Platform vs. Direct Booking: Which is better for travelers?

The hotel distribution sector has undergone a considerable transformation over the past few years, thus creating complexity. Online travel agents (OTAs) are facing both profit and loss in the market share.

At present, the majority of the hotels prioritize direct bookings rather than depending on OTAs. This drastic shift triggers a dilemma for accommodation providers. This article will be covering the benefits and disadvantages of OTAs as well as direct bookings to evaluate which one is the best.

Definition of OTA booking

An online travel agency deals with assisting their customers in booking hotels and flight tickets. They often serve as a middleman that is capable of establishing a link between travelers and hotels. A minimum commission is provided during this process. Another major highlight of OTA is that they assist hotels by boosting their online visibility. Valuable tools as well as better insights are offered by OTA. Guest reviews are also managed by them.

How does OTA generate profit?

OTAs earn cash by levying commissions from hotels and property owners. They reap profit in the following manner.

Rooms

OTAs earn around 5% to 30% commission from hotel bookings and flight tickets. They take advantage of either an agency model or the merchant record model to handle payments.

Agency model

In the case of an agency model, the reservations of travelers are managed by an online traveling agency without accepting payments. Instead, they collect the payment details from a traveler and offer them to the hotel.

Merchant of record model

The merchant of record model involves charging the traveler for a hotel room and utilizing one’s own mode of payment by the online travel agency. Thus, making the hotel the merchant of record to the OTA.

Marketing

The majority of the hotels provide a commission to OTA with the aim of ranking higher in search results. Both bookings and awareness will experience a surge by being top-ranked.

Definition of direct booking

Direct bookings take place once the travelers reserve accommodation straight via the official site of the hotel or through the phone. Each communication will be gathered from the hotel rather than an online travel agency.

The hotels witnessed a remarkable hike in direct booking, especially during the outbreak of the pandemic. Despite the availability of direct bookings, some of the hotels still encounter costs for the booking.

Which is the preferred type of booking that suits hotels?

Both direct bookings and OTAs prove beneficial for the hotels. This is particularly because there is better flexibility and maximum loyalty. Striking a perfect balance will assist hotels to succeed in the future.

Differences between OTA and direct bookings

OTA is capable of providing enhanced visibility and reach. It offers numerous benefits to the hotels in the form of the ‘Billboard effect’. The chances of customers searching for your hotel and navigating through the website are very high. OTAs always focus on generating higher revenue by offering vast marketing to hotels. They would assist them in reaching a large group of target audiences while creating more bookings for flight tickets.

Direct bookings assist in enhancing guest relationships.

The profile information of a guest is automatically captured once they through an OTA. This would enable the OTA to interact with them. However, OTAs are capable of establishing a close link which is often done by hotels.

On the contrary, direct bookings permit hotels to collect guest information to create a fruitful relationship while offering personalized experiences, thus promoting loyalty.

Direct bookings help you to save revenue shares.

Online travel agencies are quite famous for hotel agencies, but they usually arrive with hefty fees. Normally, hotels pay around 15-30% of the booking value to OTAs. Obtaining more reservations either through the website or Facebook page enables you to save funds. The primary objective of hotels is to maximize revenue and fortify their brand.

Online travel agencies do have the potential to offer an efficient experience.

Nowadays, most of the people are relying on online travel agencies to view and compare several hotels. As a result, it would ensure a swift and seamless booking experience. Both direct bookings and online travel agencies have their pros and cons.

It is not a wise decision for the hotels to depend on any of the methods for reservations. Apart from hotel initiatives, travelers’ preferences are being influenced by the advent of OTA. Each booking method is essential for hotels that necessitate strategic planning.

What are the ways to strike a perfect balance between direct bookings and OTA?

Despite the existing conflict between OTAs and direct bookings, individuals will be able to enhance their hotel business by reconsidering their distribution tactics. They may resort to utilizing pricing, exclusive offers along with policies and incentives for the guests.

Some of the valuable tips to be taken into consideration are as follows.

Travelers are unable to access loyalty programs and rewards in the case of OTAs. Individuals will be able to boost their loyalty program by focusing on previous guests that contain personalized packages.

Incorporate smart pricing tactics.

The price fixed for hotel rooms is very crucial. One must be able to evenly balance direct and OTA bookings simultaneously. Therefore, possessing a transparent pricing strategy is important. Individuals may even take into consideration the utilization of revenue and marketing management services. Even revenue managers are capable of offering assistance in carrying out prudent decisions rather than depending on assumptions.

A flexible and smooth cancellation policy is crucial.

A seamless and flexible cancellation policy is vital since it assists in amplifying direct bookings. Some customers might encounter unnecessary delays in obtaining refunds from OTAs.

Conclusion

Online travel agencies continue to play a pivotal role in the hotel sector and it is likely to increase in the forthcoming years. At present, hotels are very careful while paying commissions to OTAs. They should consider boosting their direct booking tactics while relying on OTAs. Implementing a well-balanced approach will contribute to the growth of the hotel.