NB: This is an article by Jean Francois Mourier, CEO of REVPAR GURU
As someone who has been working in the hotel industry for more than 13 years, I still find it shocking to discuss independent properties’ pricing strategies with revenue managers. I am always amazed at how many of the properties are still using the OTAs as their main source of revenue and completely ignoring the direct channel.
Phocuswright and h2c’s Independent Lodging Market: Marketing, Distribution and Technology Strategies for Non-Branded Properties, shows that in 2015 “OTAs will represent 58% of US independent properties’ online volume this year, compared to a 48% share for chains”. European independent properties have an even greater reliance on third-party channels: the OTAs “will represent 74% of European independent lodging online bookings in 2015”.
Although many hoteliers may believe otherwise, independent properties often have a big advantage over branded properties in driving business to the direct channel, as it applies to revenue management strategy. Independent properties have a smaller staff and, typically, can be more nimble to adapt to market changes and update revenue management strategies and rates accordingly.
Why should the direct channel be the primary booking channel for independent properties (vs. the OTAs)?
Most independent hotels don’t have the immense marketing budgets necessary to have a strong presence in the online channel so the OTAs should never be used as the primary source of bookings. Instead, independent properties should use the OTAs as a marketing medium designed to increase the property’s online visibility in order to generate an increase in direct bookings. In other words… the billboard effect.
If you aren’t familiar with the billboard effect, there is some great reading available from Cornell on the subject but I’ll give you a quick overview: the billboard effect refers to the increases in direct bookings experienced by hotels when they are listed on the OTAs.