By Cloudbeds | Published on August 21, 2020
What is a direct booking?
Direct bookings are reservations that guests confirm directly with a hotel (or other property types), without using an OTA or 3rd party intermediary. They’re normally made on the hotel’s website, over the phone/email with the sales team, or by walk-in guests. Direct bookings are beneficial because they connect hotels directly with their guests and save them money on distribution commissions.
As you probably know, direct bookings have become an important part of any hotel’s distribution mix. By building greater brand loyalty and giving you direct access to your guests, direct bookings can be a powerful force in reducing your customer acquisition costs and improving your profitability.
Still, it’s important to note that all bookings are innately good. Often when we discuss the importance of direct bookings it sounds as if we’re arguing that somehow third-party bookings are bad, when they’re not. It’s true that different types of bookings will bring you varying amounts of revenue and profit. While OTAs take a percentage of your nightly rate, it’s still revenue you may not have obtained somewhere else.
Before we jump into some concrete tactics for capturing more direct sales, let’s quickly review the differences between metasearch, online travel agencies, and direct bookings. This brief review will give you the foundation to understand the place of direct sales within the context of your hotel’s distribution strategy. Then, we can optimize, optimize, optimize!
Metasearch vs. OTAs. vs. Hotel Direct Bookings
Part of creating a winning distribution strategy is meeting your customers where they are. Three of the largest sources of bookings for hotels and other properties are online travel agencies, metasearch websites, and your hotel’s own website. Each booking source has its own advantages and challenges, so it’s helpful to know the differences when developing your property’s distribution strategy. Developing a dynamic channel mix that you adjust to your property’s changing needs is a key part of building a successful “book direct” initiative.
Online travel agencies (OTAs), such as Expedia, Airbnb, and Booking.com, are widely used by travelers around the world. The majority of OTA bookings come with a commission fee. This means that guests create their reservations and process their payments via the OTA website, and the OTAs keep a negotiated commission per booking before distributing the remaining payment amount to hotels. Commission fees for some channels can sometimes be as high as 15% per booking!
Benefits: Easy access to travelers worldwide; access to niche markets via region-specific OTAs, like Ctrip, or property-specific ones like Mr and Mrs Smith for boutique hotels; visibility to travelers that may not have been aware of your hotel before searching (also known as the billboard effect, where consumers visit an OTA for research and eventually book direct); marketing promotions and inventory allotments give you control over the share of OTA sales in your distribution mix.
Challenges: High commission rates for the more popular OTAs and rising commissions over the years; access to very little information about the guests who book your hotel on an OTA; less control over the guest experience as their first point of contact is with the OTA.
Metasearch sites, such as Kayak, TripAdvisor, and Trivago, allow consumers to compare prices across multiple websites. Hotels then bid on advertising placement and only pay when a consumer clicks on the ad. Google’s Free Booking Links on Hotel Search on the other hand are changing the game in the travel space. Metasearch differs from OTAs in that it works on a non-commission model, instead, you pay a cost per click (CPC). You can set a budget for how much you want to bid for each click and adjust bids to optimize your overall strategy.
Benefits: Visibility of your hotel during traveler research; the CPC model levels the playing field by leading travelers to reserve directly on your website, giving you ownership of the relationship; the CPC model also makes it easy to scale demand as needed; you only pay for performance.
Challenges: You’re competing in an open auction, which often rewards bigger budgets; fluctuating CPC bids based on market demand means that you must keep a close eye on your performance to avoid overspending.
Direct hotel booking allow the hotel to transact directly with bookers. The advantages of direct sales are twofold: the hotel doesn’t pay commission to third-parties and maintains a direct relationship with the customer. However, these bookings aren’t completely free. First, you have to have an online booking engine on your website to be able to take your own reservations and process payments, even if they are commission-free. Second, you will still have to invest in marketing efforts to attract travelers and remain competitive in your market.
Benefits: Direct bookings give you a one-on-one relationship with guests; more opportunities for upsells before arrival; no commissions paid to third-party OTAs or other marketplaces means more revenue and profits for your hotel; loyalty bookings can lower overall cost by increasing the lifetime value of each guest.
Challenges: Direct bookings require strong digital marketing skills or the services of expert hotel marketing agencies to keep costs low compared to other channels.
Kalibri Labs study shows the change in booking costs over the years.
