Maximize Your Hotel Revenue Using OTAs with Larose Suria
November 21, 2022
Article by Ayna Gonzales
OTAs or Online Travel Agencies are third-party booking channels travelers use to find accommodations during their trips. In a 2022 study, hospitalitynet.org reported that while direct bookings are on the rise, 17% of guests still use OTAs to book hotels and nearly everyone used OTAs to do their initial research before making final reservations.
While OTAs do get a bad reputation for their high commission fees, it’s careless to think that these booking channels are dispensable in the customer’s online booking process. In fact, OTAs play a large role not just in driving hotel revenue but also in improving online visibility and marketing.
To learn more about how OTAs can help hoteliers maximize their revenue, our zenrooms Revenue Manager Larose Suria shared her expert views on optimizing these platforms.
Larose has over 10 years of hospitality experience, specializing in revenue management and analysis. She manages our teams of analysts, distribution specialists, and business development units across Southeast Asia and overseas overall pricing strategies of Partner Hotels.
Why should hoteliers still list with OTAs when they have their own reservation systems?
“When you have a listing with OTA channels you can reap the benefits of not spending more marketing expenses. One of the perks of joining OTAs is we get more exposure to a market that might not search for your website or property name directly,” says Larose.
Hotel marketing expenses are some of the biggest costs associated with running a hotel. With an OTA, hoteliers automatically enjoy more exposure to customers and are introduced to guests outside their normal target audience.
A small- or medium-sized hotel can double or triple their monthly views and exposure just by listing with a popular OTA. Compared to running their own marketing campaign to reach the same level of traffic, using an OTAs established network is the more economical and effective route.
Furthermore, hotels that don’t have the capacity to run marketing campaigns can also benefit from sitewide efforts that their OTAs implement.
“Usually people go for their preferred OTA channel and filter by area that they want to travel to. A hotel can enjoy more visibility if they join a campaign or promotion that OTA created where usually they spend a lot of marketing expenses to make those campaigns successful,’ notes Larose.
OTAs usually cover the majority of a hotel’s marketing expenses on their website however, those benefits do come at a price – their booking or commission fees.
How can hoteliers offset OTA commission fees? How should hoteliers price their rooms on OTAs compared to the rates on their own websites?
Did you know that OTA fees can go as high as 20% per booking? So while OTA do provide hotels with large visibility, it isn’t without a substantial trade-off. It’s usually these booking fees that deter smaller hotels from listing with OTAs for fear that their profit would suffer in the long run.
Even though someone’s first instinct would be to increase room rates to cover the commission fees, Larose advises against impulsive pricing decisions.
“Usually, what we can do if the commission is too high for property cost, we can increase the hotel price to offset those fees. However, that might make your possibility to gain booking decrease because if competitors in your area sell cheaper than that price with the same value, guests will choose the property with cheaper price,” explains Larose.
Before committing to a price increase, it’s best to look into factors that will significantly affect the amount of booking your hotel will receive.
1. Check your competitors’ rates on OTAs. Make sure your increased rate is still a viable option for customers.
“Before increasing the price it's better to check on competitors in the area. See how much they are selling their rooms for and if their value is better or not,” says Larose.
“If covering the whole commission makes your property way too expensive, you can increase part of the commission amount and think of the rest as marketing expenses.”
2. Remember to adhere to OTA guidelines. Check if you can negotiate better rates for your hotel.
Larose advises hoteliers to consult with their OTA contacts before making drastic changes.
“It is best to recheck the contract between property and OTA if there might be a clause that demands prices on the OTA and on the property’s website be the same.”
Some OTAs can fine or even sue hotels that go against their contracts. It’s always better to try to negotiate a compromise. OTAs will be more willing to bend the rules a bit so they can keep their clients.
3. Maintain rate parity against competitors and prevailing market rates.
“If competitors are able to provide similar services while having the same quality of properties like yours then it is best to re-strategise if maybe some other cost reduction is needed or simplifying those benefits to be more cost effective,” says Larose.
Oftentimes, hoteliers will resort to cutting out some services to justify the room prices or they’ll increase rates too much above the industry standard. While it does sometimes work, more often than not, these hotels suffer losses because customers have better choices offered to them.
There is, however, a way to calculate rates without having to compromise too much of your services or earnings. By using our Revenue Management System, hoteliers can enjoy auto-generated room prices that can compete with other businesses at any given time.
Learn more about how our Revenue Management System can increase your earnings. Schedule a FREE consultation today.
What are some disadvantages of using an OTA?
Larose notes two problems with OTAs that hoteliers don’t talk about:
1. Mandatory OTA campaigns and promotions
With OTAs, hoteliers often sign contracts that oblige them to join any or all marketing efforts and promotions the OTA organizes. Even if the campaign isn’t aligned with the hotel’s overall strategy, brand, or goals, they have no choice but to adhere to this policy.
Sometimes, if hotels aren’t pricing their rooms strategically, these campaigns can hinder their revenue goals and even cause losses in the long run. And even then, OTAs aren’t held liable for any losses because of the terms and conditions laid on in the contract.
2. Transparency and comparison of hotels
One of the reasons why customers use OTAs is the transparency of the sites. Guests can easily compare hotel rates and amenities and find reviews all in one place. This feature can be a double-edged sword for hotels.
On one hand, if their hotel is performing well and ticks off all the characteristics a customer is looking for, they can easily secure bookings. On the other hand, if hotels have poor reviews, unattractive rates, and few amenities, customers can easily filter them out without a second thought.
So with commission fees, competitor comparisons, and mandatory OTA promotions, how can hoteliers manage their OTA listing better to increase revenue?
Use a Channel Manager to maximize distribution across OTAs and increase overall bookings.
A Channel Manager is a hotel inventory and distribution software that helps hoteliers manage their third-party listings and integrate with the best OTAs in the industry.
With a channel manager, hotels can automatically distribute their rooms across OTAs to maximize their sales. The software adjusts prices to stay competitive within the booking site while also making sure rates are aligned with the preset hotel pricing rules.
Every time the market changes or customer trends shift, the channel manager along with the revenue management system will update rates instantly to prevent any losses. Hoteliers can rest easy knowing their rooms are always up to par with market prices and staying attractive to customers.
Learn more about channel management on our blog.
zenrooms Channel Manager helps hoteliers connect with 150+ OTAs and booking sites and automatically updates room availability and distribution.
The software also includes:
Single-point dashboard for easy management
Yield management features
Integration with hotel Revenue Management System
At the end of the day, even if a hotel is profitable on its own, Larose still emphasizes the importance of listing with OTAs to maximize revenue and bookings.
She says “It is still more advisable to list your property in every OTA channel that you know shares the same value with your property People always want to have better deals, want to be able to compare which properties will bring more benefit for them for the value they are paying for, and one of the ways people do the comparison is via OTA.”
By choosing to ignore OTAs, hoteliers risk losing out on significant revenue and bookings and potential brand awareness their massive marketing efforts produce. Listing with OTAs have far more benefits in the long run and allows hoteliers to reach more guests and establish their place in the industry as frontrunners.