Navigating the complexities of OTA commissions within the hospitality industry can be a daunting task. With a deep dive into the intricacies of these fees and their effect on hoteliers, this guide goes beyond merely explaining what OTA commissions are. Instead, it offers you three expert strategies to significantly lower these costs, empowering you to optimize your operations and improve your bottom line.
Don’t worry, we’re here to help you figure out OTA fees and thrive in in the hospitality sector. With the right pricing strategy you can overcome OTA commission rates and stay competitive.
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Understanding OTA Commissions
OTA commissions are fees that hotels pay to online travel agencies (OTAs) for each booking made through their platform. These commissions are a significant expense for hotel owners, often eating into profit margins. Typically, commission rates can range widely, depending on multiple factors, including the hotel’s location, the OTA’s market dominance, and the specifics of the contract between the hotel and the OTA.
These commissions are included in every OTA contract, and will directly influence the price of each hotel room. The business of online travel agents rely on these hefty commission fees. It is not something that can be avoided if you want to ensure visibility to your rooms in OTA search results.
Why Reducing OTA Commissions Is Vital
Reducing OTA commissions isn’t just about saving money; it’s about taking control of your bookings and fostering direct relationships with your guests. When you reduce reliance on OTAs, you increase your profit margins, gain more insights into your guest preferences, and have the freedom to tailor the booking experience to meet your guests’ needs.
OTA commission fees can also be quite high and vary depending several factors. They can also sometimes prevent you from implementing offers like a loyalty program and reductions because you can’t afford to go any lower and still cover the 15% flat fee some OTA websites ask for. Your revenue management strategy needs to take this information into account in order to attract new customers.
Cut OTA Costs Dramatically: Top 3 Strategies for Hoteliers
1. Create a High-Converting Website
Your website is your most powerful tool for increasing direct bookings. A well-designed website tailored for the hospitality industry, equipped with a seamless booking process, can significantly reduce your reliance on OTAs.
Your website should feature:
- A prominent “Book Now” button
- An easy-to-use payment processing system to secure reservations
- Options for guests to add travel insurance
By focusing on a website that converts at zero cost and is always updated, you eliminate the barriers to direct booking.
As a hotel owner, having your own website can be a game-changer. Not only can you rely less on third party booking sites, but you also have more freedom to attract potential guests with a lower price, since you won’t have to negotiate commission rates on these reservations, and there won’t be any additional fees.
Not only will you get more direct bookings, but you can also leverage social media and improve guest communication and send them directly to your website, ensuring they don’t stop on the way to check out the competition and book directly with you. A must-have for small hotels.
2. Utilize a Free Booking Engine
Some services charge commissions or flat fees for direct bookings through your website or even from Google Hotel links on your Google My Business tab. Opt for a solution where direct bookings are free of charge, with no hidden fees for additional services like Google Hotel links. This strategy not only boosts your direct bookings but also ensures that you’re not losing money on the bookings you’ve worked hard to secure independently.
3. Leverage an Unlimited Channel Manager
The cost of connecting to multiple OTAs can quickly add up if your channel manager charges based on the number of OTA connections. A channel manager that allows for unlimited online travel agency connections at no extra cost can significantly reduce the financial burden of maintaining a broad online presence. This approach enables you to be present on as many OTAs as necessary without the added costs.
