You often hear it in the hospitality world: “OTA commissions are killing margins.” And yes, to some extent, this is true. And large OTAs sometimes do abuse their powerful positions. But are commissions really that evil? Or are they just misunderstood marketing costs, sometimes exploited by corporate greed?
(If you’re new to OTAs, I wrote an intro to travel ecommerce that breaks down the basics.)
The Real Cost of “Direct” Bookings
In most cases, a complaint about commission is followed by an argument about the benefits of direct bookings. And in an ideal world, they are. People directly book via phone, email, or your website, and you, as a hotel, pay no commission or fee. But in this argumentation, the simple question “how do I get people to find my property?” is often overlooked. Without a presence on large OTAs, hotels need to invest heavily in marketing, from strong SEO and conversion-increasing UX design to ad campaigns, all with upfront costs and no guarantee of bookings.
Small independent hotels often lack the financial resources to attract sufficient knowledge, skills, and experience to run effective digital marketing campaigns and strategies. Commission structures, on the other hand, can be seen as a form of performance-based marketing, meaning costs are only incurred when a booking is made. In return for this, they bring (international) visibility and demand that would not have been reached otherwise. As well as optimised conversion funnels and consumer trust through reviews and brand recognition.
So, should SME hotels abandon direct bookings altogether?
No, definitely not. It’s smart to build your own distribution channels, and hotels should establish a strong digital presence with a well-designed website and engaging social media content. But there is also no need to turn OTAs into villains. Utilize OTAs strategically to efficiently fill your rooms and leverage them as a distribution partner within a broader marketing mix.
Rather than obsessing over reducing distribution costs, SME hotels should focus on delivering amazing, personal, and authentic experiences that larger chains cannot match. And turn guests who discover your hotel through an OTA into loyal customers who book directly next time, recommending the experience to friends and family through word of mouth, the strongest marketing method available.
In short, OTAs can help you get discovered, but it’s the guests’ experience that brings people back. Use that first booking as your chance to earn the second one directly.