow OTAs to get their website visitors to click on a button, navigate to a different page, or make a booking.
Discounting or participating in a campaign is as easy as clicking a button now. A constant stream of competition and market data encourages you to participate in a new campaign or keeps you there. It's no surprise that most hoteliers feel left out if they don't have one of these offers on their OTA listing.
How many options do OTAs provide now?
- Deal of the day/week/month
- Stay-Pay offers
- Minimum Length of Stay (MLOS) offer and the likes
- Early bird
- Prepaid rates
- Value add/ package offer
- Weekend/ Weekday offer
- Member rates
- Corporate rates
- Mobile rates
- Campaign rates
- OTA exclusive
- Commission override
- Ranking booster
- Domestic offer
- No credit card offer
- Discounting for prepayment (by OTA)
- Fixed placement
- Advertising placement
Why do most hoteliers fall for these?
- It is easy enough to participate and see business volume grow.
- There is a need.
- It is a habit. I mean, why not?
- Fear of missing out (FOMO)? I can see my competition doing this.
- It is the only way I know.
- It is a great strategy. I have lost count of how many times I have seen them in hotel strategy presentations.
Very rarely, there is a proper calculation of costs, benefits, and an exit strategy behind it.
Here are the questions I ask our hotels to help them decide.
- What are the costs?
- What are the benefits?
- Are the costs and benefits temporary or permanent?
- Is there a special need right now?
- Does it fit the current strategy?
- Will it become an easy shortcut (for hotels) once used?
- Can you exit once the need is fulfilled?
When is it a bad idea to participate?
- When you do not get any incremental revenue after creating them,
- If the additional revenue disappears as soon as you stop the promotion,
- You create it and then forget about it. I have found a forgotten promotion entry behind parity issues countless times.
- When the bookers are harder to convert to direct,
- When a hotel does not want to keep track of costs vs. benefits on an ongoing basis,
- When the additional distribution costs can be invested elsewhere for a better ROI,
When is it a strategy?
- When you have a need period and it is the only option.
- When you can get out of it as soon as your needs are fulfilled.
- When you do not become dependent on them (extra costs).
- When it helps you compete with other properties, perhaps in specific POSes,
- When you can gain a higher ranking and then maintain the momentum.
- When effective, ADR generated beats most of the other channels (and is comparable with direct).
- When it does not affect your rate parity (non-exclusive),
- When additional cost is lower or comparable to that of other hefty channels like direct,
OTAs will do what is best for them. It is only when what is good for them and good for me overlaps that we have a deal.
I always play hard to get when it comes to promotions on OTAs. All the investments in technology, advertising, personnel, and efforts to drive direct business compete with them. Obviously, revenue from OTAs is an integral part of a hotel’s business mix. A savvy hotelier measures the cost of doing business with all channels and deploys resources based on where the profitability will be higher and sustainable.
When do you feel it is justified to participate in campaigns on OTAs?