Save Big On Commissions: 10 Ways To Reduce OTA Dependency

I remember every time my family and I wanted to go for holidays, we would always reach out to travel agents. They would book our flights or trains, our stay, and arrange all the sightseeing.

And even today, after the internet has seeped in our lives, we don’t book directly. The only thing that has changed is instead of travel agents, we buy packages right from the online travel agents (OTAs).

Personally, OTAs have made things really simple.

Why would I book individually when I am getting everything in one place? 

On top of that, they get me deals that I mostly don’t find on my own or they are not available on hotel websites.

But lately, I came to know that OTAs and hotels are not getting along well. And as a blogger from the hospitality domain, I know why that is the case.

To be honest, OTAs are not the ones to be blamed for this shaky situation. It’s the balance that hotels fail to strike, the dependency that hotels have on OTAs, and the negligence that hotels have towards other sources.

No, I am not blaming hotels either. But this is something very common in hotels and needs to be addressed.

But before that, let me ask hotels a few questions:

• How many OTAs are you listed on?
• How much commission do you payout for each booking?
• What’s your ratio of OTA bookings to direct hotel bookings?
• Does your hotel website provide a seamless experience to guests just like OTAs?
• How much profit will you make if your OTA bookings are always higher than other sources?

If you can answer these, then I am sure you already get the point. Relying only on OTAs will cost you business.

Even though your occupancy will be high, your profit margin will be low. 

In this blog, I would like to help you understand that OTAs are not the only avenues to generate hotel bookings. There are other available ways that will help you reduce OTA dependency and contribute to your overall revenue.

How Did OTAs Come into the Picture?

Before I jump right into all the burning questions, let’s  look at the onset of online travel agencies.

It all dates back to October 1996, when tech giant Microsoft launched a product called Expedia. And it completely changed how people plan and book travel, including hotel stays.

More and more OTAs came in and started invading the online booking space. They were providing a readily searchable inventory and smooth booking experience to travellers.

For hotels, it was more of a mixed blessing. Though there was a commission involved, OTAs were bringing in more reservations for hotels.

According to a report, even during the 2008-09 recession, OTAs were all out and working. Many hotels lacked the capabilities to conduct business the right way, but OTAs kept on delivering what they promised — business.

The ball was completely in OTAs’ courts.

Then, Why is There a Clash?

OTAs started and still are spending aggressively on advertising and technology. More than half of all travellers use an OTA to plan their travel and stay. Not to mention, more than 80% of online bookings are made by under-30s, with OTAs being their preferred booking platform. 

They are the face of the hotel industry; one so powerful that hotels have no option but to join hands with them. 

And why not? Even during the COVID pandemic, they are helping hotels generate reservations.

But, there still remain a few concerns for hotels that push them to reduce OTA dependency.

To make their grip stronger on the industry, OTAs increased their commissions. Hotels today payout hefty commissions — as much as 20–30% on each booking (which is huge). 

This undoubtedly impairs profitability and can deny properties the growth they need to stand strong in this competitive market. 

This has shaken the relationship between both the parties. 

Not only that, there are other pain points which I will share in the next point.

Why Hotels Should Not Rely on OTAs for Scoring Reservations?

Before I start listing the concerns and tell you why hotels should decrease OTA dependency, let’s understand that OTAs are NOT the evil ones here. They were, are and will be one of the major sources of revenues for hotels. 

Along with the commissions, here are some more reasons for exploring other channels of gaining bookings and reduce OTA dependency:

• Hotel’s relationship with guests is a concern. OTAs remain the primary point of contact for guests, even though they provide hotels with guest details. 
• OTAs always run discounts to bring in more guests. But little do you know that they mostly ask for additional commission from hotels. This results in low profits and even loss.
• It is not an easy task to maintain your inventory on multiple OTAs (until and unless you have a channel manager in place). A single error may lead to double booking, which poorly impacts your brand image.
• Relying solely on OTAs increases your workload. You need more manpower to keep an eye on your OTA listings, optimize them, and do a lot to rank higher.

