A Three Step Relief Plan to OTA Frustration
Broad Strategies to Persuade OTA Customers to Book Direct
By Larry Mogelonsky , Owner of Hotel Mogel Consulting Limited and the founder of LMA Communications Inc.
Do online travel agencies (OTAs) have you frustrated? They certainly do for me. On the surface is their commission rate, which can squeeze a property's margins and force unsavory cuts to service levels. But there's a bigger factor lurking in our midst. It all comes down to branding. The OTAs' marketing machine is huge, larger than any single hotel or chain entity can commit to. They advertise across all major communication mediums while we struggle to balance one or two, swaying consumers one by one until we reach a tipping point.
The topic is a constant source of discussion when I meet with owners, general managers, marketers and revenue managers. Apart from those properties in the five-diamond range who do not wholeheartedly engage this channel, there seems to be unanimous frustration expressed on many levels, primarily concerning the OTAs' commission structure, followed quickly by the lack of brand or product differentiation on their search result pages.
But no one who engages this distribution method seems able to reduce their dependence on the steady stream of generated revenue. The OTAs work hard to deliver an efficient product delivery system, reinforce their branding with high levels of effective advertising and create their own packaging, promotion and loyalty programs. No wonder hoteliers are frustrated; they're practically helpless in putting into action a viable solution. Thankfully, there is a three step system that may be the answer you need to eliminate any agency aggravation.
Step One: Understand Your Real Revenue
The first aspect to address pertains to revenue implications. The old model of ADR and RevPAR needs to be replaced with Net-ADR and Net-RevPAR – numbers which reflect the deduction of distribution costs from all revenue sources. In other words, using net calculations instead of gross will level the playing field.
With this approach, the property moves distribution costs out of sales and marketing, or wherever else they are hiding on your statement, and onto the top line. This lets you examine every external cost impacting ADR – definitely the OTAs, but also GDS charges, traditional travel agent commissions, third-party group commissions and even, albeit nominal, booking engine costs from reservations made on your brand.com.
Years ago, this might have been difficult to do as accounting systems were less sophisticated. But with today's ability to look at every kernel of data, I suspect that your controller or CFO will relish the opportunity of surgically cutting into the cost accounting, especially if it means ultimately finding a way to uncover ways of improving the bottom line.
Once the data is revealed, you can work to evaluate the relative advantages and disadvantages of each channel as they correspond with each property's individual situation. Through a meaningful understanding of the relative return of each channel and the allocation of resources needed to influence consumers, this becomes the first step to shift business into those channels you find most profitable.
Step Two: Reduce Decision Fatigue Through Clear and Concise Branding
Hoteliers are frustrated, but consumers are as well! More to the point, they are confused over each brand and sub-brand's unique selling proposition. Few brands stand apart which makes the research harder and the final purchase decision exhausting. A travel experience should be anything but frustrating – especially given that navigating airports and flying in general are both nightmares – and alleviating this anxiety begins well before arriving at a chosen property.
By streamlining selections according to the primary purchase driver – price – all on one search results page, the OTAs make travel research simple. In order to understand the psychological mechanism at play here, you should familiarize yourself with the term: decision fatigue. Neurologists have found that making a decision is the most energetically taxing job on the brain. Yes, lifting weights may drain your muscles and temporarily lower oxygen levels, but decisions use up far more sugar neuron for neuron.
To understand this concept, think first about a grocery store and that rack of sugary snacks immediately adjacent to the cash register. If you go shopping with a list, the decision work has mostly been completed prior to entry. But without a list, you leave what ends up in your cart to memory work and on-the-spot decisions. It's tougher to do, so much so that by the time the latter customer is ready to checkout, his or her brain sugar levels have been depleted to the point where they are subconsciously compelled to buy a little boost right as they exit.
Give a person a choice of two options (Do I follow the list for this particular item or do I improvise?) and the decision is easy. Give a person 25 options and it's a headache. In this sense, the OTAs are the rack of chocolate bars abutting the cash register, aggregating the hotel purchase choices in such a way as to minimize the additive anxiety of deciding amongst the many competing properties at a single location.
The solution here is to simplify your brand so that its unique traits can be more readily understood by potential guests. In this day and age of lightning fast communications, you have a maximum of one concise sentence to express the crux of your brand to consumers. Sharpening your brand to this point may just be the single most important task you do.
There's a systemic problem in the hospitality industry these days whereby instead of focusing on only those characteristics that define a property or brand, companies are taking the shotgun approach – blasting consumers with long lists of features and hotel sub-brands with too much overlap. Quick: what are the nine main brands under the Starwood banner and what makes each exceptional? As a hotelier, if you can't answer these sorts of brand questions off the top of your head then how can you expect a layman to do the same? In short, they won't even try; they'll go to the OTAs which do all the mental processing for them.
While reducing the number of brands may be quite difficult, clarifying the unique differentiators of each is not, or at least it shouldn't be. Simplify the brand message you communicate to the public and make the purchase that much easier. Have one concept and stick to it. That way, consumers can book directly with you instead of through an OTA because they won't have to worry about all things related to the subconscious onset of decision fatigue.