How to Increase Direct Hotel Bookings
Now that we’ve talked about their value, let’s look at some key tactics to increase those direct sales at your hotel. As you look to increase your direct bookings, remember that small improvements amplify over time, so don’t get discouraged if you don’t see results overnight. Each 1% increase in direct sales is a win worth celebrating! Eventually, you can rely less and less on OTAs, metasearch, and other third-party, commission-charging sources for your bookings.
Here are a few ways to increase your hotel’s direct bookings:
1. Use a commission-free booking engine
Look for a commission-free booking engine that’s also mobile-friendly: mobile devices account for a significant share of travel research and booking, with Euromonitor estimating that 1 in 4 travel bookings will be on mobile by 2024. Mobile usability will maintain the competitiveness of your own channel.
Also, make sure the booking process is limited to two or three steps and includes a rate checker so consumers can compare prices right from your website. That way, you keep them from leaving your site to rate shop on OTAs and you also give them a reason to book by showing that you have the best rate.
2. Build an eye-catching, user-friendly hotel website
Your website is often the first impression potential guests will have of your property. Go the extra mile to keep your site updated and use high-quality images of all your rooms and property area. Simplify the booking flow by providing a modern and seamless experience to further encourage travelers to book. Also, make sure that you have a bold, colorful call-to-action (CTA), like “Book Now,” on every page of your website.
3. Leverage digital marketing
This is where boosting direct sales can get a bit tricky. Instead of relying on OTAs for their marketing muscle, you’ll have to run hotel marketing campaigns yourself. Begin by looking at your property management system data to identify guest segments most likely to book direct. Then, come up with targeted offers and messaging to each segment as a test to learn what works. It’s all about continuous improvement!
4. Lean into loyalty
Your past guests are a gold mine when it comes to rebooking. Re-engage past customers using an email marketing campaign with compelling discounts and offers. Also, if you don’t have one, consider launching a loyalty program. Travelers respond well to these programs, and you’ll learn a lot more about your best guest profiles. Your loyalty programs don’t have to be complicated, with points and redemptions…It could be as simple as promising “Members Only” rates.
5. Get active on social media
Social media is a fantastic way to strengthen and promote your brand and build relationships with both past and potential guests. Encourage social content sharing around your property by creating your own hashtag and even building “Instagrammable” corners to encourage guests to post and share photos. You can then reshare content posted by guests. Nurture and engage with your community online, and then make periodic offers or exclusive packages just for your followers. For more tips and examples, get your copy of our ebook: How Hotels Win on Social Media in 2021.
6. Personalize the guest experience
Guest profiles within your PMS can contain detailed information, such as birthdays, anniversaries, and special requests. You can use this information to build guest relationships and offer personalized services, special discounts and deals during their stay.
For instance, say one of your guests recently visited your property for an anniversary trip, and they noted that they have a gluten allergy. Imagine the guest’s reaction if you send him or her a note informing that your restaurant has recently expanded its gluten-free options and offering a discount on a room for their approaching anniversary. Personalized service creates lasting customer loyalty and encourages repeat visits and direct bookings.
7. Be responsive online
From OTAs to online directories and community forums, like Yelp, travelers from all over the world have open platforms to rate and review your hotel. Your future guests are likely to visit some of these sites when researching your property. Be sure to inspect your property listings on OTAs and directories, and respond to reviews when you can. A personal, well-tempered comment from the owner or manager looks good to guests and improves your brand’s perception. Those same guests are more likely to visit your website and book there.
You can also set up Google Alerts to email you whenever someone mentions your hotel’s name online. It’s free! These automated alerts will help you keep up with any new online mentions about your property. Lastly, you can also attend the Book Direct Show or follow its speakers who share actionable education and expertise on how to achieve more direct bookings.
Reducing the amount of dependency on OTAs and increasing direct booking revenue can create a higher bottom line for your property. Still, keep in mind that the best reservation is the one that pays the property the most in value (Total RevPAR) and was acquired through the least amount of expense and means (Cost of Acquisition or CaC). Sometimes the commission costs paid to OTAs are actually less than costs incurred on an individual marketing campaign. Remember to track these costs as you test different ways to drive direct bookings. Increasing hotel direct bookings requires cleverness and creativity, but it will be well worth it when you start driving more direct bookings and keeping more of your revenue than ever before!
Ready to start driving more sales at your property? Give Cloudbeds a try.