So, what can be done to make things simpler for hotels? 

Well, if you ask me, I would definitely recommend you to invest your time and resources on other channels as well. 

OTAs are here to stay and they will do everything to mark their territory in the industry. 

BUT, hotels can incorporate strategies to reduce OTA dependency.

Here Are 10 Ways to Reduce OTA Reliance

OTAs have their own set of benefits without a doubt, but one cannot overlook the challenges they present. And hotels must look for ways to avoid putting all their eggs in one basket.

#1 Analyse channel distribution

When strategizing your distribution, you must start with analysis. And it begins with acquiring the right set of data from the right sources. Be it booking patterns, age group, or determining which channels are prime sources of your reservations.

That’s not all. Identify the market (by which I mean, your competitors as well) and try to determine what strategies they are deploying.

You’ll be able to gather accurate data for in-depth analysis and get an idea about your target demographic and demand for your hotel. Hence, you’ll be able to make much more informed decisions and develop a successful channel distribution strategy.

For example: Post-analysis results show that people are booking from OTAs because of the experience they provide. You can take that into consideration and work on your website booking experience. Make it as user-friendly as possible.

#2 Incorporate a strong pricing strategy

I cannot emphasise enough on the importance of having a strong pricing strategy!!

Let me ask you a question. Why would someone book with you directly, if they are getting the same room at a lower price on an OTA?

There are MANY hotels around the world that keep complaining about low conversion rates on their website. But they always fail to notice or maybe they overlook the fact that their rates are lower on OTAs.

DO NOT put up lower rates on OTAs than on your hotel website. If you do this, then you’re going to miss out on a lot of direct bookings.

#3 Work on your website experience

I would never book with a hotel that doesn’t have a website.

The experience that a guest/potential guest gets on your website is pivotal for conversion. The more user-friendly your website is, the more likely you are to drive bookings from it.

The website should:

• load as fast as possible
• be SEO optimized
• have an intriguing interface
• have all the details — high-resolution photos, amenities, and so on.
• be easy-to-use and navigate
• include right Call-to-Action (CTA) buttons at the right places
• have a booking engine in place (more details in next point)

#4 Invest in a booking engine

Someone comes to your website and notices that you have everything — the details, photos, room rates, offers, etc. Now they want to book with you directly but the options they have is a phone number and an email address or maybe a form.

Do you think they will book? I really don’t think so!

I don’t see a point why a hotel SHOULD NOT invest in a booking engine. It has so much to offer.

A booking engine lets you capture and process direct online reservations in a smooth manner. Not to mention, you can also run loyalty programs and rewards.

Word to the wise: When you decide on a booking engine, determine whether the provider is an authorised partner for Google’s Free Hotel Booking Links program. Why? Because this program lets you display your direct booking rates for free on Google hotel search. And hotels can only enrol through authorised partners. 

It is really important that you stay abreast with all the new happenings in the industry. And this program by the search giant is definitely one of the best.

#5 Let your guests book through Facebook

Facebook has become much more business-centric in the past few years.

If you aren’t making the best out of this platform, you are missing out. Big time!

Integrate your booking engine with your hotel’s Facebook page. When you have that in place along with a ‘Book Now’ button, you will be able to secure commission-free bookings from there too.

#6 Retain your direct guests

Before you go about your guest retention strategies, you must have strong reasons for why they should book directly with you.

One of the best ways to do that is by offering incentives and rewards.

Let me give you an example: You have a guest who is checking out. What you can do is, send a ‘Thank you’ note to them. Plus, mention that you are offering them a free night on their next stay. To avail this offer, they just have to go to your website and book their stay.

In the same manner, you can offer them free meal or access to the exclusive areas of your hotel or just a bottle of wine.

