Some commission payments makes sense. OTAs have worked hard to establish their brands.
This is an analysis by Brandon Dennis, vice president of marketing at Cloudbeds.
Many guests go to OTAs first to look for hotels, instead of going to Google or hotel websites. When you list your hotel inventory on OTAs, you open up new marketing channels. These fill inventory you would not have sold otherwise.
It is only fair that the OTA gets a commission on those reservations.
Your website is a different story.
If a guest goes straight to your website, it’s because you have established an attractive brand. No one else did that. You did.
When they find your website on Google, it's because Google thinks your website is the best fit for the guest’s search. You earned that by standing out, attracting quality backlinks, and producing amazing content. No one else did that. You did.
So it doesn’t make sense to give someone else a slice of your hard-earned revenue.
You already have an established brand
When guests arrive on your website, you present them with enticing offers to encourage them to book directly. Sometimes the offers are rate discounts guests can’t find on OTAs. When restricted by rate parity, you can instead offer a better value. These can include adventure packages, tours, free movies, and other deals.
In a sense, you are already “paying” for a direct booking by providing greater value on your website.
But when your booking engine charges a commission, they erode the profit you make from direct bookings.
You’re giving away money that’s already yours
Your hotel has been around for years, if not decades, and you've established a reputation. You have business travellers that always book with you because of your loyalty program. You see families who stay with you every year for their vacation. You get a lot of word-of-mouth business because you impress with your service and guests spread the word.
When you use a for-commission booking engine, you’re giving away a slice of each direct reservation you would have made anyway.
But there are lots of commission-free options.
It takes software to power an online booking engine. It makes sense, then, that the software maker who made your booking engine benefits from it. The problem is that there are already many commission-free booking engines out there.
Full disclosure--Cloudbeds has a commission-free booking engine. But we’re not the only ones. There are commission-free booking engines for nearly every website platform out there. This includes Wordpress, Squarespace, Shopify, and more.
Why choose a booking engine that takes a commission when you can choose one that doesn't? The only reason to pay commissions on direct bookings is if your website provider chooses not to support them. There are dozens, even hundreds, that do.
You’re already paying for ads
Hotel marketers have great success using Google AdWords to get bookings from Google users. Flash-deal websites, such as Groupon and LivingSocial, are also a lucrative advertising avenue. These ads send visitors to your website, where you hope to make a direct reservation that nets you more money than an OTA booking.
So why pay for ads, and then send those visitors to a for-commission booking engine? You’re paying for the privilege of paying a commission. A for-commission booking engine makes direct bookings less valuable. This loss in value could make online advertising not worth it.
Do the math
You’re already paying for ads, OTA listings, website software, flash-deals, packages, and more. That’s a huge investment into direct bookings that you’ve already made. To add a “tax” on top of each transaction erodes your profit to the point where all this advertising may not be worth it.
Direct reservations should be free. With the number of commission-free booking engines out there to choose from, there is no reason they shouldn’t be.
This is an analysis by Brandon Dennis, vice-president of marketing at Cloudbeds.
NB Image by Shutterstock