By: Rebecca Cregan, director of Market Management, Expedia Group
At a time when major Canadian markets face increased hotel supply, as well as competition from alternative-accommodation providers, hoteliers should consider OTAs as one tool — among many in their toolbox — that can help their property thrive. The most common question I receive from hoteliers is ‘how can I increase my hotel revenue?’ and my response to them is, make sure to capture the highest-paying travellers, on the right channel, at the right time.
Good hotel distribution is about balance and working with multiple offline and online channels, as well as multiple distribution partners. Hoteliers should still aim to promote their most profitable channels; however, it’s unrealistic to think consumers will only book direct and that a hotel could rely solely on its direct channels. Data from Phocuswright’s Canadian Online Travel Overview indicates that travel agencies and call centres remain important avenues for hotel distribution in Canada, while the shift online continues as OTAs are on track to increase their share of the overall hotel market.
Hoteliers operate in a very cyclical industry, where demand levels fluctuate. In the best-performing markets, hoteliers are unlikely to sell all their room inventory roughly four months of each year, while underperforming markets are chasing occupancy daily. Due to market uncertainty, hoteliers need to use every distribution channel at their disposal with a long-term view in mind. Very often, that means leveraging the reach of an OTA such as Expedia Group. By 2021, research by Phocuswright shows OTAs are expected to capture 62 per cent of the online-hotel market in Canada.
Today’s world operates online and Canadian travellers continue to grow more comfortable with online booking. According to research by Expedia Group Media Solutions, the share of travellers who only/usually book online rose from 50 per cent in 2014 to 55 per cent in 2017.Traveller behaviour is constantly evolving and emerging technologies impact hotel distribution strategies. In order to remain competitive in their market, hoteliers must consider that younger generations make up a bigger proportion of travellers. According to research from Expedia Group Media Solutions, by 2020 Gen Z will be the largest generation, with buying power up to $143 billion.
Travellers book on OTAs and other distributors for reasons other than price. The truth is, to organise a trip of a lifetime, travellers are required to book multiple flights and hotels across multiple destinations. This is when OTAs and other distributors offer the convenience to search hotels and other travel options.
While some may tout a perception that OTAs are making profits at the expense of small hoteliers, they are an essential marketing channel. OTAs operate on a model where hoteliers are displayed in their best light and promoted across the globe — yet they pay nothing until a booking is delivered and guaranteed.
It would be difficult for an independent Canadian hotel to achieve similar exposure for the same cost — particularly in international inbound markets — while also leveraging free consultancy, tools and technologies provided by OTAs.
Even hotels managed by large brands end up paying per booking due to brand franchise, marketing, loyalty and distribution costs that would end up being charged to these owners for booking revenue delivered by such hotel brands. While they benefit from brand awareness, this can be viewed as a cost to compete against other hotels rather than the customer-acquisition cost.
It’s important to consider the bigger picture, rather than focusing on negativity around OTAs. In other words, consider OTAs as one of effective means for marketing your hotel globally to attract more customers year-round and boost your bottom line.