Let me help you with some more tips:

• Your guest database is your goldmine. Use that to categorize and prioritize past guests to target the right ones.
• Now gather their past interests/activities. Did they order red wine while they were there at your property? Yes? Great! Drop them a mail, offering free red wine on their next stay.
• Know their purpose of staying at your hotel. Create experiences based on that.
• Train your staff!!!!!! Imagine a past guest calls up and says s/he is getting a cheaper deal on an OTA. And what if your frontdesk staff asks them to go ahead and book from the OTA? That’s a red flag!
• Look at your previous feedbacks. Did you fail to provide a ride to your guest to the airport? Well, let them know you are offering them a free pick up and drop this time.  

Retaining guests is important, and if you do it the right way, they will contribute significantly to your revenue.

You can also read our blog on “How to Create the Best Hotel Loyalty Program for Maximum Customer Retention?”

#7 Communicate with your guests

Communication is one of the keys to establish a strong relationship with your guests. And the stronger the relationship, the higher the chances of landing direct bookings.

When I am saying communicate, I mean keep in touch with them. Email them about exclusive offers, rewards, feedback or just an email wishing them on their birthday or a festival (you already have their data).

Personalised emails are a gem. They can do wonders!

#ProTip: Invest in an automation tool to drop timely emails. The conversation and knowledge sharing needs to be consistent.

#8 Leverage paid advertisements to bring in more direct bookings

Hotels must invest in effective marketing campaigns. It is one of the most important aspects that contribute to your revenue.

But again, you need to take strategic approaches to make the most out of them.

Like I said in the first point, you need data. So, gather and segment your data and look for the guests who are more likely to book directly with you. Once done, target them with your campaigns.

You can use Facebook ads or Google ads to go about it.

We have blogs on both of them. Give them a read to understand the nuts and bolts.

• How to Set Up Facebook Ads for Your Hotel: A Step-by-step Guide
• How to Set Up Google Ads for Your Hotel: A Step-by-step Guide

#ProTip: Try to keep your initial campaigns as a test. It will help you learn what works for what kind of guests.

General social media posting is also a fantastic way to strengthen and promote your brand and build relationships. It might take a bit time to get the traction, but with the right approach, you will be able to gain great benefits and reduce OTA dependency.

To make your job easier, here’s another blog: Excellent Social Media Marketing Strategies For Hotels

Read in and you’ll definitely have a crystal clear idea of social media marketing.

#9 Bet on metasearch engines

I have to say this! If you haven’t bet on metasearch engines yet, then you are definitely letting some of the major opportunities go.

Metasearch engines provide people with multiple results (hotel room rates) from several platforms to compare with. And unlike OTAs, metasearch engines redirect the users to the hotels’ websites.

This presents hotels with an opportunity to generate traffic and increase direct bookings.

#10 Focus on building a strong brand image

While you work on all the above-mentioned strategies, do not overlook this one. Everything else will only work when you have a strong and trusted brand image.

From serving guests at your property to promoting your hotel on the internet, you have to be consistently engaging, authentic, and exciting.

The more you include that empathy quotient, the more you connect with your guests/potential guests.

Brand building is not a cakewalk, but you have to put in your efforts if you want to reap long term benefits.

What’s Next?

So you have finally learned all about how to reduce OTA dependency. But have you thought about the next steps? Where are you going to get reservations from, if not OTAs?

Here are some of the ways you can drive bookings (direct bookings is definitely one of them):

1. Corporate Bookings: Business travel is an important source of revenue for hotels. When you partner with the right companies and provide them with great experiences, you increase your chances of revenue boost. 

2. Meetings, Incentives, Conferences and Exhibitions (MICE): Organising events, conferences, exhibitions etc. is a great way to keep the cash flowing in your hotel business. Renting out rooms is certainly the prime job, but putting efforts in MICE gives you a place ahead of your competitors.

3. Offline agents: Offline agents are still in the game. Despite the internet boom, there are many people who tend to plan their travel and stay through an offline or brick and mortar agent. 
   So, you must consider partnering with some. Not to mention, the commission they charge (10-15%) is much lesser than OTAs.