Step Three: Give Consumers a Reason to Book Direct
The first step was all about discovery. The second step was all about clarification. Now it's time to put it all into action – via tactical and logistical issues – which, like most things, is easier said than done. Chief among this, we need to explore some of the ways you can encourage guests to book directly through your brand.com or central reservation system.
But first, let me debunk a statement that I've heard countless times: "I will give my guests such a fantastic experience that next time they will certainly book with me directly." Although we'd all like this to be true, the modern traveler doesn't exactly think this way. Vacationers are bold, traveling to different cities and countries instead of constantly repeating the same excursions over and over. For business and leisure alike, delivering that 'wow moment' necessary to drive repeat visits is becoming all the more difficult and requiring escalating costs to do so.
Remember, your contract with the OTAs requires you to maintain price parity through all channels, presenting you with a somewhat paradoxical situation. Your mission is to convert OTA customers to your own, but rendering this transfer can be a rather costly affair, especially considering the transient, globetrotting behavior of today's travelers.
But don't give up; there are several approaches you can consider to sway OTA consumers to the more profitable, direct booking channels. As the lowest common denominator, a key objective should be awareness, so that guests can pass the word along to other potential customers about the substantial benefits of direct bookings. Here are some ideas to consider:
1. Join our loyalty program and earn rewards - Remind guests of the advantages of your chain's reward program and identify the explicit advantages of these loyalty systems. For independent hotels, loyalty programs such as Stash Rewards and Voila can fill in this gap quite well. Of course, if a guest books through an OTA, he or she does not earn loyalty points, but they don't know this. It's your imperative to educate them. For instance, instead of sending a perfunctory customer survey email upon checkout, send a letter that informs them in simple language about how booking direct will benefit them. Train your front desk clerks on how best to approach this topic with guests upon check-in and leave some informative pamphlets lying around or the occasional infographic flashed across a lobby flatscreen.
2. Lever internet access - Free WiFi is now unquestionably a top issue for business and leisure travelers. Many loyalty programs already offer complimentary internet access as one of the main features of membership. If your property already has free WiFi, then maybe it's time to change your product mix to make it free only for those who are your direct customers and not those who are OTA customers. Alternately, segment your WiFi with basic (that is, slower) delivery as free for everyone and the premium (that is, faster) internet access free only for your direct channel customers or loyalty cardholders.
3. Free breakfast - Provide free continental breakfast to those who book with you direct. This can be in the form of a coupon or voucher given to your guests upon arrival and it can even be expressed to these consumers in a congratulatory manner to heighten excitement. The vouchers should be dated and personalized to the guest or room number. Why stop at breakfast? As many operators already provide complimentary breakfast, you might consider differentiating your property by offering lunch or afternoon teatime vouchers. Additionally, it is important to subtly tell those customers who go through the OTAs that this benefit has been foregone, and then communicate how they can get this by booking direct on their next visit.
4. Mobile check-in - Advances in technology include the ability for guests to check-in through their mobile phones, thereby avoiding any lineups at the front desk. To utilize this technology, a hotel needs to know a lot about the guest, typically through information garnered from a loyalty program database. Clearly, OTA customers have no such relationship and would not be eligible for this advance. Yet another advantage to relay via your front desk clerks to OTA customers who've just finished waiting in a lineup.
5. All other amenities - All other features or amenities should be up for grabs as potential perks to offer direct customers as the expense of OTA guests. Think spa treatments, gym access, lobby bar cocktails, room service vouchers, gift shop vouchers, free newspapers delivered to the guestroom each morning, complimentary dry-cleaning, shuttle services and so on. The cardinal rule is that you must communicate with each benefit that they are receiving the bonus because they booked direct and not through a third party. That way, they know the effect (extra service or benefit) in addition to the cause (booking direct).
6. Offer monetary incentives - A promotion code is all it takes. Creating a financial inducement is a surefire way to encourage a repeat purchase. But these packaging actions must be performed adroitly. Too much and you run the risk of creating a new class of consumers addicted to your promotional packages, refusing to book at the regular rate and holding out for the next price slash. On the other hand, your hopefully sporadic promotions must be enticing enough to elicit more than just a shoulder shrug from browsing consumers. Finding this balance requires tact to keep your margins and avoid breach of rate parity contracts.
To state the hard truth, any plan to encourage booking direct will not be perfect. Remember that many guests will never end up being repeat customers as they may not visit your location ever again. But if enough hotels are creating a buzz about booking direct, the traveling public will soon get the picture and hopefully a collective light bulb will go on, shifting booking habits before we pass said tipping point.
One last word: many so called 'experts' think that SEO is the solution. In other words, enhancing the visibility of your website on Google searches so that consumers looking for a destination can easily finds you and, once they come to your site, become so enamored with your offerings that they will be compelled to book direct. In reality, while having a great website is a vital part of the marketing mix, an OTA customer will typically view your property on his or her preferred OTA's results page. And if they indeed go directly to your website, it will often not be to book, but rather to get a look at your rooms and other amenities.
Remember, we're trying to change an ingrained behavior and it will take a lot more than some nifty SEO magic to overcome. Old habits die hard after all, and so I wish you the best of luck in your direct booking conversion strategies. Be patient. Start with this three step plan, and then utilize one or more of the six broad tactics listed above.