Marketing your property via online travel agencies can be a complicated endeavor. There are many options to choose from with varying commission levels, target markets, and other features. In this guide, we will explore how you can best use OTAs as lucrative marketing channels for your property. Also, don’t miss our recently released Big Book of OTAs – Your Ultimate Guide to Distribution and Channel Management for your Hotel, Hostel, Vacation Rental, or B&B. At the end, see our OTA-at-a-glance breakdown, and compare them to learn which OTAs you should use for your property and business goals.
Online travel agencies, or OTAs, were originally designed to sell excess inventory in times of slow demand. Today, OTAs drive the majority of bookings around the world. They are a primary source of revenue for most hotels. In 2013, OTAs were responsible for almost $19 billion in hotel gross bookings in the United States alone, according to PhoCusWright’s white paper.
OTAs such as Expedia and Priceline have evolved into sophisticated marketing channels for hoteliers of all sizes. Never before have consumers been able to easily compare different travel options side-by-side in terms of price, time, and location. These platforms offer access to markets once unattainable by small hoteliers and hostel owners.
Online travel agencies offer consumers a versatile experience. Not only can they show the multitude of travel options, but also offer trusted reviews and accurate local information. OTAs have created their own brands that consumers trust and recognize as thought-leaders. Hoteliers leverage OTA’s brand when they list their property with them. For example, Lonely Planet reviews each of their properties individually. Guests trust their expert, first-hand opinion. Or, travel sites such as Expedia guarantee low pricing and travelers know they are getting the best deal.
Four major brands control the OTA market. Expedia, Priceline, Orbitz Worldwide, and Travelocity control about 95% of the market in the United States, according to Forbes. Recently, Expedia acquired Travelocity and announced plans to buy Orbitz. Expedia also owns hotels.com, which has 16 million monthly users. While Priceline, which enjoys 40 million monthly users, owns Booking.com. Booking.com is by far the largest player in the OTA space. While it is difficult to penetrate the market as an OTA competitor, the saturated market works in favor of the hotelier. Both consumers and hoteliers can benefit from the large companies’ ample resources and capabilities.
OTAs provide resources simply unavailable to most hoteliers. Many view OTAs as distribution channels, but they offer more than extended reach. OTAs create culturally appropriate online experiences. This includes currency conversions, language support, and tailored experiences based on purchasing habits. OTAs offer hoteliers access to non-brand loyal travelers, younger travelers, and the packaged traveler. Hotel loyalty members only make up 43% of the total US adult leisure traveler market. Thus, there is a large opportunity for OTAs to work for the smaller hotelier (source).
OTAs offer hoteliers and consumers much more than a distribution channel. Sites such as Expedia and TripAdvisor are often consumers first stop when researching travel plans. They can offer value to consumers at all stages of the buying process: problem recognition, information search, evaluation of alternatives, purchase decision, purchase, and postpurchase evaluation. But, OTAs also create the ‘billboard effect’. When guests discover hotels on OTAs, most of them do further research about the hotels using search engines, leading to direct website traffic, and increased direct reservations for hotels (source). A study conducted at Cornell estimates the incremental reservations from listing on an OTA from 7.5 to 26%. This does not include reservations booked on the OTA.
According to PhoCusWright, hoteliers must analyze both distribution and marketing costs. Hotels spend 6-9% of their revenue on sales and marketing, while OTAs spend 35-40%. When a room is booked on an OTA, it is wrong to assume that the booking would have happened without OTA participation. It is also wrong to assume and that those bookings do not create future booking opportunities.
Proprietary websites have their place in the market. But, a successful marketing distribution strategy effectively balances distribution. Creating a profitable distribution strategy is important for all property types, and is a combination of OTA connections and direct bookings.
While understanding the importance of online travel agencies, it is often time-consuming to decide the best sites for your business. Check out our analysis of the most popular OTAs in the world, below. Cloudbeds product myallocator integrates with all of them.
Disclaimer: We compiled the following from publicly available information that can change at any time. Please use this guide as a reference only. Contact OTAs directly to verify information before making any business decisions.
Airbnb helps travelers live like locals. 74% of properties are located outside the main hotel districts. This travel website is diverse in listings and can be accessed by almost anyone from air beds in apartments to enchanted castles, according to Airbnb’s website.
Ctrip is China’s leading travel website. They provide service to more than 90 million registered members. There are more than 70,000 hotels listed, 30 million reviews, and 400,000 international hotels (source). Ctrip is a strong brand within China and dominates their local market.
With all of the different online travel agencies to choose from, we have created a short list of which ones you should join based on your property type.
Bed and Breakfasts are small lodging establishments that offer guests a unique, quirky experience. B&Bs are perfect for romantic getaways, the adventurous traveler, and guests seeking a relaxed, unique experience. B&Bs are most likely to attract wealthier guests (source). Because B&Bs are typically smaller than independent hotels, choosing OTAs with low commissions is important. OTAs focused on unique experiences is also important.
Higher Commission but prominent B&B presence
Hostels are perfect for backpackers, adventure travellers, and budget travellers. Hostels are great for trips with multiple locations, large groups, and small budgets. These types of venues should focus on OTAs with low commissions and niche target markets.
Vacation Rentals are properties that rent the entire house or a complex of houses. They are perfect for couples, honeymooners, families, and groups. Although the property comes with a higher price tag, the ability to house many people makes it a cheap alternative. Vacation rentals should avoid high commission OTAs and focus on travel websites with low commission models.
Independent Hotels offer anywhere from 10-100 rooms. Hotels generally attract all types of guests. Couples, families, and solo travellers frequent independent hotels for their amenities and unique charm. These tourists want to be ingrained in local culture and have the inside scoop. Independent hotels should focus on niche OTAs with low commissions. Limited use of more expensive OTAs is also plausible.
Lower commission and niche:
Hotel Groups include companies that own 3-10 large, luxurious properties. These type of properties also attract different types of guests. Travelers who appreciate unique experiences in a luxurious setting. These travelers want to feel like locals and have the inside scoop. Hotel groups should focus on the low-commission niche OTAs, but also use more expensive OTAs when necessary to move inventory.
Large Hotel Chains often have 100+ rooms that are fairly cheap. They attract many different types of guests. Business travellers, families, and tourists are all attracted to these properties. Guests usually know what to expect from large chain franchises and enjoy their amenities. Because they offer so many rooms, worrying about commission is not as important as filling vacant inventory.
If you need help getting set up on the major OTAs, check out our article on how to get connected.
Online travel agencies offer property owners of all types a lot of opportunity. From extended reach to extensive consumer information, OTAs hold a lot of significance for consumers. Not every OTA is right for every property. By analyzing each OTA and identifying what works best for your property and leverage OTAs to their full advantage.