A traditional priority for hotels has been to please and satisfy their clients with the clear objective that the client returns to the hotel on his next visit to that particular destination.
However, what hotels have barely done is incentivise clients to book with them directly the next time they come. This lack of initiative has put on a platter to intermediaries not just customer loyalty to the hotel but also customer loyalty to their channel to make the bookings.
To this day, OTAs don’t waste any time and after clients check out of your hotel, they send them customer-loyalty emails which, we fear, are not always about staying again at your hotel but rather in any of the ones available on their channel. For them, the priority is to build loyalty to their channel. The fact that they return to your hotel is secondary in the best of cases.
Once again we come across a conflict of interests between the hotel and the distribution. You want your client to return to your hotel by booking through the direct channel and the intermediaries, instead, want their upcoming bookings to be through their channel. Which hotel they book is pretty much irrelevant.
Customer acquisition costs vs retention costs.
Acquiring a client who doesn’t know your hotel is really complicated and increasingly expensive. This is where OTAs really provide some value, since they showcase your hotel to the world. Due to the huge competition between hotels, customer-acquisition costs are constantly increasing, since OTAs use an “auction” system where the hotel who bids the highest has the most visibility (or so they say). The average cost of Booking.com in Europe is of 17-20%, while Expedia’s goes up to 18-22%. On average, we could say that the average cost of OTAs in terms of customer acquisition is 20%.
Retaining a client, on the other hand, isn’t so expensive, since the client has already been to your hotel, knows you and, if he liked it, will come back and happily recommend it to others. It doesn’t come at zero cost because you have to have the appropriate tools, dedicate your staff’s time and, in order to make it attractive, offer an exclusive discount. Adding up all of these costs shouldn’t surpass 7-10%. We’re talking about saving 10-13% for each booking if you manage to build customer loyalty through your direct channel.