Why include OTAs in your hotel revenue management strategy (and how to do it)

If most hoteliers don't rave about OTAs, it's no surprise. Compared to traditional channels, online travel agencies have global scale and unparalleled economic capacity (in 2023, Booking.com alone invested nearly $7 billion in marketing). This effectively affords OTAs a strong position in their relationship with accommodations, enabling them to impose their own rules and conditions on them.

In addition to rather high sales commissions (15-18% on average), the conditions include having to accept a rating model based entirely on guest liking − reviews − and a visibility distribution system in which those who do not "conform" to the standards are heavily penalized.

Despite all this, there are few accommodations that have the strength to really do without Booking.com, Expedia, Airbnb, and the other portals. The reason is simple: all the customers are there.

In 2023, OTAs were used by 80 percent of travelers. Not only to finalize the reservation, but also to study the properties: 61% of them visited a portal before making a direct reservation on the site of their chosen hotel.

The reasons for this preference are varied:

• for 53%, OTAs allow them to plan trips faster, making them ideal for last minute trips,
• 47% choose them because it is easier to compare prices,
• while for 42% on OTAs it is easier to save money.

Moreover, in a context where people are increasingly accustomed to buying online from giants such as Amazon, Zalando or Netflix, it is clear that the distribution of goods and services through global digital brands is set to consolidate and increase more and more. It is predicted that, as early as 2028, 76 percent of total revenue in the travel and tourism industry will be generated through online sales.

This is why striking a balance with OTAs is crucial for any hospitality establishment that wants to be competitive in the market.

Despite the overwhelming power of OTAs, the post-pandemic years have shown that there is still room for disintermediation: in Europe, direct bookings were forecast to still outnumber intermediated bookings in 2023.

Similarly, physical travel agencies have not yet lost their strength and appeal to certain types of customers: in 2023, 12 percent of travelers turned to them.

So what is to be done? Which channel should be targeted?

One of the main tasks of revenue management is precisely to answer this question, assessing the potential of each individual distribution channel and then building a solid distribution strategy.

In this sense, it is also crucial to know how to balance the various channels, whether intermediary or direct, to diversify the sources of demand supply.

Doing so will ensure greater stability over time and limit the damage if for some reason a source of customers suddenly disappears.

In addition, retaining a significant share of non-brokered bookings (and especially of loyal customers) means keeping acquisition costs lower on average and thus profit margins higher.

This is why the decision to exclude OTAs from your strategy should come only after a serious and realistic evaluation. In most cases, presence on OTAs is critical for at least two reasons:

Ecco perché la decisione di escludere le OTA da questa strategia dovrebbe arrivare solo dopo una seria e realistica valutazione. Nella maggioranza dei casi, la presenza sulle OTA è fondamentale per almeno due motivi:

To achieve the same visibility offered by OTAs would require months and tens of thousands of euros spent on advertising campaigns. If you look at it this way, the commission that portals demand on sales is, on the whole, quite reasonable, especially for medium-sized independent accommodation.

Also, to reach the same geographic areas covered by OTAs, how many languages would you have to translate your website into? In how many countries would you have to rank on local search engines? An OTA does this work "for free”, making your listing available in all languages and across multiple market segments.

Large online portals spend significant amounts of money to make the user interface of their site or application more and more functional and comfortable. And they do not do this randomly, but based on the behavior of their own users. In this sense, it is very difficult for booking engines or websites to stand up to the shopping experience offered.

Should we therefore thank Booking.com and Expedia for existing? No, however, we need to be open to the idea that they exist and will probably continue to exist for quite a while. So the only sensible thing to do is to try to exploit their potential where and when it is beneficial for one's facility (without giving up promoting one's own vision of hospitality and values).

The most frequently asked question is how much scope to give OTAs within the inventory? Obviously, as much as it "suits" you: that is, all the space that other distribution channels fail to fill, or fill at a lower price or margin.

