When is a hotel distribution dilemma no longer a dilemma?
One of the most frequent questions I’m asked by our hotelier clients is whether they should limit their investment with OTAs and spend more on trying to attract direct bookings, as OTA commissions are so high.
We have always said that OTAs should be a central part of any distribution strategy and we have advocated for a targeted blended distribution approach - which I believe is even more important as we start to recover from the pandemic.
Hotels need to draw on the reach and brand power of OTAs to raise visibility to international feeder markets and regions, which they traditionally struggle to penetrate, while focusing in-house market efforts on capturing local and drive-to demand.
That’s why I was so pleased to read about the findings of the recent research by Peter O’Connor, Professor of Strategy at University of Southern Australia Business School that now puts numbers behind that advice.
The study found “a statistically positive effect on profitability for hotels that participated in Booking.com compared to those that did not.” It actually found the positive effect of participation on ROA was 2.89 percentage points.
Interestingly, the findings also concluded that the positive association is stronger “as properties decrease in size,” and suggested this may be because smaller properties are usually owner managed and make less use of technology. Using OTAs such as Booking.com enables them to reach markets they otherwise wouldn’t be able to.
So it’s clear and settled; hotels that participate in Booking.com make more profit, with this effect more economically important and pronounced for smaller properties.
If you are a hotel revenue, distribution or marketing executive, I’d encourage you to read the full report.