Pay OTAs Commission OR Pay For Direct Bookings?

When marketers like myself state you should be increasing your direct bookings through paid media, you may have some of the below thoughts:

  • Will the cost of servicing & media spend really be less than the commission we pay?
  • If cost was like for like, what’s so special about more direct bookings?
  • Is the risk worth the reward?

For anyone managing a budget, all of these questions are valid and it’s the job of your marketing specialist to make sure you know all the facts upfront.

In todays blog, we want to give you our balanced take on using paid media to increase direct bookings VS solely relying on the OTAs.

Cost to start: OTAs

To begin selling inventory on the likes of & Expedia couldn’t be easier. In 2021, these companies have made the journey to connect your hotel with their websites very streamlined. Afterall, the faster you are live, the faster they make money.

To get set up with paid media however is an altogether more complex process. First, you need the expertise, then, you need to connect your booking engine to meta-search. Then, you need your tracking set up. Then, you need your search ads set up, altogether taking 3 – 5 weeks, if done by experts. 3 – 5 weeks is quite a bit of upfront time and money.

To get to the start line, OTAs win, but thankfully for you, both are still relatively quick compared to some technical tasks.

Risk: Draw

Originally we had this down as the OTAs winning because you only pay when a sale is made via their platform whereas for paid media, you may be investing a few £££ for management and then investing over a learning period where you should allow for the CPB’s to be unprofitable (not saying they will be!).

However, we then considered the long term play with both channels. When you consider OTAs are under pressure and how hotels are gradually ‘waking up’ to the importance of owning the interaction, the future is not certain for the likes of & others. If they went bust tomorrow and you rely on them for 40% of your bookings, you will find yourself in deep trouble. Paid media on the other hand isn’t married to one platform or the other, it’s dynamic. Today, Google is dominant for paid but depending on performance, budget is also allocated to the likes of TripAdvisor, Bing & Kayak. If the market changes, we will simply adjust and your inventory will continue to be sold at the best market rate.

Overall, both arguments are valid so, no one wins here.

Data: Direct

The OTAs are building their own walled gardens of data. Within this garden, they have all the guest information that you could use for upsells, remarketing future stays, ensuring a great stay experience and much more. The problem? They aren’t sharing.

Bookings made through your website on the other hand bring with them all the data that you can use to build your own walled garden, allowing you to venture deep into the likes of email marketing, which has an average ROI of  £36 for every £1 spent and much more. Imagine if half your bookings were repeated guests, how much would this push up your demand and RevPAR!?

Hands down, direct bookings are best for customer data.

Cost Per Booking: Direct

Looking across multiple regions, the data is pretty clear that Google’s meta-search produces lower CPBs than OTAs. The average OTA commission in the UK is about 18% whereas we have found meta-search on Google in 2019 to cost an average of 6% per booking. If for one year you sold 25 rooms per day at £80 via direct instead of the OTAs, that’s £86.6k saved per year. Now, if you increase the room # or RevPAR and you find the gap widens more and more.

Best approach: Both

Before you start thinking of cutting the OTAs out altogether, it’s worth noting that they are still introducing you to many potential travelers who may have otherwise not found your hotel. It’s also important to be diversified – some guests from brands awareness, others from email, others from paid and others still from OTAs, this way you can afford for 1 or 2 channels to go haywire you will still be fine.

So, will the cost & media spend be less than OTA commissions? Yes, the data suggests so. What’s so special about direct bookings? The data you keep. Is the risk worth the reward? Absolutely, it’s just about taking that first step.

If you would like direction on how to diversify your distribution channels to include more direct bookings, we’d be happy to help out, you can reach out here🤙