Which US luxury hotel nowadays is not present on at least one of the big Online Travel Agencies (OTAs)? Especially for a niche boutique or smaller luxury hotels, it may sound like a business dream: put a property up on Booking, Priceline, or Hotels.com, and get all the exposure, new guests and bookings without spending any additional money and effort on marketing.
According to SimilarWeb, booking.com alone generates around 600 million visits per month, with almost 8% coming from the U.S. And it comes as no surprise, because in 2018, Booking Holdings (the mother company of booking.com) spent more than $4.9 billion on both performance marketing (search, metasearch, travel research sites, affiliate marketing) and brand marketing (TV advertising, online display, online video and so on) combined!
However, all this exposure comes at a price to these luxury hotels and niche players, and the price is often bigger than most hoteliers would think.
The Downsides Of Relying On OTAs
OTAs’ Fees and Commissions
The first big downside that comes to mind are of course commissions and margins. While luxury hotels are enjoying higher margins on average, a 15% commission on every booking can add up pretty quickly and result in major profit losses.
Price Equalization and Luxury Experience Commodification
Another downside of OTAs is the strong tendency towards price equalization and commodification of the overall luxury hospitality experience. It might be beneficial for the guests who look for a last minute deal or want to book a hotel based price alone. However, this downward pressure diminishes the sole idea behind a luxury or boutique hotel in principle – which should be about offering an outstanding and one of a kind experience to the guests before, during, and after their stay.
In the OTA ecosystem, hotel marketers have no control over the customers buying journey anymore. An affluent traveler nowadays can book a hotel without ever really interacting with it in any meaningful way. They can look up a travel destination on Priceline, compare different options, choose a hotel based on price (if they are budget consumers) and, finally, book their stay without ever leaving Priceline (or any other similar OTA).
While it can be disputed that price equalization is beneficial for guests, removing all individuality and branding from the buying process and turning the whole hotel experience in another fast food style commodity are definitely not beneficial to anyone. Not the affluent and discerning guests, nor the luxury hotelier who is concerned with providing excellent service.
Blurred Lines Between Low, Mid and High-End Hotels
With OTAs, the lines between hotels in the low, mid and high-end tier become blurred, the only differentiator that remains are a couple of pictures and the price. Standardized property descriptions and facility feature lists don’t provide any opportunities to showcase a brand and its core luxury values. There is no beautiful and sophisticated website with enticing luxury copy to communicate abundance and artistic inspiration, no spectacular branding videos that show the human side of the hotel, no interactive room overviews with rich-media, no smooth and personalized check-out process and little to none follow-up.
How To Break Out Of The Vicious Cycle
Of Over-Relying On OTAs
The obvious solution is to invest in your own form of luxury oriented online direct marketing. Hoteliers need to rethink the traditional split where brand marketing is considered to be a major investment in terms of story-telling, content and video production, and performance marketing part is associated solely with paid social, SEM and OTAs. Instead, it would be better to adopt a more open-minded approach and focus on designing a custom hotel marketing funnel based on a growth or direct marketing mind-set.
A great digital marketing funnel for a luxury hotel should be built with a smart mix of both brand and performance marketing elements. In this case, performance marketing goes way beyond search, paid social and display advertising on mainstream media and networks. Marketers tend to forget that there is a big selection of niche media outlets available for luxury hotels that can be leveraged to fuel traffic into custom funnels.
One of the biggest benefits of an online luxury marketing funnel is that hotel marketers retain full control over their guest’s journey – from the moment they discover the hotel all the way to the reservation booking, and confirmation process. Nurturing customers through email automations or offering loyalty programs or VIP services as an addition to the basic funnel will also promote word-of-mouth, which is so crucial in today’s luxury environment.
For a lot of small hotels cutting out OTAs completely out of their marketing strategy will remain not feasible, but medium and larger sized boutique and luxury hotels should consider their options and if it can make sense to re-distribute some of their annual promotion budgets towards strengthening their own online revenue potential.