Recently, a revenue manager reacted to my LinkedIn post about independent hoteliers’ overdependence on the OTAs by stating Even with the best intentions, money and talent, there’s no way independents can beat the big OTA’s in search and make money. There’s no scheme where they can get a positive ROI on investing search. Google has been trying to break up the OTA monopoly on search for years, but never succeeded.

This statement is wrong in so many ways, I simply do not know where to begin.

1. Let’s start with the obvious. The mega OTAs are spending upwards of $10 billion on Google Ads, Google Hotel Ads, Google Display Network (GDN) and all other Google marketing formats. Google is NOT trying to break the OTA monopoly – on the contrary! Naturally, you need to know something about digital marketing to be aware of that. Without a single contract with 750,000 hotels, without maintaining tens of thousands of APIs, without a multibillion dollar CRS, without investing a single dollar in customer service and payroll for 18,000 plus marketers, support, techies, sales and area managers, etc., Google is making a cool $10 billion!
2. Yet, in spite of the billions in marketing spend, the OTAs are spending on marketing an average of $250 per month per hotel on their platform. This is it! Can independent hotels spend $250 and more on their marketing per month? Of course they can! Best practices require hoteliers to be spending at least 4% of room revenue on marketing. If they invest adequately in technology, marketing and talent, they can double, triple and quadruple their direct online revenues and decrease their dependence on the OTAs. And do this at a very respectable ROI!
3. Talking about ROIs, at my company NextGuest, now part of Cendyn, we tracked the cost of direct online distribution in the course of 20 years across our more than 5,000 plus independent hotel clients. You know what? The average cost has stayed consistently in the range of 4.25% – 4.5%, including website cost amortized over 36 months, website maintenance, hosting, analytics, digital marketing (Content Marketing, SEO, metasearch, online media, social media, email marketing, CRM marketing, omnichannel marketing campaigns, etc.), consulting fees. Compare this to OTA commissions now exceeding 30% – standard commissions of 18%-25% plus commissions for increased visibility, mobile bookings, OTA loyalty member discounts, etc.
4. There are so many tricks-of-the-trade for an independent hotel that are not that expensive: invest in Google Ads to own 100% share of voice on your hotel brand name keyword terms. Invest in targeting your property’s key feeder markets that generate 80% of your business via GDN and Google Ads and leave the 20% to the OTAs. Invest in GDN retargeting. Invest in content marketing – the cheapest marketing format of them all. Invest in social media. Invest in CRM technology to retain your past guests, convert OTA customers to direct guests and create brand ambassadors. Invest in a website chatbot to provide 24/7 customer service and reservation office. Etc.
5. Independent hoteliers have a great advantage over the OTAs: Hoteliers know their property’s product and services much better than the OTAs. They know their guests and their preferences much better than the OTAs. Hoteliers know their local neighborhoods and immediate destinations far better than the “far and away”-based OTAs. Hoteliers know the local tour and activity providers much better than the OTAs and can create unique hotel packages and offers.

Some revenue managers think the direct online channel is a nuisance, a distraction, even a competition to what they are doing. How can we make sure that revenue managers are not averse to the direct online channel? The only way is to a) combine the current far-flung revenue generation positions or departments into a Revenue Dept, led by a Chief Revenue Officer or Manager, incorporating revenue managers, sales, marketing and CRM specialists or departments, and b) incentivize revenue employees on achieving lower average Cost of Acquisition of bookings.

Revenue Management