The cost of acquiring guests is significant in the Australian hotel sector and can affect your hotel’s profitability greatly. For instance, online travel agencies (OTAs) charge between 15 and 25 percent commission for every booking they secure, with hotels also paying substantial transaction fees to their selling systems if the reservation is received through them.
For many hoteliers, OTAs are an accepted part of the distribution toolkit due to their marketing power and high customer traffic. However, they should not make up a majority of sales or distribution given these channels’ costs influence on the revenue hotels can secure from each guest – impacting a property’s bottom line.
In a competitive operating environment where profit margins are strained, revenue managers must determine the cost structure of each booking channel, and assess their impact on hotel profitability.
Through capturing channel costs by looking at each booking endpoint in their distribution ecosystem—from direct online bookings through each Global Distribution System (GDS), OTA and group booking partner – hoteliers can effectively review and analyse their acquisition outlay.
Once a hotel has a clean data set from which it can isolate its channel costs, revenue managers can measure channel performance using metrics such as net revenue and net ADR. These metrics, which account for channel costs, inform whether to take more or less of the available demand through various channels.
A hotel that knows the cost of its booking channels also has greater power when it comes to contract negotiations with booking partners. This includes deciding how to agree to a fair commission percentage, or which rate and availability parity clauses to agree upon (and how a hotel is penalised for authorised breaking of said clauses within a contract).
Convert your ‘lookers’ into ‘bookers’
The most cost-effective online booking channel for a hotel remains its own website. How can hoteliers maximise direct bookings through their website?
The first step is increasing web traffic from potential guests and attracting more ‘lookers.’ To do this, hotels need to understand more about those lookers. What dates are they searching for, where do they search and what is driving them to a particular market? Collecting this market intelligence provides data that can be used to develop targeted marketing campaigns that attract the right type of lookers, the ones most likely to become bookers.
Hoteliers can also increase direct bookings by retargeting past visitors and directing them to their website. When researching a location, potential guests may visit a variety of travel websites and OTAs before deciding where to stay.
Hotels need to keep their property on the top of the consumer’s mind and influence guests to book on the hotel’s website. Technology that offers tailored adverts customised around visitor behaviour or website activity can help hotels achieve an estimated 10 percent return rate on website visits – increasing direct booking opportunities and positively impacting on hotel profitability.