What OTA commission rates are costing your hotel – and how to reduce them

What OTA commission rates are costing your hotel – and how to reduce them 842 510 HotelREZ

OTAs, short for Online Travel Agencies, make up an important distribution channel for most travel businesses as more than half of all travellers use an OTA to plan their upcoming trips. For millennials, the figures are even more drastic: a recent report found that over 80% of bookings were made online by under-30s, with OTAs being their preferred booking channel. 

OTAs can undoubtedly help independent hotels reach new customers (especially if they are targeting those younger than 30). But, if left unmanaged, they can take advantage of a hotel brand and charge a high commission for it.

Before you panic – it is possible to reduce your dependence on OTAs while still receiving quality bookings. It does, however, require a coordinated approach across many areas of your business including sales, legal, marketing and revenue management. 

What are OTA booking sites?

An OTA website allows customers to buy various travel products including flights, hotels, car rentals, cruises and packages on one channel. Some of the most well-known OTAs are Expedia, Booking.com, Hotels.com, Priceline and Orbitz, amongst many others. OTAs may mistakenly seem like a hotel’s best friend because they have the ability to drive traffic to your hotel website and can reach markets in which you aren’t well represented in yet. 

Problems with OTAs largely arise due to their business model: their revenue comes from OTA commission fees that the hotels are charged when bookings are made through them. Whilst these used to be around 10%, commissions have increased drastically in the last few years. Today, hotels are usually charged 15 – 30% of the value of the booked stay. What’s more, because in the UK commissions are paid on a VAT inclusive rate, the actual cost can continue to rise  up to 36%.

Additionally, the distribution strategies they use to promote hotels are more than questionable. A large proportion of the commissions a hotel pays them actually gets used to bid against the hotel’s brand name on a metasearch engine (such as Google Hotel Ads), urging customers to book through them instead of going to the hotel directly. So not only do OTAs increase your distribution costs, they eventually dilute your brand online. 

What if we told you there is a way to pay less commission and reduce your reliance on OTA’s whilst still increasing your REVPAR?

How to minimise online travel agency commissions

The best way to increase REVPAR and customer loyalty is to encourage bookings that come in directly through the hotel website and the GDS agency. This also means you will get less bookings from one-time guests that are using an OTA to look for the best deal.

Here’s how to increase direct bookings without using OTAs:

1.) Use social media marketing?

Engaging in social media and maintaining an active online presence is key to generating more brand awareness for your hotel. And while there’s no one ‘best channel’ to post on to drive more bookings, we advise choosing the social platforms your hotel guests are most active on. For example, if you are targeting millennials, then using Instagram and Pinterest will give you more exposure. If, on the other hand, you offer golf weekend getaways for retirees, then using Facebook will prove more useful.

We recommend seeing your social media channels as a sort of ‘online concierge service’, and posting interesting content on local attractions, events and fun activities near your hotel. If you have time to create some of your own content, even better. That way you can direct people back to your own website for booking, bypassing OTAs entirely.

For more information on social media marketing for hotels, have a read of Three ways to promote your hotel on social media.

2.) Make search engine results work for you

When it comes to finding a travel destination and accommodation, 75% of people do online research before they book hotels. Millions of travellers use search engines, such as Google, Tripadvisor, Kayak and Trivago, to find hotels everyday. And they generally click on the results on the first page. If your hotel’s direct booking site is not listed on the first page, you’ll likely lose clicks to an OTA.

So what can you do? Ensuring your hotel website ranks well essentially boils down to having a good search engine optimisation (SEO) strategy. This includes doing coherent keyword research, adding the right phrases to the right pages and ensuring you get relevant websites to link back to you. We dive deeper into an SEO strategy in our recent article ‘Digital marketing checklist for independent hotels.

3.) Don’t forget to use mobile technology

Mobile bookings have grown by 1700% in the last few years, and people are now five times more likely to leave a website if it isn’t mobile-friendly. Ensuring your website is optimised for mobile, such as by improving your loading speed, ensuring your site is responsive and providing a good customer experience, is key.

Mobile is particularly crucial for guests who are in your area and looking for a hotel nearby, as most local searches take place on a smartphone. You don’t want to lose out on customers who are practically on your doorstep!

Here are three ways to make your hotel more mobile friendly.

4.) Always offer the lowest prices on your website

The main way that OTAs drive bookings is by offering ‘unbeatable’ deals and specials. To ensure you get the bookings through your direct website, make sure you always offer the lowest price and best deals through your own site. 

Be prepared to price match OTAs and clearly explain the advantage of booking directly with you on your website. 

5.) Engage with repeat customers

The best way to get repeat business from you customers is by building up loyalty amongst guests and encouraging word of mouth marketing. When guests trust and like you, they are more likely to book directly. Simply communicating with them, either face to face or through email after their stay, will do the trick. You can, for example, offer them special deals or rewards programs if they book their next stay directly through them.

If you provide them with the right VIP treatment, these guests will think of you every time they need to stay in a hotel in your area. 

6.) Be represented on a GDS

A GDS, also known as Global Distribution System, is an online platform that connects bookers with travel suppliers worldwide in real-time. Put simply, it is a reservation tool that travel agencies use when making bookings for their clients.

When managed correctly, being represented on a GDS will dramatically increase hotel bookings and revenue, especially from corporate bookers. If you want to learn more about GDS, download our free guide to everything a boutique hotel needs to know about Global Distribution Systems.

At HotelREZ, we are specialists in hotel GDS distribution. We give all of our member hotels access to half a million travel agents worldwide who use the Amadeus, Sabre, Galileo/Apollo or Worldspan GDS’s. This opens up hotels to a range of potential new bookers that would not otherwise have access to their rates and availabilities. What’s more, by being a Global Partner of Sabre, the most advanced hotel technology partner in the market, we combine technological excellence with incremental revenue generation solutions unique to HotelREZ.

Have a look at all of our GDS representation services for more information.

Reduce your reliance on OTAs with HotelREZ

Reducing your reliance on OTAs is not as easy as sitting back and letting a travel agency handle all bookings for you, but it will give you more sustainable, long term results. However, generating more direct bookings does not mean that you need to stop working with OTAs completely. The goal is to have a strong marketing strategy that manages to find a healthy balance between commissioned bookings and those that you handle directly.

At HotelREZ, we provide quality distribution, representation, marketing and consultancy services to more than 1,500 hotels in over 100 countries. We’re able to offer you a one stop shop solution that includes connectivity, channel manager, booking engine, website design, competitive set reports and travel agency commission processing. What’s more, our industry specialists support your revenue growth and help you develop your business throughout, working with you as part of your team.

When you reduce your reliance on OTAs, you should receive more repeat customers, generate more profits and have better prospects for the future. Get in touch with us today if you are ready to take the next step. 

About HotelREZ 

HotelREZ Hotels & Resorts was founded in 2004 by Mark Lewis, an experienced hospitality industry professional and entrepreneur. Over the course of over a decade, the company has grown to be one of the leading hotel representation companies dedicated to marketing and connecting independent properties with bookers worldwide. HotelREZ now provides distribution, revenue, sales consultancy and marketing services and support to more than 1,500 hotels, apartments and hotel groups in over 100 countries including private label GDS chain code solutions. HotelREZ Hotels & Resorts is a SAAS company. 

HotelREZ manages the brand Best Loved Hotels, a collection of unique global individual properties, with a dedicated GDS Programme, together with a Website and printed Directory, aimed at the high-end leisure agency and traveller. HotelREZ also incorporates the global World Rainbow hotels, the world’s only GDS enabled LGBT global hotel consortia representing some 1200 hotels in 230 destinations across the globe.