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How European hotels can benefit by investing in direct distribution

Many European hotels complain about rising OTA costs, and for good reason. The commission costs are enormous, and OTAs often take a significant portion of business. In fact, according to SiteMinder, it’s estimated that OTAs will have 70% of gross European bookings by 2017. That’s compared with a predicted 52% market share in the U.S.

Why the major discrepancy? Partly, it seems to have something to do with a difference in mindset over the importance of the hotel website.

In the U.S., 72% of independent properties believe their direct website is most important, while only 52% of European hoteliers hold the same view. That’s despite the fact that Europe has more independent hotels and a lot less rooms per hotel.

Europe vs. USA - hotel websites
(Source: Siteminder)

So the question is, how can Europeans even begin to start weaning themselves off the dependency on OTAs when they don’t even prioritize their direct channel?

This hesitancy towards investing in direct distribution is understandable, of course. It can feel like a lot of extra work, and it comes with the added fear that all that hard work might not pay off. After all, a hotel could build a nice website that no one finds on Google. Equally, spending a lot of money bidding on AdWords doesn’t come with a guarantee that it’ll lead to extra bookings.

But while these concerns are legitimate, it’s worth remembering that investing in direct distribution can bring big benefits. In hard figures, direct bookings can be anywhere from 9-18% more profitable than OTAs. With those numbers in mind, there’s more than a compelling case for hotels to prioritize direct distribution.

Successful direct distribution strategy: 3 vital elements

A direct distribution strategy consists of three key elements that all need to work in tandem in order to boost direct bookings.

1. Conversion-optimized Website

Conversion optimized hotel websites

Creating a website that converts involves far more than buying a URL and putting together a series of photos and text.  Today, modern hotel websites are following the winning principles of e-commerce sites. This involves building a website with conversion optimization at its heart—designed to maneuver customers along the sales funnel to the all-important booking page. Here are some of the key features that conversion-optimized sites possess:

Intuitive navigation. To ensure the path towards purchase is a smooth one, e-commerce sites feature intuitive and simple navigation. This eliminates the possibility of overwhelming or confusing customers, ensuring they can find the information they want and make a purchase quickly. In the same way, modern hotel websites provide a clearly delineated path towards the booking page with minimal steps involved. By removing obstacles and making navigation options obvious, customers are naturally encouraged to stay on the site for longer.

A strong CTA. To incentivize bookings, having prominent call-to-action buttons throughout a website is of utmost importance. There’s a lot of science behind choosing an effective call-to-action, but the key is to provide visitors with a compelling reason to book and making this clearly visible on the site. In particular, the visual design of CTA buttons is often overlooked, but it’s an essential consideration to get customers clicking and booking.

Mobile friendly. A hotel website also needs to be optimized for mobile, and ideally feature a responsive design. In Europe, almost 4 in 5 travelers own a laptop, smartphone and tablet, while 20% of bookings are made via mobile. As users spend more time away from the desktop, creating a streamlined user experience across all devices is critical.

Good SEO. Websites that promote direct bookings need to be built with the proper SEO principles. Writing unique titles for every page, using meta tags, adding alt text to images and creating a URL that contains relevant words will all help a site show up in search engine results. It’s also important to spend time on keyword analysis. Check out Google’s Keyword Planner for help with that.

2. CRS and Internet Booking Engine

RezTrip Booking Engine

In most cases, the website is connected to an IBE and CRS. But is a booking engine simply a booking engine? Not all are created equal. Here are the features that make a good booking engine and CRS stand out:

A great user experience. For your direct distribution strategy to be effective, your booking engine must adopt the same user experience principles as the website. This means it should flow well, make information easy to find, and simplify the amount of work a user has to do to make a booking.

Fine-tuned control over your revenue strategy. The CRS should also be utilized as an effective revenue management tool. The best CRS platforms allow hotels to have fine-tuned control over pricing strategies across multiple channels. For instance, hotels should be allowed to market last-minute specials to mobile users without diluting pricing for desktop users. Hotels should also be able to use price checking and rate matching tools that allow them to offer best rate guarantees automatically when OTAs are attempting to undercut their rates.

Seamless integration. Are you advertising a special offer on your website that’s no longer available in your booking engine? That could be down to the fact your rate plan expired in the CRS, but you didn’t update your website in time. It can be hard to stay on top of these things all of the time. But a dynamic connection between the CRS, IBE, and website will eliminate this kind of issue. The best systems on the market have a seamless connection so that if a rate, room or offer changes in the CRS, it’s automatically updated in the IBE and website.

3. Digital Marketing

Digital Marketing for hotels

After investing in a great website and booking engine, it’s essential to expand its visibility and start attracting qualified traffic that will lead to more direct bookings. That’s where digital marketing comes in.

In terms of financial outlay, digital marketing represents a hotel’s primary customer acquisition cost after the website build and commission costs from the booking engine. And while it can be a waste of money if not managed effectively, a successful digital marketing campaign can pay for itself many times over. Here are some of the key advertising channels to consider, along with an outline on the factors that contribute to effective campaigns.

Pay-per-click advertising. Advertising through PPC can be extremely profitable. On average, every $1 of revenue spent through Google AdWords generates $2. The key, of course, is knowing how to spend your PPC budget wisely. Creating a winning PPC campaign involves far more than picking the best keywords. You’ll also need to focus on creating an engaging PPC ad with optimized copy that taps into the desires of your customers. Once your ad has been clicked, customers should be directed to a well-designed and conversion-optimized landing page that helps to drive direct bookings.

Email marketing. From advertising your seasonal room deals to promoting the latest events or sightseeing tours, email marketing provides a platform for hotels to communicate with customers year-round. And because email marketing is to an engaged audience that has opted in to your communications, it has one of the highest returns: approximately $40 for every $1 spent.

As well as being a proactive marketing tool, email can also be used to win back abandoned bookings. According to the latest figures by SalesCycle, 81% of people abandon their travel bookings online. But retargeting emails can be highly effective at convincing customers to complete their reservation. SalesCycle found that abandonment emails had almost double the open rates of traditional marketing emails, and more than a quarter of clicks within the email resulted in a recovered conversion back on site.

Content and social marketing. While traditional forms of advertising have their place, hotels should also be investing in a solid content marketing and social media strategy. This form of marketing isn’t about selling. Whether it’s investing in a hotel blog, or developing a unique Instagram or Snapchat strategy, content and social marketing is about sharing valuable, useful or entertaining content that creates brand awareness and builds relationships.

Online reputation management. Do you know what other people are saying about you online? Do you control the message? Having people trust your own hotel website means that people have to trust what others are saying about you as well. From updating your local Google Business listing to responding to online reviews, managing your online reputation is an important part of your digital marketing strategy.

Understanding the e-commerce ecosystem

It’s still important to maintain relationships with OTAs, but the imbalance in Europe isn’t sustainable. Hotels need to better understand the value that the direct distribution adds to their profits. Breaking the hold that the OTAs currently have on them very much relies on a shift in priority.

Direct distribution strategy isn’t something that can be done half-heartedly. All three of the areas discussed above need to work in unison: a conversion-focused website, a streamlined CRS and internet booking engine, and a quality direct marketing campaign.

To make sure these elements are given the attention they deserve, you need to work with a technology partner that has your best interests in mind. Remember, tech companies that work on a commission-based model vs. a monthly fee model have a far greater incentive to help you succeed in your direct strategy.

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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