I have written many times that I believed that the biggest threat to our industry was the control of the OTAs (turns out however, I was wrong and Covid-19 gazumped me on that!).
NB: This is an article from Right Revenue
But if there is a tiny glimmer of light through this terrible epidemic, it is that we have an opportunity to take stock and come out of this stronger.
We use the word ‘unprecedented’ in almost every conversation and it is true, these are unprecedented times for us, but they are equally as unprecedented for the OTAs.
Booking (or as one Dutch newspaper calls them ‘The Profit Machine’) has seen bookings drop by over 85%. They have cut at least 25% of their team (possibly more since writing) and have had to approach the Dutch Government for a loan.
Trivago and TripAdvisor are in a downward tailspin and as 74% of Trivago’s profits come from Expedia and Booking, you can see why. AirBnb are ‘going back to their core business’ of homes and please don’t let anyone tell you that this is some romantic gesture of wanting to concentrate on what they do best, and giving hotels back some control. This is in fact a pivot (or actually more like an awkward shuffle) back to the most profitable part of their business, leaving the costly onboarding of hotels and experiences to someone else.
The facts are very clear:
1 – These companies do not act like hoteliers, they act like businesses, glaring in its simplicity, but they simply look at margins and profitability and segments that were costing too much will go, and they will concentrate on where they have the potential to make money. They understand that ‘cash is king’, my question is ‘will we do the same?’
2 – We as hoteliers often lose sight of is that if we don’t give OTAs inventory, they have nothing to sell, so shouldn’t we be taking a little bit of the power back?
3 – There are many hoteliers that will rush to put full inventory and heavily discounted rates on the OTAs with a theory that their business is desperate and they need to open all channels with discounted rates. But the fact is that our business pie is only so big; you will only receive a small slice to begin with, so why on earth would you a) give that to a channel that is going to cost you an average of 20% and b) at rates so low, that you are only driving your profitability on a race-to-the-bottom?
4 – And why on earth do we feel that the whole market will be rate driven? I am not for one moment saying that there may be a segment of travellers who will be price conscious but will everyone? Won’t many be looking for an experience after this and some sort of semblance of normality?
This is a time for us as an industry to stop, take a breath and to take control. We all by now believe that the first segment to come back will be ‘staycation’ and we have a unique opportunity to capture that customer directly. Your customers know you, so are therefore MUCH more likely to search your website directly rather than go straight to an OTA – so be ready!
- Make sure that your website has very clear messaging that you are open for business.
- Get your messaging right on cleanliness and social distancing. Make the messaging warm and welcoming.
- Start to look at your PPC campaigns. Make the demographics local and appeal to the markets you not only feel that you had, but also new markets that you wish to attract. For example, we all believe that families may wish to travel first. Are you family-friendly and more importantly, are you family ready? But if this is not for you, then what is?
- Now is the time to get your rate strategy right and by that I mean, do not dump your rates! Get clever, get smart and design some attractive packages which allow your guests to feel they are having a wonderful hotel experience, with the freedom to get outside.
This is a unique time when we can encourage direct and maximise on that direct customer experience. This comes with a cohesive strategy of great rates; great communication and an absolute drive to lessen your reliance on the OTAs and to build on your direct campaign.
So in my usual ‘shoot from the hip’ style, if you don’t have a website that gives confident messaging; rates to entice direct business; a marketing campaign to back that up and a desire to secure repeat business, then shame on you…
Now is the time to act like a business and to do that you need to understand your segmentation, your costs and your profitability. The OTAs took away our ability to communicate with our customers; they took away our ability to price sensibly; they drove our margins to the floor but this is a unique time for us to re-align and we need as an industry to come together as we are definitely stronger together… We need our trade bodies to support and we need group thinking on:
- Not driving rates down (history has shown us that a 10% drop can take 3 years to recover from)
- Saying no to rate parity and allowing us to price as we chose on our own brand sites
- Negotiating commission.
Most of you who know me, already know, I am not averse to the OTAs, they certainly have their place and we need them. They are a distribution channel but only that. They should not control our business and they should not control how we do business. Perhaps now is the time to negotiate commission on repeat bookings or reduce commission based on volume (the more flexible you are with the OTAs, the lower your commission level), but now is the time to redress the balance and whilst tough to do alone, coming together as a collective is empowering. The OTAs have been killing our business from the inside out and now is the time to fix that.
So how do you do that? Well, collaboration is key. You need to speak to your trade bodies; you need to talk to fellow hoteliers and work out a strategy. There are many examples where the OTAs have been forced to negotiate better deals with hoteliers when they came together as a collective. And always remember, that their business relies as much on you (more actually) as yours does on them. Your guests for the foreseeable future will be local and will not always need an OTA to search, so now is the time for us as an industry to re-align and re-adjust.
Someone in the industry told me last week that they thought that revenue management was broken. Of course, I emphatically disagree with that. This is the time that revenue management will shine. Revenue Management software algorithms have been adjusted (or ours have anyway), so use your software for support. It will be great Revenue Managers, using great data that will put great strategies in place to come out of this. Revenue Management will be the driving force behind change and that change is already here.