June 25, 2019 · Stuart Butler
How An Over-Reliance On OTAs Will Put You Out Of Business
I’m seriously worried about what’s going to happen when the economy eventually takes a nose dive. Over-reliance on OTAs is going to put a lot of people out of business or force properties to sell to larger companies at a deeply discounted price.
Think about it. The last time the economy crashed, demand for travel decreased and hotels had to turn to the OTAs to drive occupancy. It was like a safety valve for the industry. Hotels could no longer fend for themselves, so they turned on the faucet and in came a new stream of guests courtesy of Expedia and Booking.com.
Back then, the OTAs didn’t have nearly as much weight as they do now. Hotels could afford to give up some of their margins in order to keep their doors open. This was great at the time.
What should have happened in the following decade of prosperity, where we saw increased occupancy and increased RevPar, hotels should have been weaning themselves off of the OTA drug and investing in building their own pipeline of new business. They should have focused on growing their owned assets such as their email database. They should have been encouraging more guest loyalty with a comprehensive strategy to turn third-party guests into direct bookers. Unfortunately, too many properties have become complacent and lazy and have accepted the situation as it is.
When the economy does dip (and it will), what will hotels do to survive? There is no safety valve this time. They can’t afford to give away more of their margins. There is no magical third-party who can drive new demand when you’re already reliant on those channels for your existing business. There is a ticking time bomb and no one knows when it’s going to go off. It could be days, months, or even years, but it will happen eventually.
The good news is that it’s never too late to start preparing. The economy is thriving and you can afford to invest your time and energy into direct booking strategies that help you get to an appropriate level of OTA reliance. For Fuel clients, we like to see this in the 8-15% range for independent hotels. That seems healthy to us. OTAs do a good job of finding you new guests that you may not have had a chance to reach were you not on these third-party sites. As long as you spend the appropriate amount of energy trying to get them to book direct for future stays.
So, how do you begin to unravel yourself from the OTAs? I recently wrote the following article on Hotel Executive that gives 10 ways to drive direct bookings in 2019.
If you’re not into reading, we also published similar content in audio format on the Fuel Podcast:
Fuel Hotel Marketing Podcast: Episode 115 – Top 10 Ways To Drive Direct Bookings Before OTAs Put You Out Of Business
Either way, now is the time to get started. Before it’s too late.