How to Reduce Online Travel Agencies Commission Fees
October 31, 2018
Online Travel Agencies, such as Expedia, TripAdvisor, Hotels.com, Booking.com, OpenTable, etc Are An Excellent Way to Get Bookings For Hotels, Guest Houses, B&Bs, Pubs, Inns and Restaurants.
But it comes at a cost.
OTA Commission Fees Can Be Reduced
Online Travel Agencies (OTAs) normally charge commission rates of between 12-30% of the booking value depending on your accommodation or catering type. The number of rooms or covers offered can also affect the commission fees requested by these booking systems. With most rates being upwards of 15-20% the impact this has on your profit margin is huge.
The alternative to OTA websites is to take the booking yourself. With the OTAs dominating the search engines that isn’t easy. But is isn’t impossible either, as can be seen below.
The Pros and Cons of Online Travel Agencies for Hotels, Guest Houses, B&Bs, Motels, Hostels, Pubs, Wine Bars, Tea Rooms, Coffee Shops, Inns and Restaurants
Online Travel Agency website are popular because they appear at the top of the search pages on Google, Bing etc, and because travellers find them easy to use with lots of information in one place. Some also offer inducements to regular users, such as free stays once ten or more bookings have been made.
For travellers OTAs mean convenience and good prices. For the hotelier or restaurateur it means commission fees and lost of control.
What is sure is that OTAs are huge and account for a huge number of bookings every week. As long ago as 2015, travel and hospitality consultant, Frederic Gonzalo, was quoting figures as high as 58% of independent property bookings in the US being via an OTA, with 50% of chain bookings being via OTAs. He went on to say that Google and Amazon had also made inroads into the online booking sector with the challenge of airbnb yet to be really certain. Since then airbnb has grown to become one of the dominating factors in online bookings..
The overall picture is mixed. There are pros and cons to using OTAs.
OTA Disadvantages for Book Hotels, Guest Houses, B&Bs, Motels, Hostels, Pubs, Wine Bars, Tea Rooms, Coffee Shops, Inns and Restaurants
Don’t overlook this. Set up a OTA account and add rooms or tables and sit back. Bookings will come. It can be that easy. The downside is the cost, but you are paying for a sure fire way of filling a lot of bookings.
OTAs are a very convenient way to get relatively high volumes of bookings compared to traditional methods. If you can be sure of getting on Page One of Google then you may not need the volumes that OTAs can send. But putting a smaller number of rooms on the sites, especially places like LateRooms when you have a high number of vacancies can be a wise move.
The more places you can be found the more likely you are to have high occupancy rates. So OTAs can be very beneficial for this reason, especially as they tend to dominate the search engines.
However if you can get into the Three Pack, you can reduce the number of times you need to list your rooms and tables on the OTAs.
One big advantage to using an OTA is their ability to attract new customers for your business. Once a customer has been once you can obtain their details and encourage repeat bookings direct with your establishment.
With the visibility that big advertising and SEO budgets provide OTAs it’s hard to compete with them in the hunt for new customers. Unless of course you can get into the Three Pack.
OTA Disadvantages for Hotels, Guest Houses, B&Bs, Motels, Hostels, Pubs, Wine Bars, Tea Rooms, Coffee Shops, Inns and Restaurants
High Commission Fees
Commision rates can be very high and can decimate profit margins. In some cases the rates can be as high as 30% and with increasing use of OTAs this is a real threat to profitability of independents and chains.
Whether you consider the commision to be a finders fee or a form of advertising expense doesn’t matter. It means that money that could have been paid to you goes to the OTA.
OTA Cancellation Fees
In a sense this is a misnomer. Some OTAs don’t allow customers to cancel .. or make it very hard to do so. And even if they cancel they still charge the hotel. Hence the finders fee concept. They have charged for finding someone to stay. They don’t guarantee they will not cancel and still expect to be paid.
The OTAs don’t want you to compete with them on price. So they frequently have a clause in their agreement that means the hospitality provider cannot offer better deals if the customer goes direct. Savvy customers know this and will often phone to negotiate a better deal. But beware letting the OTA discover you’ve breached your contract with them!
Loss Relationship Opportunities
OTAs are doing everything they can to build strong relationships with their customers … not your customers! They do this with loyalty programmes, repeat offers, email marketing, social media and more. Too many OTAs see hotels and guest houses not a partners but as providers of rooms for them. They often have more loyalty to the customer than the hotel or B&B. They know that there are plenty more hotels that will provide rooms for their hungry booking process.
Loss of Customer Information
OTAs are increasingly keeping hoteliers at arms length from the customer in any way they can. There was a time when the customer’s email and phone number was sent from the OTA to hotel or guest house owner. Today there is a move where the OTA does everything for the room provider and doesn’t pass on the email address.
So, unless you collect a customers contact details when they book in, you can’t then get back in touch with them to encourage direct repeat, commission-free, bookings.
The ideal customer is one that has booked with you in the past and repeatedly books again. The cost of customer acquisition is nil and the customer books by phone, email on on your website. There are no commission fees to be paid unless you rely on an external booking system to take the booking and prices any payments. Using an external booking or payment system on your website means a booking, commission or card fee is taken by a third party and doesn’t make much sense when you could do it direct .. without commission or booking fees.
