Who’s Really Winning The Battle Between OTA and Direct Booking?

The hotel distribution landscape is anyway a bit complex. And over the past decade, there has been a lot of transformation on this front.

The online travel agents (OTAs) have witnessed a spike as well as loss in OTA market share. And today, there are a huge number of hotels that have stopped putting much weight on OTAs and started promoting direct bookings.

This old “OTA vs hotel direct bookings” battle has put accommodation providers in a dilemma. They are finding it hard to balance between both.

In this blog, we are going to compare the pros and cons of both OTAs and direct bookings to understand which is better.

What is an OTA Booking?

An online travel agency (OTA) also known as a hotel booking site is a marketplace that provides consumers with multiple hotels to book with. Simply put, OTAs are the middleman that connect travellers with hotels and take a small commission in the process.

In recent times, OTAs have gained tremendous traction. Millions of travellers around the world use them to plan their travel and stay.

Furthermore, OTAs are not just driving bookings to hotels, but also delivering a lot of other benefits.

• Giving hotels more visibility on the web
• Providing rich tools, analytics, and insights to target the right travellers
• Managing guest reviews and more…

What is Direct Booking?

Direct bookings are nothing but guests who book directly through a hotel’s website, phone call, email, social media, etc.

How do they get to know about the hotel? 

There are multiple factors that contribute to this. They must have:

• seen your advertisement
• read your blogs
• gone to some OTA but decided to book through your website
• seen your hotel in person and considered making a booking

Also, direct booking has its own set of benefits. Here are some of them:

• A great way to nurture a good relationship with guests
• Gives you the power to personalize the guest experience
• Can gather more data for your future marketing campaigns
• And of course, you can do away with commissions

The OTA vs Direct Booking Conflict

The opportunities OTAs present in terms of revenue are significant and it is crucial for hotels not to deprive themselves of such avenues. But hotels are still sceptical about relying on it. 

Let’s understand why it has become such a huge battle.

The rise of OTA bookings

Early on, hotel reservations were either made directly through a phone call, walk-in, or via a travel agent. But over the years, things have changed. Today, there are several ways to book a hotel room and one of them is through an OTA.

The concept of OTAs dates back to the days when Microsoft launched Expedia Travel Services in 1996 in the USA. Which was then just a tool to book a room quickly evolved and gained a lot of popularity due to the good work and a lot of branding.

But there’s another reason that ushered the popularity of OTAs — lack of transparency in the traditional system.  

When brick and mortar travel agents and tour operators were still in the game, there was a serious lack of transparency. But OTAs stepped in and quickly formed a symbiotic relationship with hotels and travellers. They let everyone have a clear picture of everything.

Since then, OTAs became a go-to medium for travellers to book a stay, resulting in more and more hotel listings.

Also, why not!

Hotels were charged a modest commission, they were getting good advertisements, and they didn’t have to spend much on their online fronts.

According to a report, travel sales generated by OTAs were about 45% of entire European travel sales revenue in 2013.

The rise of direct bookings

However, today, despite all the benefits of OTAs, hotels are getting second thoughts and considering direct bookings.

But why do hotels prefer direct bookings these days?

OTAs have lately increased their commissions, cutting into hotels’ profits. That’s not all. Hotels are becoming more concerned about their relationship with their guests. OTAs are at the front and this might not help hotels build a strong guest relationship.

Considering all of this, hotels are now struggling; they cannot let go of the OTAs as they contribute to their revenue, and also, they cannot solely rely on it too.

This is where direct bookings come into the picture. 

An increase in online bookings is inevitable and hotels are now spending significant resources and efforts in enhancing their direct bookings. Securing a share has become more important than ever now.

Let’s Address the Elephant in the Room: Which is Better?

Saying upfront that OTA is better than direct booking or vice versa wouldn’t be valid. Because, both have their own set of advantages. 

So, let us look at the similarities and the differences between both and see who wins this OTA vs direct booking battle.

Here are the similarities:

Act as an online brochure

Both OTA and your hotel website act as your hotel’s online brochure. They allow your guests to check your property’s photos, description, amenities details, etc. And then decide, whether they would want to book with you.

Contribute to revenue

For many hotels, the number of direct bookings secured might be lower compared to OTAs, but there are no commissions involved.

And when it comes to OTAs, there’s a commission involved, but the booking frequency is higher.  

Both are really critical for the hotel to keep the cash flowing.

Contribute to a hotel’s brand reputation

Both OTA and your website are critical for your hotel business. 

The experience guests get while making a reservation through your hotel website impacts your brand reputation. A seamless booking experience is a brownie point for hotels and OTAs and website booking engines deliver just that.

Allow hotels to accept bookings round the clock

Your OTA listings and your website always provide your existing/potential guests with the ability to book anytime, anywhere. They just need a smart device with an internet connection to book a stay with you.

