What Vacation Rentals Can Learn From The OTA Wars

November 1, 2017 Cody Putman

 

Is there any end in sight to the booking battle between hotels and OTAs? Can we at least expect a change in terminology, so that the situation between them transforms from a war to a treaty at some point, even if they don’t always see eye to eye? The short answer is not likely. Though many major hotel brands have launched pricey and fairly effective direct booking campaigns, OTAs gained about a percentage point while hotels lost about a percentage point of bookings in the past year (Skift). The difference is negligible, but this is the point. Chipping away at the power of OTAs is a formidable task. Even major hotel chains struggle to negotiate better commission deals (see Hyatt and Expedia over the past summer).

 

If we assume vacation rentals can learn something from the direct booking wars, and we do assume this, then we can also assume that many hotels could have done things differently. So where did hotels go wrong?

 

When hotels initially began using OTAs, they did so as a way to put heads in beds, selling leftover inventory at lower margins. Perhaps this was before there was the widespread knowledge that filling a room with cheap business isn’t a sustainable strategy. Nevertheless, this is where it began. And what did OTAs do? They built technology. They paid attention to how to use the Internet, and they invested in understanding how travelers wanted to engage with them. They made this their business, while hotels were still thinking their business was staffing the front desk and being hospitable. Then OTAs made the user experience better. First takeaway?

 

#1 Let your technology work for you. As much as possible, invest in technology that will not only capture guests but will also serve them while they are staying on site. This is also more challenging for vacation rental companies because let’s be honest, you’re generally far smaller than the average hotel brand. This is why we advocate not just for individual VR companies, but also for the industry as a whole to harness resources toward this effort.

 

And because OTAs had invested in the guest experience and spent the money on branding and marketing, naturally they wanted to own the guest. And, here, hotels began ceding the guest. Some of the problems were technology and some were simply issues of training. Had front desk agents been able to properly gather details from guests upon check-in this may have looked different in the long run. The second takeaway:   

 

#2 Own the guest data. Just because the guests stay at your property doesn’t suddenly mean they are “your” customers. Not anymore. Third-party listing sites have a stake in making sure that the traveler is their customer, and in the last several months have made their strongest push ever to make sure it stays this way. What you can do in your own interest is to ensure that you capture as much guest data as possible at every single touch point. (For instance, NAVIS has technology in place that can track the guest pathway and capture their data despite the fact that third-party sites are making it more difficult for owners to connect those dots by withholding owner details from prospective guests until much later in the booking process.

 

 

Above all, what OTAs have done well is branding. They went all-in, and it has worked.

 

#3 Go all-in. Grab the branding torch and run with it. If you rely on third parties to keep vacation rentals in the spotlight when the fervor over rentals starts to die down, then you will end up in the same battle to the death over your business. OTAs have invested in getting guests to choose them because they offer choices and the ability to compare properties and they thrive on reviews and so forth. Travelers have responded by choosing OTAs, and those customers won’t be easily persuaded to jump ship, at least not without the deep discounts that hotels are currently losing money on to get guests into loyalty programs.

 

And this OTA marketing continues to work even as hotels finally (FINALLY) go all-in. See a trend? Late with technology, late to invest in the marketing to compete, late to develop competitive programs, many of which are coming at a significant cost to the hotels. What if, instead of waging war, hotels had kept pace. Now, there are billions of dollars going to advertising in an attempt to recover these guests. So our final takeaway:

 

#4. Don’t wait. Keep pace! When third parties make a move, rally your industry or your company or your property to keep pace. It may take an industry-wide movement in some cases, but better to do it now while you still have your own guests, instead of later when you’re trying to recover what you once had.

 

Sure, you can try to make the case that hotels aren’t responsible for what has happened. Hotels sometimes feel like they’ve been beaten up by a bully, but this is how the market works. The market will continue to change. What we see now as “new” may or may not eventually become a marketplace norm. Change is a constant, though, and there will definitely be another shake up down the road. Vacation rentals have an opportunity to be innovative, keep pace, and stay on top of technology. To take and maintain control and then have a shot at having a different, perhaps better, outcome.

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