Working With OTAs Effectively
As we don’t want to help the big online travel agencies (OTAs) with their search engine marketing, we’ll refrain from mentioning them by name. We all know who THEY are and we all know how THEY work. These online travel agencies are both a blessing and a curse – but working with OTAs can be effective when approached the right way.
OTAs typically charge a percentage of each booking for working with them across the board. The percentage can vary based on your market and the size of your property. If you are an accommodation provider that is part of a brands global agreement, you have different rules that will impact how you can participate with third parties. Also, if you are part of a cluster revenue management group, that will also impact how you can work with third parties. For the sake of this article, we will look at how independent properties can work with third parties.
The positive aspects of working with the online travel agencies are varied. You have personal contact with your market manager. The market manager can help you understand the intricacies of the marketplace that you as the accommodation provider may not be aware of at any given time. Those who are managing their accommodation may have a team or may have themselves to rely upon to develop their own market intelligence. The market manager can supplement this information and make it easier to make decisions that are appropriate for your marketplace. You also have the marketing reach of these third parties. For your accommodation to have the reach, and subsequent marketing spend that these third parties provide, would be nearly impossible.
The drawbacks of working with the online travel agencies are also very apparent to many accommodation providers. They take a percentage of your room profit. They may not attract the type of guests you want in the room type you want. The guests may be loyal to that third party and not your property. There may be technology issues between your system and that of the third party that can cause chaos if an interruption occurs. There may also be issues with using that third parties proprietary system and then using another third parties system as well as your own system to constantly manager your inventory in real time. It can be time consuming.
The hope is that these third parties can fill rooms you wouldn’t have filled on your own.
How does all of this impact your revenue management? It is part of the mix of considerations when you are developing your ADR and RevPAR goals, both short term and long term. Does this mean you raise all of your rates to compensate for the rate you are giving to these third parties? Which strategy will you take in the marketplace to determine how you set your rates and how you also develop your strategies to drive bottom line growth. This is a very complex mix of outside influences that will impact how you make your revenue decisions.
Ask us how we can help define your revenue management strategy and grow your bottom line.