MASTERCLASS: How to maximise ROI when experimenting with OTAs

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“I want to experiment with package deals with OTAs, what’s the best way to go about this to ensure I’m getting the best return?”

Niamh Power, head of client strategy at Avvio, says: Shop around for which OTAs to work with. Typically, Expedia and Priceline (which encompasses Booking.com and many others) own the biggest market share. Duetto has reported that Expedia controls approximately 70% of third party bookings in the USA, while Priceline controls roughly 62% of European OTA bookings. The two big players are likely to be safe bets to invest in. Due to their ample spending on advertising, remarketing and pay per click (PPC) campaigns, travellers are likely to think of these brands first when looking to book a place to stay.

Yet this is not to say that smaller brands aren’t worth thinking about and you should try a variety of OTAs to determine which channel sits best with your target audience. The key is to distribute your budget so that you’re not relying solely on one OTA. This will also help you negotiate a good deal with each OTA as you can play them against each other.

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While deciding which OTAs to work with, make note of their booking cancellation rates. According to Mirai, Booking.com’s average rate is 104% higher than the average hotel’s website, while Expedia’s average cancellation rate is 31% higher. It’s critical to pay particular attention to the cancellation rates on each channel and use these to guide you how much to overbook. It goes without saying that you should put restrictions in place to reduce cancellations across all channels.

Comb through your contract
Negotiate a good deal with your chosen provider. Don’t just go with the first contract they offer you – this is your chance to really ramp up the return on your investment. Firstly, try to get a discounted commission rate, and ensure you understand the volume of bookings you’re likely to receive from them. Ask them to provide a calculation of expected revenue, based on a similar property that they’re already working with.

You need to check the fine print of your contract with each OTA. For example, ensure you have a dynamic rate strategy, which will enable you to adjust and adapt your room rates to the season and marketplace so that you can offer more competitive deals to potential guests and attract more bookings. You should also avoid set room allocation, which limits flexibility and fluidity of inventory. Set room allocation means that if you give, let’s say, five rooms per night to Booking.com and then you sell out of available rooms on your own website, you won’t be able to pull the rooms from Booking.com. Avoid this so that you have the power to pull back those rooms and drive direct bookings.

Further to this, it’s worth pushing OTAs to not bid on your brand name in search results. Because OTAs have a huge PPC spend, if they bid on your brand name, they display in the top search results alongside your website, even when a traveller searches specifically for your brand name. This will drive travellers to book via the OTA rather than through your direct channel, resulting in a lower ROI on the booking. Our hotel partners have had some success negotiating with OTAs, so that they don’t bid for the brand name, enabling the hotel’s direct site to show up higher in the search engine results and drive more direct bookings.

To learn more about how Avvio can help you improve your direct booking revenue, visit www.avvio.com.

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