What you need know — when, who and at what cost?
There has always been a hate/love relationship between online travel agencies (OTAs) and hoteliers sometimes even considered as a ‘necessary evil’. But what do you need to know when working with OTAs? Let’s discuss and you can decide if it’s a friend or foe.
1. How to determine if you need an OTA and when to start?
To determine if your property needs an OTA depends on many factors including location of your hotel, percentage of return guests, business vs leisure travelers, size of your property as well as your occupancy overall percentage. You may be running 90% + occupancy in your high season, in this case do you really need reservations from OTAs during that time period?
Things to keep in mind when considering the decision to work with an OTA:
- You will pay 10-30% commissions on each reservation received through that OTA
- OTAs have large Google Adwords budget and can provide you with a greater online presence
- OTAs require rate parity which means same rates and same availability across all websites; however this can be negotiable in your contract
2. What is your OTA strategy?
Questions to ask yourself as part of your OTA strategy:
- Will you use them as the main driver for your reservations?
- Use them to fill empty rooms?
- What percentage of your inventory will be allocated to each OTA?
After you have determined your strategy, it is important to establish a close working relationship with your market manager. It is pointless to work with an OTA if your property shows on the 15th page or 129 out of 130 hotels in your city and keep in mind that about 80% of the reservations go to the top 5 hotels listed in the city. It’s rare for guest to make it past the 2nd page. Work with your market manager to receive tips on how to get top ranking.
3. How will you manage your rates and availability?
The more channels you have to manage your reservations, the greater the risk of overbookings. This can be very costly especially during your busy season. In most cases for OTA overbookings, you are required to:
- “Walk a Guest”, and with industry standards that you have to relocate the guest at the same or better hotel this could cost hundreds if only the Fairmont Hotel is available that day
- Still pay the commission to the OTA on an overbooking and additional charges if the OTA finds the alternate accommodations.
- Arrange for the transportation costs from your hotel to the relocation
For this reason, it is very important that you stay on top of the availability you are allocating to your OTA channel. You have 2 ways of doing this:
- Manually – through the OTA extranet: This can be extremely time consuming and very often leads to overbookings if you are using multiple OTAs. You need to stay on top of the inventory levels daily with each channel.
- Automatically – through a channel manager or your PMS: Many PMS companies offer direct connects with that OTAs, saving you time and transaction fees, such as RoomKeyPMS has direct connects with Booking.com and Expedia.
When determining which method to use, consider how much time you can dedicate to updating the extranets manually and the extra fees related to a channel manager which acts between your PMS and the OTAs. Ideal set up would be through your PMS.
4. Which OTAs should you use?
With so many OTAs out there, how do you decide which OTA to use? The major players are:
- Expedia will target mostly North American guests, and will automatically appear on Hotels.com, Venere.com, Travelocity with one contract. Booking.com has gained a lot of ground in this market as well.
- booking.com is a European OTA and widely used in Europe
- Ctrip or Agoda.com are major websites targeting the Asian market
Other things to consider for which OTA is the best fit for your hotel, consider:
- Size of your hotel – if you have a 200-300 room property, you may need to work with various OTAs out there to maximize your occupancy. For a smaller property, you may want to target the OTA which brings you the most reservations and what type of guests will they send you.
- Analyze reservations – as one OTA may bring you different types of guests and number of reservations, so you will want to dedicate more inventory to the OTA that is the better fit
Now that we have gone through some of the things to consider when and which OTA to select for your property, it’s your time to determine … The OTA, a friend or foe …