A Case Study: Long-Term Benefits of Using Partner Agency to Improve Hotel Direct Booking
This article will be useful for you if you are running your business or involved in the e-commerce industry. Or if you are running an online retail or service business, this article can give you more understanding on how to link and balance between your direct marketing and partner agency marketing service and how to ultimately improve your sales revenue and plan for your online marketing. Back in 2013, a top Thai five-star hotel brand had a problem with its OTA marketing. The management team shared an important plot that their hotel was banned from its service listing for 2 months because the hotel set its direct booking price lower than the price on the OTA platform. The result? Over 50% loss of total online revenue! The Power of Online Partner Agencies It is commonly known that OTAs, delivery apps and e-commerce websites have a vast amount of visitor traffic as their major advantage. On top of that they run their own marketing to promote their listed hotel clients on an incredibly big budget. Try once and you’ll see: google “hotel in Hua Hin” or “online food service”, big names of these online agencies will take the top spots of your search result, if not the whole first page. The reason is obvious – using a partner agency is a convenient way of bringing in your sales revenue (before commission / GP). This reason alone is enough for hotels, restaurants, cafes, or any online merchants for that matter to get attracted to online partner agencies: It’s easy, low risk, no big investment. But as they say, nothing lasts forever. Relying too much on only a few or one channel of sales can only guarantee you trouble whenever the channel you rely on can no longer bring you the same amount of income. Through all my years in the hotel industry, I have learned that many hotels, local or international names, rely on OTAs as their main sales channel. Many hotel marketing managers and owners shared their numbers with me and it revealed quite a concern whether they realised it or not. Most of the big names you are familiar with rely 60-90% of their total online sales on OTAs! Fact: more than 60% of the hotel industry live and breathe through the service and the power of OTAs. The average 15-30% commission has become a common expense routine, leveraged by sales amount and choice of ad positions on each OTA platform. Is OTA A Sustainable Marketing Channel? It might look like a simple calculation at first—100 THB sales – 50% investment + 15% commission… With the above scenario you might think that 35% profit from OTAs is not a bad idea at all, plus it doesn’t require a team effort to create marketing strategies, sales strategies, booking system operation, etc. What could go wrong? Let’s look at the future and be realistic here. There will be times that we might not be able to maintain the same level of sales revenue (that comes through OTA), possible industry down time, competitor price war, or a more and more intense competition over ad placements that makes 15% commission no longer exist due to the fact that you might forget: your OTA partner is also just another company that needs growth and increase of revenue. If a hotel cannot maintain its sales growth, its OTA partner is most likely to transform into “an expense” that keeps growing and eventually becomes a burden–a big marketing dilemma. Sales Rev Is Everything! One of my clients made a contract that guaranteed minimum sales revenue through its partner OTA platform but failed to deliver. As a result, 1% extra commission took effect. Don’t ever let such small numbers as 1% deceive you, let’s put it in a simple calculation. Take it from the 100 THB sales above and add some more zeros: let’s say your hotel makes 100M THB of sales, you are bound to pay a commission of 15M THB. +1% commission means you have to pay 16M THB commission. The 1,000,000 THB difference that you have to pay is definitely a significant amount that can affect the hotel operations and cost management in many ways. One of the top Thai five-star hotel brands that I mentioned earlier was in the same situation here. Being banned from its partner OTA platform for 2 months took a huge effect on the hotel’s revenue channel due to the fact that 50% of its sales actually came through its OTA partner. And it’s a sad nature of OTA customers that most of them do not have loyalty to the hotel brands because they make their decision based solely on price. In fact, most OTAs even have a price comparison feature for their customers–people who are “looking for the best deal”. And this is why it is not easy at all for hotels to build their loyal customer base through OTAs–it’s not built for that purpose! Many of you must have realised by now, nothing is totally risk-free. Relying on only one channel of income is definitely a risk for your business in whatever industry you are in. Same logic, relying on only your OTA partner’s marketing team and policies without learning to develop your own marketing workforce, you are simply creating a deadend for your own business. In Search of A Sustainable Sales Strategy One thing I can tell you straight out is a sustainable sales strategy for each hotel will look different, that is because each hotel has its own preferred marketing style and target. While some hotels may not have a clear set target to hit and live through their OTA partners together with a few other offline marketings, others may have big scary numbers plus minimum yearly growth for the whole team to get stressed about from the beginning of the year. For the latter case, only OTA service cannot be enough. Through my years of hands-on experience with hotel clients, I have seen a
