Are you paying more commissions to online travel agents (OTAs) than you should?

Many hotels are. In fact, increasing direct bookings is the #1 request I get from hotel owners and operators. It’s why the mission of this site is to “show hotels how to use the internet to increase direct bookings.”

If travel websites are helping fill rooms with guests that wouldn’t have booked otherwise, that’s one thing. It’s quite another if you’re paying unneeded commissions for bookings that could have been made through your own website.

Here are three common ways I see 3rd-party sites stealing direct bookings from hotels:

1) They bid on your hotel name for cheap clicks

On search engine PPC networks, your hotel name is often just a few cents per click. At prices this low, I’m amazed when hotels pass up this opportunity and allow OTAs to bid on their own name.

How you can beat them: Include your hotel name as a keyword in your PPC campaign

2) They outrank sloppy search optimization

Some hotels have websites that are so poorly optimized, that they don’t even appear at the top of search results for their own name!

Savvy OTAs can come in and rob hotels of all these easy pickings and get lots of free traffic.

How you can beat them: Implement a smart search optimization strategy for your website

3) They attract searches for ‘reviews’

Keyword research reveals one of the most common search query structures is: keyword + “review.”

The reason is simple: people want other opinions before making a purchase. Based on this logic, sites like TripAdvisor nearly always outrank a hotel’s website for review searches.

How you can beat them: Publish your own page of 3rd-party reviews…and promote it.

Sometimes, they’re just a lot more savvy about online marketing

Recent industry studies revealed that Expedia, Travelocity, Priceline and Orbitz rely heavily on the hotel industry for the bulk of their profits. Since airlines do not pay commissions on tickets sold, the hotel industry contributes more than 60% to booking fees collected by OTAs.

So these companies will fight hard with every trick available to encourage bookings through them.

What if you budgeted the current amount you spend on OTA commissions to build an online marketing campaign that drove direct bookings? This strategy would quickly pay for itself, and reap dividends over the long term.

Are OTAs stealing bookings from your hotel website?

As I said earlier, cutting price should not be your first reaction to an economic slowdown.  Instead, you should maximize profit by reaching out to your best guests.

Of course, you’ll need a guest intelligence system that tells you who these people are.

But assuming that is already in place, how can you reward your best guests?  Here are some ideas that have worked for others:

• Idea 1: Develop special birthday and anniversary packages.  Send them to your guests on their special day using email or direct mail.  This has proven very cost effective for many hotels.
• Idea 2: Create seasonal specials packages.  Partner with local businesses to offer a specially-priced package on an area attraction.  Send this to guests that have stayed at your hotel in the past.  With joint ventures like this, everyone involved benefits.
• Idea 3: Send “We haven’t seen you in a while” followup messages.  For guests that used to stay regularly, but haven’t for a while, send them an email or postcard with a special offer to come again.  Offer a free breakfast or glass of wine at your hotel bar.  Tell them you miss their business, and look forward to seeing them again.

Again, to execute these ideas, you’ll need an intelligent database like we described earlier.  As you can see, the creative freedom you have to develop truly unique promotions is directly proportional to the quality of information you have to work with.

Let me ask you this: How do you reward your best guests?

Your guest database is the best tool you have during hard times.

Why?

It’s simple: marketing to existing customers is the most cost-effective way to maximize profits.  But in order to do this, you must first have an information gathering system that enables relationship building.

Most hotels have some type of guest database already. You probably keep some information on the people who have stayed at your hotel in the past.

The difference between average and great hotel service lies in the kind of information you collect.

Establishments that provide a high level of service are famous for remembering the little details about their guests.  Catering to small preferences can provide an extraordinary experience months or years after their first stay.

I encourage you to let you use the current economic environment as a motivation to upgrade your guest intelligence system.

As you plan your database upgrade, keep this question before you:

What information do I need to build a more meaningful relationship with our guests?

• How did they find out about you?
• What did they like best about your hotel?
• What did they not like?
• When did they first stay with you?
• When did they last stay with you?
• What was the average length of their stay?
• What is the average value of their stay?
• How much revenue do they provide annually?
• Do we have sufficient contact information for followup?

When you have this level of insight, you can make smart marketing decisions.  You can focus on building relationships with profitable guests, and maximize potential profits.

Let me ask you this: What information are you collecting from guests to enhance their experience – and your profits?

For some hoteliers, the first reaction they have when facing an economic slowdown is to slash prices.

But is this really a good strategy?

If you look at historical data, the answer is clear: you should never, ever reduce prices as a quick-fix remedy.

All studies carried out in the wake of the 9/11 attacks in New York City showed that price cuts damage the long-term health of your business.  One report by Cornell University, titled “Hotel Pricing in a Networked World,” shares this insight:

“It should come as no surprise that discounting has a chilling effect on revenues. The discounting concept is based on the core micro-economic principle that reducing your price means that additional consumers will enter the market and you will sell more rooms.  The hotel industry has never been able to apply this principle successfully, and the CHR study demonstrates why this is so.

New consumers do not enter the market in response to hotel discounting.  Instead, current customers simply get more for less and revenues fall.“

So what should be your pricing strategy?

Try this: Leave your prices where they are, but increase your perceived value.

Instead of discounting, focus on building your overall value package.  Sell the experience – work to position your hotel as a destination.

Explore social media networks, and look for recurring themes of what guests like about your hotel.  Improve and showcase your specialties.  Put them at the core of your marketing efforts.

But never fall for the price cutting trap.