Hotels Must Simplify the Booking Experience to Compete with OTAs
The hotel industry has been losing booking share to the OTAs for several years, and the trend does not appear to be reversing any time soon. Phocuswright shows that U.S. hotel online gross booking revenues from the OTAs exceeded hotel websites for the first time in 2016, and the projected gap widened in 2017. This channel shift continues to erode profit margins, and has frustrated chains, independents, and hotel management companies alike.
Let us consider some of the factors driving the shift from hotel websites to online travel agencies:
1. Marketing Spend: Expedia alone spent $5.3B in marketing in 2017. OTAs spend significantly more than hotel brands and independent hotels.
2. Research & Development: OTAs spend hundreds of millions of dollars annually on R&D. This includes development of new platforms, technology, and optimizing their existing products.
3. Rise of Metasearch: The ability to see the price for the same product sold by various online retailers on a single website has also contributed to the increase in OTA production. Many independent hotels do not have their own direct website featured on metasearch sites.
4. Shift to Mobile: Expedia’s app had 250M cumulative downloads in 2016, and approximately 33% of their transactions booked via mobile. Business Insider recently reported that Americans have on average 27 apps on their phones. Because OTAs such as Expedia and Booking.com dominate travel app share, they are more likely to gain from an increased growth in mobile bookings.
In order for brands to take share back from the OTAs, they need to provide a compelling reason to book direct and simplify the booking experience. Here are a few tactics to consider for your brand:
Implement a Direct Booking Strategy
Hilton was the first major brand to offer preferred rates to their loyalty members when booking on line when they deployed their “Stop Clicking Around” campaign in 2016. Most major brands have since launched similar programs, aimed at providing loyal guests a good reason to book direct: a preferred rate. Guests consistently cite that getting the best rate is a primary motivator for choosing their booking channel, and this strategy provides the brands with an instant advantage over the OTAs. It is important that the discount provided is not so excessive that it offsets the margin benefit of booking direct.
In order for brands to take share back from the OTAs, they need to provide a compelling reason to book direct and simplify the booking experience .
Simplify the Booking Experience
The hotel booking experience can be a cumbersome task that requires many steps to complete, however this does not have to be the case. Here are a few things to consider:
1. Reduce friction in the booking funnel by eliminating unnecessary steps- Many hotel sites try and upsell ancillary products during the booking process, which can often lead to cart abandonment. Hotels should compare the profit opportunity from these up sells to the conversion impact from additional booking steps. It may be better to offer ancillary products on the confirmation page or through the confirmation and pre-trip emails.
2. Reduce the paradox of choice by limiting offers and room types- Guests typically book three or four primary offers, and two or three room types. Reducing the number of decisions a guest has to make will allow them to more easily navigate the booking funnel and will reduce cart abandonment.
3. Minimize the number of mandatory fields at checkout- Is it essential to collect a phone number at the time of booking? Howimportant is listing the country of residence? Reducing the amount of information required will lead to hire funnel conversion rates, and this data can be collected at check-in.
Think Mobile First
The lion share of hotel bookings are still made on desktop, however mobile continues to gain share. A 2017 study from Hotels Combined showed that hotel bookings on mobile devices increased 67% from the prior year. As mobile bookings increase, consider the following strategies:
1. Maintain a persistent booking button on the mobile site- The guest should always be able to enter the booking engine wherever they are on the page.
2. Enable mobile payment- Entering a credit card number, expiration date, and CV2 can be a cumbersome experience on a mobile device. Allowing mobile payment significantly simplifies the credit card transaction and reduces cart abandonment.
3. Leverage photography over copy- Guests are less likely to read copy on mobile devices, so mobile marketing should rely more on imagery to sell the product. Copy should be limited to only the most important offer and room type details.
Regaining share from the OTAs will not happen overnight, and is an uphill battle. Hotels must remain vigilant in this battle and stay on top of the latest digital trends, as the OTAs will be rapid adopters of new technology. That being said, deploying a direct booking program, simplifying the booking experience, and designing a mobile experience to optimize conversion are effective starting points for hotels to become more competitive and drive direct bookings.