Other prospective customers go direct to an OTA website, such as Trivago, TripAdvisor, etc, or search online for, say, hotel in Bournemouth.
Where they go to the OTA website then they need to find you and then select you. You then pay a commission on the booking either at that point or get billed later. Either way you pay a significant commission fee. Often this is 20% or thereabouts and seriously eats in to your profit margin. Depending on your overheads, room cost and commission rate it can easily take half or more of your profit.
Where the prospective customer goes online and searches google, Bing or other search engines for the ”hotel in Bournemouth” what they most usually see is a result like the one below. (Click It & Enlarge It)
At the top of the page are adverts paid for by the OTAs. With the commissions they charge they can afford to spend large sums to dominate the ads on Google. Individual hotels, guest houses and restaurants can’t compete with the budgets OTAs wield.
Equally as important are the organic results that are driven by websites with good content, excellent SEO and loads of online traffic.
As you can see from my search we have Online Travel Agents such as Booking.com, Trivago, TripAdvisor etc dominating this section. Individual establishments such as small local hotels or restaurants can’t compete here. Even the larger chains get squeezed out.
But individual establishments do get a mention between the ads and the organic listings. Google displays a map and lists just THREE businesses (we call it the Three Pack).
In this case it is the Village Hotel, the Britannia Hotel and the Roundhouse Hotel.
These three hotels haven’t paid a penny to appear on this page .. unike the OTAs that advertise and the OTAs that have paid a lot of money for website, content, SEO etc, and appear in the organic listings.
Google My Business for Hotels, Guest Houses, B&Bs, Pubs, Bars, Inns, Wine Bars, Coffee Shops, Tea Rooms and Restaurants.
The three hotels that appear in the Three Pack above have made use of Google My Business (GMB). I’ve written much more extensively about this on another site .. see How to Use Google to Generate More Business With Minimal Spend
Getting into the Three Pack on Google My Business depends on many factors. The first is getting listed on google Maps or in the GMB system. Then you need to get Google Reviews … see mine in the right hand column. After that it’s a mix of adding posts, images, videos and more. The cost is nil and if you find it complicated I offer a GMB course or can do it for you.
How to Reduce or Eliminate OTA / Customer Cancellation Fees
The easiest way to avoid OTA cancellation fees is to ensure you get direct bookings.
Alternatively you can negotiate OTA contracts with lower commission rates. Groups like Marriott have have negotiated to reduce their commission fees. And some chains are no longer paying any commission.
You can encourage direct bookings in many ways
Adding Incentives to book direct will encourage some customers to do so. Consider things like no-deposit booking, free cancellation to a given date, free wifi (though most people expect that anyway), free wine or flowers in the room; many options are available.
Provide Upgrades that OTAs can’t match. For example free breakfast, room upgrades (either room size or room positions such as sea views).
Offer the Best Prices. Although many OTAS don’t allow you to undercut them you can match their prices. So make it clear that your prices are the best available. Customers are getting wise to OTAs. As much as they like and use them they know that they are creaming off a big commission. So often they will search for your site after seeing the deal on the OTA. Match the OTA price, and perhaps offer an upgrade of some sort and you can get a direct booking.
Remember, most customers want a good deal. So offer it to them.
A Very Good Website
Having a very good website is essential. It needs to portray your establishment to the world. In fact it is your gateway to the world. Therefore it needs to have the best images and details available.
OTAs offer limited space to promote your business, but your website can be as big and comprehensive as you want it to be. So you can write about locally sourced produce, the local area and its attractions .. in fact anything you want.
People prefer buying from people they know, like and trust. So let them so you and your staff. One hotel I often book into writes about the chef and his choice of meat, fruit and veg. And the owner writes about her horse and foals. Reading their site is like getting a letter from a family friend and we want to know more and visit them again!
Use OTA Strategically OTAs aren’t all bad. They have their uses if used wisely. For example you might only use them when you have vacancies 5-7 days before availability. The same applies to restaurant bookings. Or you may use them in certain seasons to increase your visibility. You don’t need to use them every day of the year. In fact you don’t need to use them at all if you plan things really carefully.
The other thing is to be selective about which OTAs to use. Don’t pay fees to more than you need to. And use them only when you need to.
Understand the Commission Fee Structure OTAs Use It always amazes me that many of the businesses we work with don’t really understand the fee structure they sign up to. Before signing you need to understand the percentage being paid, any upfront fees for being on the OTA site or per room, plus the cancellation policy.
Make Direct Booking EASY
Nothing puts potential guests off more than difficulty in booking. So make direct booking very simple.
We offer a direct booking system that is very easy and integrates with your existing systems. So in one place you can see your direct bookings and any OTA bookings. It’s so simple you can even check all your bookings on your mobile, tablet or iPad anywhere you can get a signal.
But the best thing of all it is easy to use by customers and very low cost. You can say goodbye to commission fees if you use our system.
Please email Mark on for more details on firstname.lastname@example.org
And there are more free restaurant marketing tips at http://www.stefandrew.com/stefan-drew/how-to-market-a-restaurant-cafe-or-coffee-shop.html
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