As an industry we are still pondering the dilemma, ‘how can I drive more direct bookings and nudge my hard-won guests away from the OTAs?’
So instead of dwelling on that question, may I ask you a new question… ‘how much will you spend on your digital marketing budget next month?’
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I bet most of you will know how much your digital marketing company will charge as a management fee each month – box ticked! And many of you will know how much you expect to spend on your digital marketing campaigns as you have already advised (and by advised, I actually mean restricted) your agency on how much budget they have to spend.
So, the second question… ‘how much will your OTA commission cost next month?’ This is where the fun starts as I am guessing that the majority of owners, General Managers, Sales & Marketing Teams, and even our hallowed Revenue Managers will not know how much OTA commission will be taken next month. And this of course is where the problem lies…
We are all used to allowing our Digital Marketing experts a certain budget to work within. These budgets are often restricted and managed heavily. I have often sat in meetings with Digital Marketing agencies where they are asking for increased budgets and are told. ‘sorry, we can’t afford to allocate more spend’.
But let’s think about that, budgets are often seen as marketing costs and very rarely measured against the cost of getting a booking or a cost of sale. If they were, then the results may be surprising! And let’s face it, digital marketing is the most transparent way of marketing your hotel. If customers aren’t clicking, you aren’t paying… so why are these budgets restricted? Why are we not capping the amount of commission we want to spend on OTAs rather than capping our digital marketing campaign which of course is your Book Direct campaign?
As an industry, we often don’t measure the leakage of commission to the OTAs and we certainly don’t measure it against the costs of securing a direct booking through digital.
Here at Right Revenue, we often see hotels with too strong a reliance on OTA business, with up to OTA channels equating up to 70% of their total sales! Yes, seriously! The average can be around 40% and let’s face it, you aren’t going to get that down to 20% overnight. So set yourself a target for 2023 to reduce your OTA reliance by even 5%. Ask your Digital Marketing Agency to help you achieve that. Allocate even a portion of the spend you would have had on that OTA commission to digital and watch the magic happen…