Almost 60% percent of guests have dropped Online Travel Agencies (OTAs) in favour of other forms of bookings. So why still push them?
With direct bookings quickly replacing OTAs as the preferred way to book, it’s important for managers of lets between 15 to 30 rooms to understand how these choices will effect their revenue streams– especially during the high season. In this guide, we’ll do a deep dive on direct bookings vs OTA and guide you toward the right choice for your brand.
Table of Contents
Understanding the Basics
If you’ve been in this industry a while, you’ve probably used your fair share of Online Travel Agencies. OTAs comprise sites like Booking.com, Airbnb, or Expedia. They provide guests with the ability to book hotel rooms on demand and hotel owners some marketing in the form of exposure on their platform. Direct hotel bookings, on the other hand, avoid these third-party intermediaries and let guests book directly on your website.
Many hotels depend on a strategy that utilises both OTA booking to boost visibility and direct channels to boost revenue. An online travel agency may appear cheap for guests, however, they create disadvantages for serviced accommodation–which pay commissions per room booked on their platform. Similarly, while encouraging more direct bookings brings money back to your wallet, it reduces your hotel visibility to what guests may stumble upon in their search results.
The key is to strike the right balance between offering the best price point for guests and using an external booking channel for boosting brand awareness. And with online bookings set to dominate 74% of total revenue in the travel and tourism market, there’s no better time to take advantage.
The Local Context: UK’s Tourism Challenges
Brexit’s Impact on Hospitality
Customer data shows Brexit has taken its toll on the hospitality industry with tourism dropping by a third for the sector as a whole. Coupled with the pound’s value depreciating massively, many serviced accommodations have endured increased costs for importing goods, services, labour, and additional costs crucial to maximising hotel reservations.
Naturally, this is putting a lot of pressure on the profit most hoteliers expect during the busy season. However, despite waning international interest in traveling to UK shores, there’s been a great revival of interest locally.
Post-Pandemic Recovery and Domestic Tourism
There is, if you can believe it, a silver lining amid all of these challenges: the anticipated rebound in domestic tourism. In this sector, online bookings have soared. With many eager to explore within the United Kingdom, hotels have a golden opportunity to recover and thrive. However, this also means adapting to new consumer expectations, including how they prefer to book their stays.
Market research shows netizens of the United Kingdom overwhelmingly prefer to make their reservations online with 39% even preferring to book directly on a hotel’s website. This compares with just 17% who would opt to do so via an online travel agency. It seems, post-pandemic, travelers expect more out of their holidays from direct booking to destination.
Direct Bookings vs OTA: A Comparative Look
When weighing OTA vs direct booking, it’s important to look at the broader financial implications both OTA and other channels may bring.
Pros of OTA Booking:
✅ Broad Exposure
✅ Convenience for Guests
✅ Access to Hard-to-Reach Segments
✅ Wide Range of Options and Discounts
While managers of large properties benefit from the large advertising budgets OTAs like Expedia and Booking.com use to boost hotel visibility, this also comes at a cost, namely in the form of large commissions. Large chains tend to ask for up to 30% in fees, which, during a rampant labour and inflation crisis, nobody wants to pay.
Customers may prefer OTAs because it allows them to compare thousands of options in one place. Hoteliers may prefer OTAs for their ability to access hard-to-reach consumer segments. OTAs also tend to offer a wide range of options and discounts. However despite the convenience, frustrations experienced by travellers during the pandemic, with regards to booking flexibility, have significantly decreased consumer confidence in these third-party platforms.
Ultimately, your relationship with OTAs should be determined by the potential and actual ROI generated from these channels. Sometimes the exposure is worth the dent in the wallet and OTA booking comes in handy when last-minute vacancies need to be sold. But if your aim is higher revenue, then direct bookings might be the way to go.
Why Direct Booking is Often Better for Hotels
Direct bookings bring several advantages over OTA reservations. From reducing the reliance on commission-based platforms to fostering direct relationships with guests, the benefits are tangible.
Pros of Direct Booking:
✅ Stronger Guest Relationships
✅ Valuable Data Collection
✅ Control Over Pricing
✅ Protection against Over-booking
✅ Enhanced Guest Experience
Direct bookings allow hotels to gather valuable data, enabling personalised marketing strategies like exclusive benefits at your property, special offers, or implementing new loyalty programs to keep guests coming back. Direct bookings also allow guests for direct contact with serviced accommodations, which can make all the difference when seeking guest reviews.
To ensure you are maximising your revenue potential, use our RevPAR Calculator. This tool provides valuable insight into your revenue per available room, helping you to optimise your pricing strategy and improve financial performance.
