One of the ongoing debates in hospitality, is how a hotel should think about direct sales, vs. third party sales, in their online travel mix.
So let’s start with three pretty obvious thoughts:
- Direct bookings allow you to present your property in a highly customised way, and build a relationship with the traveller from the first interaction
- If you can fill your hotel to 100% occupancy, with market-leading ADR, purely from direct sales… then firstly, your hotel is a rare beast, and secondly well-done
- Third party online sales – Booking.com, Expedia, Agoda etc. – can look expensive, with 15-20% commissions, and if you can avoid paying those commissions by driving these bookings through direct channels instead, that’s a great saving
That leads to a simplistic rallying call to drive the share of bookings a hotel receives from direct bookings up, and from third party channels down. And there are hundreds of articles articulating how to do this, so this won’t be one more!
But now let’s start to go deeper to think about that goal. Most hotels can’t achieve 100% occupancy, with market-leading ADR, from their direct sales channel (and even if they can, there may be potential to push that ADR even higher if demand was coming from more channels). What third party channels do, is give your hotel a platform to market to a huge number of travellers, most of whom have never heard of your hotel before. Yes, you pay a fee, but let’s model out the alternative.
If a traveller has never heard of your hotel before, they are not searching you out. They are instead going to be going to a site like Google, and typing in something generic like ‘Hotels in Bangkok’. To be somewhere near the top of the ad results (and all the volume goes to the top few places), you’ll need to pay between US$1.32 and US$5.73 per Google Ads Planner.
Taking the middle of this range at $3.50 per click, if your ADR is $100 a night, then you’d need to convert any traffic to your direct site at 20% in order for this to be cheaper than paying an OTA channel with 17.5% commission: