OTA commissions are up, but you're still winning. Here's why...

"A year of hard work and my OTA commissions still went up!"

Sound familiar?

At the end of a year in which we learned that 'Book Direct' campaigns really do work, it's surely frustrating to many hoteliers that their OTA commission fees have only continued to rise. While the big brands might be managing to keep their numbers flat (thanks to a focus on loyalty, and investment in 'Book Direct' marketing spend), smaller properties might be seeing as much as 25% growth in the cash they spend on OTAs each year.

So how do you measure the success of a 'Book Direct' campaign if it feels like you've already lost the battle? How much of a growth in commission is too much?

Well, things may be better than they seem.

How do you compare?

Time to have a look at the numbers. Based on their quarterly reporting, Cowen estimate Expedia's room night growth over the last twelve months to be about ~15%. Booking.com's comes in at around ~21%. Taking into account booking volumes for each, the weighted growth of the two titans of travel is therefore about 19%.

Now, let's take a look at your OTA bills (your favourite activity, I'm sure). Did they grow by less than 19% in 2017?

If they did - hey, congrats! You’re doing better than the average hotel at encouraging your guests to book direct. In this market, keeping commissions flat, for example, can be seen as a great success. The OTAs might be growing, but they’re not growing off the back of your business.

So, if your commission costs rose by, say, 5%, bear in mind that without your 'Book Direct' efforts, you might have seen commissions rise at the 19% average the market experienced. Actually reducing the cash you pay out in commission would have taken a monumental rejection of the trend.

The bigger picture

While this calculation will give you a pretty good overall measure of how successfully you managed your distribution in 2017 (assuming, that is, that you weren't intending to grow the OTA channel), it is a simplification. For starters, we haven't yet seen all of 2017's results, so those room night growth percentages are only estimates.

It's also worth remembering that Expedia's 15% growth in room nights isn't just due to room nights switching from Brand.com; it's also due to the steady stream of travellers switching over from phone, travel agent and other 'offline' bookings.

Most of all, though, direct bookings are worth far more than the money they save you in commission fees. For starters, direct bookers are likely to spend more in your hotel - and have a better time, too. You have the chance to build up stronger (and more profitable relationships), you don't dilute your brand by passing it through an intermediary, you're better-equipped from a data perspective... we could go on. Increasing direct bookings isn't just about saving money, so the metrics you measure yourself by shouldn't be purely financial.

So there you have it: you probably are doing much better than you think. Consider this message a gift of Triptease festive cheer. Now, merry Christmas to all... and to all a good night.


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About The Author

Lily is Content Manager at Triptease. When she's not investigating the industry or spreading the word that #DirectIsBest, she enjoys music, cycling, and obscure radio quiz shows.