Many hotels and hotel chains have come to the conclusion that the most important channel is the direct channel, since it generates the greatest margin and profitability, in comparison with other channels like the OTA’s or others.
We agree that taking the step of prioritizing the direct channel has represented a breakthrough in the hotel industry in the last decade, but we believe that much work remains to be done to make the direct channel not only a priority channel, but the most important channel.
It is very important to understand why at this moment it is not and never will be if the necessary actions are not taken. There are three main factors that make channels such as OTAs (Booking, Expedia or others) more important than the direct channel:
1. They generate more bookings than the direct channel, since the hotel pays to the OTA’s a commission that is 5 – 10 times greater than the expense in the direct channel and this way the OTAs can invest in technology, digital strategy, campaigns and consequently become the main source of reservations for the hotel.
2. Price parity. The hotel loses money with price parity contracts under the conditions in which a user who does not know the hotel and does not search for his name directly on Google, but does a search on Google or in the OTAs for generic terms like ”hotel in x city”. Why? Because, although the user visits our website after seeing our hotel in an OTA and for the same room has to pay the same price, he does not end up booking on our website, since it does not offer any benefits and only causes a loss of time because has to enter his data.
All OTA threats, according to which a hotel that has the lowest price on the web will lose position in the OTA’s “display”, have made many hotels afraid to lose their bookings and offer OTA’s the same price as the price of the web itself. Apart from being a measure that is banned in half of the countries of Europe, it is a strategy of the OTA’s that causes a lot of losses to the hotel.
3. Different cancellation policies and conditions. OTAs often apply strategies that in our opinion should not be allowed by any hotel that wants to prioritize its direct channel. These strategies consist of the resignation by the OTAs to an X part of the commission itself with the aim of offering better conditions to the clients. In this way we can find in the web of an OTA rooms with breakfast included that in the web of the hotel have the same price, but without breakfast; Rooms with free cancellation that on the web of the hotel have the cost for cancellation one night of lodging, etc. In order to offer the best conditions to the clients and thus increase the direct reservations, it would be optimal that the hotel prohibits to the OTA’s the commercialization of the rooms with better conditions than in the web of the hotel.
Since the invention of the coin, no one has ever been interested in buying a product or service to whom it offers a higher price or worse conditions, knowing that in another place can find it at a better price, with better conditions and greater ease of acquisition.