Many travellers these days use online travel agencies (OTAs) when they search for accommodation.
NB: This is an article from BEONx, one of our Expert Partners
In fact, sites like Expedia and Booking.com are some of the most visited websites in the world. Promoting your hotel through an OTA can therefore be a great way to build your hotel’s brand presence and reputation.
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However, although there can be a lot of benefits to working with OTAs, there are also some downsides.
In today’s post, we are going to explore the pros and cons of working with OTAs. We will also explain how to create an effective distribution strategy that helps you generate maximum revenue for your hotel.
Working with OTAs can go a long way to enhance your revenue management and distribution channel strategies. However, although there can be many advantages, these need to be weighed up against the disadvantages. It’s important to consider both the pros and the cons before entering into an agreement with an OTA.
Let’s start with the pros:
- Increased visibility: Partnering with OTAs can help hotels increase their visibility and reach a wider audience, including international travellers who may not be familiar with a hotel’s brand.
- Access to a large customer base: Most OTAs have a large customer base and an established online presence, which can help hotels tap into new markets and generate additional revenue.
- Time and cost savings: OTAs handle the marketing and advertising side of a hotel’s inventory, saving hotels valuable time and resources. Additionally, the commission-based model used by most OTAs means that hotels only pay for actual bookings, making it a cost-effective option in terms of distribution.
Here are some of the cons of working with OTAs:
- Commission fees: OTAs charge a commission on every booking made through their platform, which can be as high as 25%. This can significantly impact a hotel’s profit margins.
- Lack of control: When working with OTAs, hotels have limited control over their brand, pricing, and customer data. Additionally, OTAs may use aggressive tactics to push other properties located in the same area, potentially causing the hotel to lose bookings.
- Dependency: Over-reliance on OTAs can leave hotels vulnerable to sudden changes in the market, such as changes in commission rates or shifts in consumer behaviour. Additionally, hotels can lose direct bookings and customer loyalty if they rely solely on OTAs for distribution.
- Booking restrictions: OTAs might impose restrictive terms and conditions for bookings, such as automatic room reselling or guest cancellation policies.