OTAs are usually beneficial when:

• an accommodation is new to the market, and you need all the input it can get to fill rooms, until you have reached the full productivity of other channels,
• you need to "plug holes" in occupancy due to unexpected market fluctuations, last-minute cancellations and forecast errors,
• demand is very strong. In this case, rates on OTAs can fly much higher (and plummet lower) than other distribution channels, giving you an opportunity to increase overall margins.

When a lodging establishment has reached a certain maturity in the market and full capacity in terms of productivity, then yes: it is time to work up to and invest in limiting acquisition costs by reducing investment in intermediary channels.

This involves gradually removing activities that incentivize booking on brokered channels and/or reducing the quota reserved for them, shifting resources and availability to direct channels (or at least the higher-margin channels).

It also means investing in targeted marketing measures to boost brand awareness and bring customers to your bookingengine, for example by following these 5 tips to increase direct bookings from the booking engine.

Forecasting is a pillar of revenue management and is also key to understanding how to integrate OTAs into your strategy because it allows you to determine the future performance of various distribution channels.

Each channel and each market segment has its own performance curve that follows seasonal (or event calendar) trends. By using forecasting, it is possible to predict with good approximation how each channel will perform over time and to decide in advance when and to what extent it makes sense to reserve portions of our room contingent for each.

If you have never done forecasting and want to get started, or if you have already done it and would like to get some more advice, read our article on how to reliably forecast room demand for your accommodation.

A good way to take advantage of OTAs is to position yourself on portals with dedicated products or packages. To give you an idea, you might decide to use a specific OTA to go after a target audience that you struggle to reach through other avenues.

It could be a specific type of clientele (such as the business segment) or a specific geographic area, or even a combination of two or more factors. You might think about using special cancellation terms or special included services on the OTA, perhaps dedicated discounts for certain geographic areas or for certain devices that match the target audience you are trying to hit.

As mentioned earlier, OTAs have the power to position you anywhere − if you are able to package the right offer, you could finally open up a new market for your facility to cultivate and retain over time.

Of course, in order to be really effective with dedicated discounts and packages, you have to know your target audience very well, you have to study their habits, needs and aspirations. These are all answers that require professional help or in-depth independent research.

For example, an excellent place to find data and research to sketch your target audience can be the institutional site of the ETC (European Travel Commission), with its many statistical researches conducted at the European level on tourist flows.

In addition to this, you need to know how to manage discounts on OTAs without damaging yourself. To learn more about techniques and tools, you can read our article on how to take advantage of discounts on OTAs effectively and without losing revenue.

In order to make the most of a channel, in addition to a targeted product, you must also have a lot of visibility. On OTAs, visibility translates to one word: ranking.

Each OTA defines its ranking according to its own specific algorithm, which is more or less secret and more or less constantly evolving. The algorithm depends on a very large number of factors, including preferences deduced from the behavior of individual users: from these preferences, the OTA understands which solutions are the most interesting for that user and offers them to first, increasing the probability of purchase.

In addition to preference profiling, however, there are also objective factors that can affect your accommodation's ranking: reviews, services offered, category, number of reservations generated, frequency of rate updates, conversion rate between listing visits and reservations received, and many others. An example? In this article, you will find all the steps to optimize your Booking.com listing and get more bookings.

Although these and other parameters are fairly well known, it is not easy to know to what extent each of them affects ranking. Therefore, the most effective way to improve your ranking is to be active on several fronts, following the advice provided by each individual OTA.

In this article you have seen why and how OTAs should be included in your revenue management strategy, with the aim of diversifying your distribution channels and gaining as much visibility as possible. Once you have decided to include one or more OTAs in your strategy, you will need to make sure you occupy the top positions in their rankings.

As we said, the OTAs themselves provide guidance to their partner establishments on how to increase the visibility of their listings, however, it can be complicated to collect them all: that's why we have created a checklist with the recommended actions to achieve maximum visibility on the most popular OTAs: Booking.com, Expedia, Agoda and Airbnb.