What is an OTA?
An OTA in the context of travel stands for “Online Travel Agency.” It’s a website or app where you can book various travel-related services like flights, hotels, rental cars, and vacation packages. OTAs make it easy for people to plan and arrange their trips without having to visit physical travel agencies or make phone calls.
Think of an OTA like a virtual travel agency that you can access from your computer or smartphone. It allows you to compare different options, check prices, and make reservations for your travel needs all in one place. Popular OTAs include websites like Expedia, Booking.com, and TripAdvisor.
Direct Bookings vs. OTAs
| Aspect | Direct Bookings | OTA Bookings |
|---|---|---|
| Commission | 0% | 12-20% |
| Experience | Direct – phone number, email, your branding, display your properties in your style, your story. | Limited. Unable to communicate outside of channel portals, often no control over descriptions and styling. |
| Payment Terms | However you like: upon booking, 50/50, pay at check-in – you decide. | Determined by OTAs, regulated by their systems and policies. |
| Payout | As soon as the guest pays. | Often not until the guest’s trip is complete, sometimes even longer. |
Direct bookings vs OTAs
There’s no doubt our businesses can get great exposure relying on global OTAs, but at a cost of 15-20% in commission – you have to wonder if there are other ways to gain guests.
The Darkside of OTAs
In the accommodation and hotel industry, we have an extensive range of websites, travel agencies and directories where we can showcase our tourism business. There’s no doubt OTAs have boosted our ability to market globally, but there’s also a darker side. OTAs charge hefty commission fees, some up to 20%! Not only are they expensive, but they take away our control – you’re often stuck talking with guests on an unfriendly portal which completely diminishes your branding, your unique voice and your ability to deal directly with your guests. It removes you from the booking experience so much that you actually can’t share your phone number, email address or often, they even ban businesses from talking about specifics of their rooms.
OTAs do this for a reason, they don’t want you to get your guests details because they know you’ll be able to wow them – you can provide better rates, you can show them your story, share your personality and overall create a warmer and more fulfilling guest experience.
A lot of hotels are concerned that their guests don’t want to book directly, that the security of booking through an OTA is desirable to guests, and you can’t compete with these global websites to rank on Google. This was all proved wrong throughout the COVID-19 pandemic. In fact, guests who booked directly were able to call, email and communicate with their hosts directly – payments and cancellation policies were all handled directly, no need to go through any third party websites or unhelpful customer service, guests and hosts could sort it out on their own.
Is direct bookings right for you?
Heads On Pillows are delighted to compare and introduce the difference between taking direct bookings and relying on OTAs. Follow this guide to see if a direct bookings approach is right for you!
Commission
The most obvious difference, but often overlooked, is the fact that OTAs charge a large sum of money to list your property. It may not appear obvious at first glance, because to just list is usually free, but where they make most of their money is by either charging you, charging your guests, or charging both a percentage of your rate as a means to profit from the connection they provide.
For example, Booking.com will typically charge between 12-15% of the total tariff (or ask for you to pay more to prioritise your listing), where your guest might pay $300 per night, you’ll usually receive around $255, depending on your commission structure. As much as that connection is great – you still have to charge a credit card or arrange payment, you still have to check in your guests, take stunning photos and ensure your guest’s experience is perfect.
Or maybe you’re in the holiday rental business? There’s no doubt you’ll have heard of Airbnb. It’s a multi-billion dollar, global business. Airbnb has been great for kickstarting the share-economy, it truly revolutionized the travel industry, but when their commission sits at around 15%, we really need to ask if there’s another way. Airbnb provide a couple of commission structures, one where they asks hosts to pay the total fee, but another where they just charge 3% and pass the rest onto your guests – this is a great way to make hosts feel like they’re getting exceptional value (3% sounds amazing compared to 15%), but really, the total your guest is paying compared to your payout is where you should be working out your commission bill.
What’s so great about direct bookings is that you pay no commission on any bookings. Your guests are yours, your relationship, your terms and ultimately, your payout 100%.
Experience
It’s easy to discuss the benefits of direct bookings in monetary terms – saving 15% on commission or being able to get your payout today is obviously attractive, but what is arguable just as important is the guest experience.
The channels and their portals are fine when everything is running smoothly, but have you ever had a guest desperate to get on the phone with you before a booking is confirmed, but unable to get through because your phone numbers are hidden? Or maybe you’ve had a last minute cancellation that you can’t get in contact with and you’ve just been handballed to a random offshore call centre? We’ve all heard the horror stories, but it was all amplified during the COVID-19 pandemic. Some OTAs automatically refunded all guests without your consultation, others had the audacity to allow you to offer a refund but refuse to offer a refund on their fees, while some did nothing at all and just left it to you to sort out – often really difficult when you don’t have a guest’s email and just have to communicate through an app or a convoluted online portal.
Direct bookings for hotels, resorts, tourism,… are across the board a better experience. Better for hosts and better for guests. The best part about a direct booking experience is that you can curate and organise the guest experience from end-to-end. Phone calls, pre-arrival surveys, making sure you connect with the guest to ensure all their needs are met and can answer any questions before their booking is confirmed is incredible valuable. Trying to build a mailing list? You’ll need direct bookings because most OTAs don’t even offer the guest’s email, meaning if they want to book again, they’ll need to go through the OTA again.
See more: Must-have features in a hotel website
Payment Terms and Payout
Some OTAs provide a few options – you might be able to have the guest pay 100% upfront, you can charge 50% upon booking, followed by 50% 7 days before the trip commences, whereas others might just give you one option. But what if you want the balance paid 14 days before the trip starts? Or maybe you want 30 days? Some Heads On Pillows clients will have free cancellation 60 before the trip commences, others might offer non-refundable rates, it just depends on your business. With OTAs, you’re limited to their options.
Conversely, if you take direct bookings it’s all up to you. You can charge 100% upfront, you can take 25%, you can split it up into a few payments, you can take cash on arrival. Whatever works for your business.
Not to mention, a lot of OTAs might have some flexibility around the payment timeline, but your payout won’t come until the booking is complete. It doesn’t seem fair that they can take a 50% deposit for a trip that commences in 1 year, just to hold that money until 7 days after the trip is finished!
Direct bookings give you flexibility. Flexibility on payment terms, you get the cash straight away and you get your control back.
See more: SEO for travel industry
Final Comments
There is one important catch, but at Heads On Pillows we’ve demonstrated time and time again that it’s worth it. To capture direct bookings you’ll need to put yourself out there – whether it’s through a stunning website that you get onto page one on search engines, a meaningful social media presence, or a moderate investment in paid marketing on channels like Facebook and Google. It’s definitely worth it. Our clients have experienced 1000% return on investment on their digital marketing efforts, often doing so well they’ve been able to completely remove their properties from OTAs. There’s no better feeling than a calendar that is full of direct bookings!
Chat with Heads On Pillows today to learn more about an efficient digital marketing strategy, so you can start capturing more direct bookings, fill your calendars and ultimately, make more profit.
