The impact of Direct Bookings on your hotel

Impact of direct bookings on hotel businesses

As a hotelier, you absolutely cannot ignore the importance and vast market size of OTAs when you plan to generate more bookings. After all, OTAs have been around for over two decades now and they have revolutionized the whole hotel booking process.

However, you end up paying a huge percentage of your booking amount to them! Also, they control all the guest information, preventing you from being able to reach out to guests before they check in to your hotel. Thus, you miss out on one of the critical aspects of your guest service – pre-arrival personalization.

Having said that, there are a good number of convincing reasons to focus on driving more hotel direct bookings. This blog is going to throw some light on a few of these reasons.

1. Generate more direct booking, stop losing revenue in terms of OTA commissions

  1. You save anywhere between 15% – 25% on commission amount that you pay to OTAs
  2. Plus, you get a hold of your guest data as OTAs generally don’t share them with you

Just imagine, with an average of 15% to 25% commission rate, the kind of amount you need to pay when you get around 60% of your bookings from OTAs. Now, how it would look when you generate around the same amount of bookings directly and for the rest 40%, you are still dependent on OTAs.

The entire revenue earned via direct channels is yours.

  1. With direct booking, your hotel’s acquisition cost per guest goes down
  2. Direct booking, coming via your booking engine, leads to an average of 2X increase in booking value compared to OTA. This is mainly because, on OTAs, you can only promote packages which leads to price rise. This may prevent a traveler from making the booking. But, you can promote add-ons via your hotel booking engine.

Impact of direct bookings on hotel businesses

2. Ensure less booking cancellation, no more lost revenue

Hotels must deal with around 40% cancellation of bookings that they get from OTAs. Don’t believe it? According to a 2016 report, cancellations on Booking.com is 104% more than on the hotel website and on Expedia, this is 31% more.

Reason – To prompt guests customers to book through them, OTAs offer ‘Free cancellation’ or ‘Pay at hotel’ policy. As customers don’t have to pay any advance amount while booking, the cancellation percentage goes up. Plus, guests tend to book with multiple properties while booking via an OTA. They generally do it as they wait till the last minute until they finalize the destination. Ultimately, they have to keep one booking and abandon others.

Such cancellations translate into ‘lost revenue’ and ‘loss of opportunity’. And this gets more serious in the absence of a well-planned revenue management strategy, as this can also throw your hotel’s occupancy forecast off the track.

 Impact of direct bookings on hotel businesses

 Impact of direct bookings on hotel businesses

However, if you manage to acquire maximum direct bookings via your hotel website, things can improve. This is because, generally, guests have to pay some advance amount while making a reservation at your hotel. This prevents them from cancelling their bookings under normal circumstances.

Having been a part of the Hospitality industry for the last 10 years, we can assure you that the cancellation rate coming through a hotel website is significantly low compared to cancellations originating from OTA channels.

3. Grow your customer database, talk to them directly and get repeat business from them

Many OTAs have a policy of not providing guest mail IDs to hotels. This restriction prevents you from communicating with your guests before their arrival at your hotel. Thus, you can not get in touch with them to understand what more you can add to your services. In simple words, you can not ensure pre-arrival personalization for your guests.

Plus, if you forget to capture guests’ contact details during peak seasons when check-in/out and your business is at full throttle, you are absolutely left with nothing. You cannot re-target them and market/promote your brand to them and you will never be able to get repeat business from them. In such cases, you will have to keep paying commission to your OTA partner in order to get bookings from the same customer.

However, you manage to attract guests directly via your website, or even if a guest walks into your hotel, this issue is automatically resolved. With every booking, you can get the guest to furnish personal details like phone number, mail id etc.

With such gold mines of information at hand, you can communicate directly with your past guests. Send them targeted communications/promotions. Tell them how you keep trying to make their next stay memorable. They like it all and more likely, they would keep coming back directly to you.

So, why Increase hotel direct bookings?

The answer to the question “Why increase hotel Direct Bookings?” is simple and straightforward. All you’ve to do is to ask yourself on “whether you want to grow your hotel business consistently” or “you’re happy with the immediate benefits with OTA’s”.

Impact of direct bookings on hotel businesses

Mohammed Azam

Azam is the product marketing champ at Hotelogix. When he is not busy ideating, you’ll find him playing one of these- chess, pool, cricket or the guitar. An ardent start-up and tech geek, Azam is a big fan of all things relating to marketing. You can get in touch with him at mohammed.azam@hotelogix.com