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3 practices OTAs use to gain advantage over hotels

In the race for travel bookings, online travel agencies (OTAs) have been known to do a few things that can seem unfair. While being careful to remain within the rules, the industry’s major players have a handful of special tactics up their sleeve to help them gain the upper hand, making hotels more dependent on them for business.

But that doesn’t mean to say hotels are powerless. Armed with the knowledge of how OTAs sometimes operate, hotels can employ strategies of their own to protect their own interests and ensure they are not losing too much of their direct booking business to OTAs.

Here are three methods OTAs are using right now to gain advantage over hotels with actionable advice on what hotels can do to counteract them.

1. Brand hijacking

Brand hijacking, the practice of bidding on a brand name that is not your own, is something commonly used by OTAs in pay-per-click advertising to gain an advantage in search engine results. By bidding on a hotel’s brand name, they’re able to position themselves at the top of the results page by virtue of the fact they’ve paid for a premium position.

Even if your hotel comes out top of the organic search list, there could still be three to four PPC ads above these organic results, along with a Google’s own hotel search box. In all likelihood, a traveler is pretty unlikely to scroll down the page to specifically seek out your own hotel’s listing.

The problem is, brand name searches typically represent “bottom of funnel” keywords—the point at which a potential customer is ready to buy. So when the traveler sees the sponsored OTA ad with the hotel name in the URL and page title near the top of the search results page, they will simply click that ad. When that happens, there’s a strong chance the OTA will end up winning the booking over the hotel.

How hotels can fight this tactic

There’s a quick and easy fix for this one: bid on your own brand name.  If OTAs continue bidding on your name and you don’t, your hotel will always end up being placed behind their PPC ads.

Our own research has found that ad position is directly related to an increase in click-through rates and booking revenue, so it’s well worth making a relatively small investment to boost your own profit margins.

One thing to prevent this practice is to trademark your hotel name along with your destination. If you catch an OTA bidding on your brand name, you’ll have the necessary legal backing to register a complaint with Google. At that point, the hijacking offender will not be able to use your name within their ads.

That said, the issue of brand hijacking can and should be addressed further upstream. Overall it is an unfair practice to smaller independent hotels who have worked hard to build up their brand name and maintain relationships with repeat guests. One German hotel saw its cost-per-click costs rise by 18x because of brand hijacking!

We would love to see hotels banding together to expressly prohibit this within their OTA contracts, as many hotels themselves are forbidden to bid on OTA brand names within these same contracts.

2. Dimming

An especially insidious practice, “dimming” involves an OTA deliberately diminishing a hotel’s appearance or rank position on their search results page. In the most severe cases, the hotel may simply be ditched from the site altogether.

Why are OTAs doing this? In the wake of relaxed rate parity laws in Europe, some hotels have decided to lower rates on their own website to tempt customers to book direct. Dimming is the OTA’s way of trying to stamp this practice out.

More recently, this OTA tactic has spread within US, seemingly in response to hotels offering loyalty members discounted rates. A recent article by the Washington Post revealed just how widespread dimming has become, highlighting how Expedia has even resorted to deliberately publishing hotel room listings without photos, driving down the conversion rate and bookings for that particular hotel.

How hotels can fight this tactic

As OTA dimming practices come under increasing media scrutiny, hotels should stand firm and continue offering lower rates where possible. If OTAs become known for frequently skewing search results in their own favor, consumer trust may quickly begin to erode. And when that happens, a growing number may choose to book direct through the hotel website instead.

One of the big reasons travelers prefer booking with OTAs is a belief that they offer lower rates. So by offering consumers better deals for booking direct—whether that’s better prices or enhanced amenities—hotels can begin to chisel away at this perception.

While this combative approach involves a certain short-term risk, it could ultimately lead to greater long-term gains if widespread booking behavior can be altered.

As an alternative, hotels could seek to negotiate fairer terms in their OTA contracts. In the case of Best Western, their contracts allow them to offer discounted rates to loyalty members while permitting OTAs to do the same. This approach obviously involves a certain compromise, but it also gives hotels the ability to offer lower rates with the reassurance they won’t be penalized for doing so.

Independent hoteliers without large loyalty programs can stipulate different contract terms that allow discounts to be offered through alternate channels, such as to newsletter subscribers or social media followers.

**Editor’s Note** As of Sept. 21, 2016, Expedia announced that they would no longer practice dimming hotels. Although Expedia said that they were axing the strategy because it “was not improving the overall consumer experience,” the decision happened to come after pressure from the Washington Post article and other mainstream media coverage.

3. Owning customer data

OTA contracts often stipulate that hotels can’t market to customers that booked directly with the OTA. While this is fairly standard practice, hotels need to be careful about how much control OTAs are given. In one particular case we’ve seen, a contract stated that the company in question shall “remain the data controller and owner of the Customer data at all times.”

Pretty draconian and highly damaging: in an instance like this, the hotel completely forfeits its right to market to any guests originally obtained via the OTA.

How hotels can fight this tactic

If your hotel doesn’t ever capture a guest’s information, you lose out on the opportunity to build the relationship and create a repeat booking. If that same guest does choose to rebook, there’s a good chance they’ll go through the OTA again.

To prevent this from happening, it’s important to be eagle-eyed about how your OTA contract is worded. Check the fine print to make sure you’re not agreeing to let an OTA have complete control over your guest’s data. At the very least, OTAs should only own the rights to guest information up until the point of the stay itself.

At that point, your hotel should at least be able to market to any guests who have given you their consent to do so.

Simple to do but easy to forget, make it a policy for your front desk staff to ask for this permission when a guest checks in. A robust data-capturing process could end up helping you create countless customers for life.

OTA tactics to continue?

It’s fair to assume that OTAs will continue using every trick in the book to win bookings. As long as they do, hotels need to stay on their toes and combat these tactics whenever possible.

There is, of course, a balancing act involved here. OTAs help hotels reach new markets that are not possible to hotels on their own. Keeping them as partners is important, but not at all costs. New business aside, hotels deserve the right to successfully market to and retain past guests without punishment from the OTAs.

For those reasons, OTAs need to be challenged when they use their size and scale to out-muscle and out-maneuver independent hotels and smaller chains.

Not only can a more assertive approach help win individual battles, but by sheer numbers, hotels can collectively challenge the status quo and pressure OTAs to operate with greater fairness and flexibility.

Interested in learning more about how to lessen your dependency on OTAs? Join our webinar on Oct. 26, 2016 hosted by Travel Tripper, StayNTouch, and TrustYou.

Break Away from the OTA webinar

Gautam Lulla

Gautam Lulla

Gautam is CEO of Pegasus and an outspoken expert in hotel technology and distribution. When he's not busy disrupting the status quo, you can find him ripping powder on the slopes. Contact him at gautam@pegs.com.

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