And why your “no fees, only commissions” mantra is killing the hospitality industry
Hoteliers and other accommodation hosts complain a lot. That’s very unusual, being in a happy business. And although the pandemic took a great toll on our wonderful sector, not many gave up – on the contrary, I have never seen so much positivity looking to the future where everything gets better – maybe as good as in 2019 plus some bonus changes added.
One of the things not going to change after the pandemic is the way how hospitality businesses are handling their marketing and promotion. To fill rooms and get heads in beds they will be handing over their inventory to the likes of Booking and Expedia. Like lambs to the slaughter they will be paying their commissions – one of the highest promotion costs of any industry. And yes, they complain but “we have no choice”, “you can’t ignore Booking, Expedia, HRS, etc, etc”.
And I even haven’t mentioned Google yet. They are quickly becoming the biggest OTA (online travel agent), giving even Booking – previously their biggest advertiser – a run for their money. Google is creating an environment in which customers are caught on the first search page, are shown actual rates and book without ever visiting your website. You can advertise with Google, but if you don’t know the ins and outs of bidding for clicks there is another way of getting those direct bookings: pay commission… And you are still stuck with the competition of the OTAs who have made a business out of advertising with Google Hotel Ads (and are much better at it than you).
Do you have to surrender to the OTAs and Google and keep on paying sky-high commissions? NO! Of all the things the OTAs and Google do really well – and they do: perfecting the booking process, giving the image they publish better rates, payment transactions, etc, etc – they miss out on where you can stand out. OTAs and Google follow demand, that is why they focus on location (hello Google Maps!) and price. But as you are a hotelier or host that sells an experience, rather than a place to sleep at a certain location, you can create a demand and attract that looking customer the OTAs are not targeting. In other words: not getting your customers with location and price. For decades the mantra was “location, location, location” as if they rest of your offerings were not important. Nowadays almost every accommodation has competition location-wise. And yes, Google makes it so much easier to find these competitors. And as for pricing: you are not waiting for the bargain hunters either booking through the OTAs.
So you have found your niche and imagined your perfect customer. Then why you keep on giving your inventory to the OTAs, refusing to pay any other fees only commissions? Which in itself are fees, in the end you are paying, or rather the customer is paying. Customers have started noticing: an initiative like Moonback (who collected 2€ million in crowd funding) are taking on the OTAs and making the public aware of the high prices they are paying keeping the OTA industry up. Industry is actually an overstatement, as only two companies – Booking Holdings and Expedia – are controlling 90% of this market.
As much as I like the Moonback initiative it has a backfall, namely it presents the properties by location and price. It might do so later in another way (hire me!) but that is not helping you at the moment. Back to were we left off: you sell an experience. And you want direct bookings. There are thousands of online publications you can join. Probably you get approached by many to have you in their offerings. Be selective and join those that fit your niche. Or a bit bigger than your niche. For example you have no idea how big the market is for people who want to bring their dog. There are websites out there who work on commission only. As we have seen the fees are usually hidden in the commission rates. Another disadvantage of this is that those publications are ‘one channel sellers’. As they are dependent on those commissions, they shield off their channel as it is their only source of income. So they are missing out on customers who want to book through another channel – indeed you will always have customers going to Booking or TripAdvisor no matter what. The sites and blogs without a booking engine, and thus charge fees, don’t have this ‘problem’. On the other hand, these cannot track whatever is happening outside of their website and if they are actually giving you a booking. You have to see these publications as ‘old school’ advertising as you don’t know exactly what the return is. So you have to be comfortable with that and are happy with any exposure. Although there is good tracking nowadays, like affiliate marketing agencies do (that a subject for another article), this will become increasingly more difficult as search engines are banning more and more third party cookies. First party channels, like OTAs, know this and will sit more tightly as they do now on their data. So prepare for a comeback of advertising. And let go of your ‘commissions only’ stand. Sorry, revenue managers.
But I have no budget for that! Often heard, but really where do your commission payments come from? That is your budget. Calculate what you pay on commissions. For example, if an annual fee is €300. Your average nightly rate is €200. You usually pay 15% commission. That’s €30 in commissions, so you need 10 room nights to get your ROI, leaving exposure -non trackable- aside. That is not much, even if you have a small number of rooms. But than I need to join tens of sites! No, you don’t – be picky which suits your niche best. A mix of channels is best, as you won’t rule out the OTAs anyway. How much as I would like to.
The Curator. With http://www.dnahotels.com I am creating the #1 platform for authentic, inspirational places to stay.