Food for thought: In 2023 hoteliers will pay the top OTAs and bed banks $50 billion in commissions/markups. A staggering amount!
Just imagine if 10%, 20%, 30% or even 50% of these commissions are saved by direct bookings via the hotel website or app and used to increase salaries of the property associates, for professional development, improvements in property product, amenities and infrastructure, technology innovations and digital marketing.
Some say that the OTAs have the marketing muscle that individual hotels often can’t match and can open doors to new markets and customer segments. helping to put “heads in beds” that might otherwise remain empty.
Many hotels do not need new feeder markets or new customer segments that the OTAs could open to them, since they can achieve desired occupancies from their traditional feeder markets and customer segments. A hotel in London or in New York does not need Agoda sending them a few Australians, Brazilians or Indonesians a week to survive.
The issue is that the OTAs are now taking over bigger and bigger percentages of the property’s traditional feeder markets and customer segments, taking advantage of hoteliers’ systemic underinvestments in technology, digital marketing and talent.
Hoteliers know their hotel product and destination, local activities and experiences far better than the OTAs. Hoteliers know their feeder markets and customer segments far better than the OTAs.
What they only need to do is increase their investments in technology and digital marketing from the current puny 2%-3%. There are plenty of highly professional hotel tech vendors and digital marketing agencies to do the actual job so that independents do not have to do it on their own.
As for the cost of direct online bookings: In the course of 20 years at my company NextGuest(now merged with Cendyn) we measured the true cost of direct bookings across our 15,000 plus hotel clients, including property website/app amortized over 36 months, website maintenance, hosting and analytics, consulting services, digital marketing (SEO, SEM, online media, email marketing, metasearch, etc). The average cost of direct online bookings was consistently 4.25%-4.5%. Compare this to the average OTA commissions/markups of 25% and above.
