OTAs deliver paying guests to hotels and that’s fantastic.
They also ask rather a lot in commission for delivering that paying guest, which is not quite so fantastic for the hotel. And for some hotels, the proportion of all guests delivered by the OTA is enormous. I was in a meeting with a prospective client the other day who told me two-thirds of his entire business is OTA-driven and that he pays roughly 25% of the gross booking fee in commission — ouch!
We’ve all got to start where we are though, so I started out by asking what he knew about the one-third of his bookings that were direct. “Not much…” was the response.
With some more probing, I found out exactly what this hotel didn’t know:
- The journey the direct customers had gone on
- The cost of acquiring those direct customers
- How many of those had come to the site via brand searches — suggesting they were engaged with the brand vs. those who came through ‘practical’ searches e.g. “Cheap hotels in London”
- How many of the direct customers were repeat customers
- The lifetime value to date of those customers
- The relationship between the business’ eCRM and other marketing activities and the resulting revenue
- I could go on…
In essence, this business knew almost nothing about the customers who were most engaged with it. Their direct business was essentially something that ‘just happens’ even though they were spending very little to support it. Contrast this with the OTA-supplied guests, which, whilst they were very expensive, the business knew exactly where they were coming from…as long as the question asked was “Which OTA supplied which guest?”
So, for this hotel owner, the OTAs were the part of his business that he understood best. He also knew that ‘all’ he had to do to get more business was spend more money with the OTAs. His problem, which is why we were having the conversation, was that he couldn’t afford to expand his OTA campaigns further.
Let’s get back to the start of this blog piece where I said:
“OTAs deliver paying guests to hotels and that’s fantastic.”
I believe this. I also think that many hotel businesses have slipped into to depending on OTAs to provide ‘easy’ revenue. And the OTAs have exploited that dependence by attaching big commissions to those guests, and too many hotels – addicted to the easy revenue – have succumbed to the fix, complaining about the price attached but not doing much about it.
And there is a lot that can be done about it.
Let’s begin with what types of guests there are. There are only two types of guests: those who will come back and those who won’t. For the hotel, wherever the guest who walks in for the first time has come from — and it was probably via an OTA — your first task is to find out whether this guest might come back. And this is where the enormous power of your data comes in.
For example, if all you know at check-in is that this guest is Male, came from xyz.com OTA, has booked for Tuesday night and is staying for just one night, you should already know the propensity for this guest to come back again before you do anything to improve that. How? Because you’re sitting on a wealth of customer data that tells you historically how many Males arriving on a Tuesday for one night stays who were sourced from xyz.com have already come back, once, twice, three times… You can also find out what the typical period is between the first stay and the second stay, which gives you information about when you should send out eCRM offers to this guest. And you can find out whether the second stay of this guest profile is typically the same or different to the first stay.
From this information, hotels can also quickly work out the lifetime value you can expect from this particular customer, if only you can get him to come back again. You are, based on almost every case I’ve seen to date, sitting on a wealth of data that tells you a huge amount about just how valuable your guests are. You can rank every single guest — ever — in terms of how much value they have brought to you already and how much they might bring to in the future…. Unless another brand grabs them or the OTA convinces them “It’s simpler to buy again, through us”.
To build a relationship with the best guests, you just need to do two things:
- Get their permission to talk to them
- Deliver communications that resonate with the guest and remind them that they want to come back, and this time, book direct
It’s also hard work. And it takes time and effort.
But the result is more long-term repeat-purchasing guests with higher lifetime value, who love your brand and who tell everyone they know why you’re brilliant.
There’s another result too: that expensive OTA box you rely on today will get a lot smaller and less costly. And because you’ve become less reliant on it to deliver those expensive guests, now you can choose to use it when you need it i.e. to deliver first time guests in those periods when your data tells you that you won’t (yet) have enough of your best-guests to fill the hotel.
That’s the box a successful hotel has got its OTA in.