The Internet has made reservations really simple and both OTA and direct booking win the game here over traditional reservations.

Here are the differences:

OTA delivers more visibility and reach

OTAs provide a lot of advantages to hotels, and the ‘Billboard Effect’ is one of them. People are more likely to search for your hotel and visit your website when they see you on an OTA.

Also, OTAs want to gain higher revenue. So, they provide extensive marketing to hotels, helping them reach a broader audience, and generate more bookings.

Direct bookings help with better guest relationships

I have already mentioned this above. But let me give you a clear picture here.

Every time a guest books through an OTA, his/her data gets captured and that particular OTA can use the data to communicate with them.

But OTAs are not able to build the level of close relationships a hotel builds with its guests. 

This is where direct bookings are an advantage. 

It allows hotels to gather guests’ data to cultivate meaningful relationships. Also, hotels can deliver a personalized guest experience for every individual and in return, cultivates loyalty.

Direct booking saves the revenue shares

OTAs are the most preferred booking channel. However, according to a report, hotels usually pay 15 – 30% of the value of the booked stay which is definitely a huge percentage.

Now just think, if you get most of your reservations from your website or your Facebook page and not from any OTA, how much would you actually save?

Increasing sustainable revenue is the ultimate goal for hotels apart from building a brand. And hotels that focus on driving direct reservations achieves the same. (https://spoonerberries.com)

In this scenario of OTA vs direct booking, direct booking takes the cake.

OTAs deliver an efficient experience

One of the major reasons people turn to OTAs is because they get to see and compare a lot of hotels. Also, the process of booking is really fast and seamless.

And as more people are turning to OTAs, hotels are also flocking there.

Now that we know the similarities and differences between OTA and direct bookings, can we say which one is better?

Well, I don’t think we can!

Both the approaches to drive reservation have their own set of pros and cons, but that doesn’t mean hotels can rely only on one approach.

People might argue that hotels were doing well even before the OTA boom. But that doesn’t justify the current scenario of OTA vs direct booking.

The world has become internet-savvy and everything is happening online. It’s not the hotels who have brought in the OTA trend, it’s the travellers who found it really alluring.

So, the bottom line is both OTA and direct bookings are equally important for hotels. It’s just that they need to strategize their approaches. And this brings me to my next point.

How to Strike the Right Balance Between OTA and Direct Bookings?

Even though there’s an OTA vs direct booking conflict, you can still nurture and grow your hotel business if you rethink your distribution strategy. And the best way to go about it is by leveraging prices, special offers, policies, providing guests with an incentive etc.

Here are some of the tips you can consider:

Offer loyalty program

In OTAs, travellers cannot access loyalty programs and rewards. And this is what hotels can use to their advantage and secure direct bookings.

For example: You can roll out a campaign where guests would get access to the pool and gym, free breakfast, and other amenities if they book directly with you.

Furthermore, you can also take your loyalty program and reward approach to the next level by targeting former guests. You already know their preferences and behaviour, and based on that, you can curate personalized packages.

Here’s another example: Your hotel is near the airport and there are chances that most of your guests would be the ones on layovers or someone on a business trip. You can always create packages for these groups of travellers. Provide them with exclusive amenities to relax if they book directly with you.

Implement smart pricing strategies

The price you charge for your hotel rooms is crucial for your business. And while you want to strike a balance between your OTA bookings and direct booking, concrete pricing strategies are a must.

Right price, right time, and the right avenue is the key to boost occupancy and profitability.

You can read our blog on "Powerful Hotel Pricing Strategies” to know more.

Further, you can also invest in revenue and marketing management services. Revenue managers will help you make informed, data-driven choices, rather than relying on instincts or guesswork.

Here’s another blog that will help hire the right revenue management service provider for your hotel business.

Have an effective cancellation & refund policy

A flexible and seamless cancellation policy is another great way to secure more and more direct bookings. When someone cancels a booking on an OTA, they mostly end up waiting for the refund. The process of cancellation and refund on most OTAs doesn’t entice a lot of people.

So, why not use this to your advantage again? Offer a quick refund and flexible cancellation policy on direct bookings.

Optimize your website and OTA

An optimized hotel website that is easy to use and navigate, has a proper booking engine in place, has rewards and offers, is more likely to drive direct bookings.

Similarly, it is also important for hotels to optimize their OTA listing. The OTA profile must have all the relevant updated information in place — description, high-quality picture, a proper cancellation policy and so on. 

Be it on a website or an OTA, engaging content is a hook. Period.

Also, hotels must maintain rate parity; not only to avoid cutting into your hotel’s profits but also to avoid confusing customers.

Convert OTA booking to direct bookings

Whenever a guest books a stay at your hotel through an OTA, try convincing them to book with you directly on their next visit.

Offer them discounts or something complimentary on their next stay. This is one of the overlooked strategies; but if done right, it can be really effective.

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