Oak Bay Beach Hotel
You’ve heard these names before: Expedia, Travelocity, Hotels.com. These sites and their imitators are known as OTAs or online travel agencies. They generate a growing number of bookings for BC Hotels and they have changed the hospitality playing field.
OTA’s are almost universally used by BC properties, and this high participation rate comes with costs for property operators. OTA’s commoditize room nights and compete for the lowest possible room rate. This squeezes profit margins, requires dedicated inventory and restricts discounts that hotel operators can offer on their own. The short term benefit for hotel operators that come from OTAs can sometimes be outweighed by the costs and restrictions that accompany a listing. This is the situation that our client found themselves in at the end of 2017.
A Four Diamond Hotel/Resort in Victoria BC found themselves selling too many OTA reserved rooms, and too few rooms booked directly by travelers. This was the case even though the rates offered at their own website was no more than what could be found on Expedia. The key difference for the operator is that rooms booked through an OTA come with a hefty commission ranging from 14% for hotel chains up to 30% for independent properties. All things being equal, any operator would prefer a direct booking over one that came through an OTA because it means they can make up to 30% more per night, even if the rate that the customer pays is exactly the same.
Our customer wished to reduce their dependence on OTA’s in order to increase profitability by attracting tourists to book directly with their resort, while maintaining the low rates offered by OTAs. To achieve this while still conforming to the terms of service required by OTA’s, we had to come up with a multi-step plan. We developed pricing and marketing materials that promoted extra benefits visitors could expect by booking directly with our client’s resort and we increased the client’s outbound marketing to include paid search and programmatic advertising targeting likely visitors.
By taking the marketing in-house and targeting the audiences where visitors had come from most often, we were able to customize our campaign to be as efficient as possible. Consistent monthly programs were put in place with a uniform budget that had to be less than the average monthly spend on OTA commissions. All of these efforts steered guests to book directly with the client rather than through an OTA portal.
Results: We were able to more than triple their directly booked room counts and enhance their visibility online to their primary audiences, reducing their dependence on OTAs with a budget that was just 40% of their average commission costs per month.
Our customer was able to increase profitability, reduce dependence on OTAs and maintain high occupancy rates all while spending less than the cost of their previous years OTA commission. By identifying their best customer profile they were able to hone their advertising, which reduced overall costs while increasing yield. The increase of brand specific advertising in the marketplace has increased organic searches for their property and established them as a go to destination when people are visiting Victoria BC.