A Three Step Relief Plan to OTA Frustration
Broad Strategies to Persuade OTA Customers to Book Direct
By Larry Mogelonsky President & Founder, LMA Communications | September 28, 2014
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.
For those unfamiliar with the term, a 'tipping point' is defined as a threshold in a continuum where habits or events can no longer be restored to their original position. The concept of the tipping point has been well documented recently in the press with concern to climate change and global warming. When applied to the accommodation distribution network, has the hotel industry's adoption of the OTAs reached a tipping point from which there is no return?
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.