© Nida Kiraz | Tüm Hakları Saklıdır.
Hello, I am Nida Kiraz, an experienced manager with many years of successful work experience in the tourism and hospitality industry. I am currently actively working as the Sales & Marketing Director of Papillon Hotels and the President of the Sports and Tourism Association.
The basic portfolio of every luxury hotel marketer consists usually of a couple of tactics and channels that seem to be consistent across a large variety of both independent and franchise 5 star properties. This portfolio usually consists of a elegant looking but clunky website, basic SEO optimization, some direct booking ecommerce functionality paired with simple marketing analytics, some email & loyalty marketing, professional room, food and property photography and last but not least integrations with several of the most common OTAs like booking.com. A stunning majority of most luxury hotel bookings come from OTAs. Every luxury hotel marketer out there should ask him or herself the question if that is a sustainable and wise distribution of sales-driving marketing channels. In our opinion, it is not!
After all, every business that is relying on only one channel, one technology or one supplier runs at a high risk of experiencing a so called “rug-pull” where due to a change in terms and conditions, regulation or just sheer greed by the OTA partner sales take a sudden dive and liquidity for the property is in jeopardy. In addition to that a lot of big OTA companies have stated openly in their annual public reports in the last couple years that they intend to acquire more direct ownership of properties and increase their investment in search, social media marketing and programmatic advertising to take complete control of the marketplace. This would mean that this effort to vertically and horizontally integrate their business model in the hospitality industry will most likely in five to ten years lead to severe conflicts of interest in addition to oligopoly and market power problems that will severely affect large luxury hospitality groups as well as small boutique independent brands. Some hotel marketers would argue that this is too much of a grim dark view of the future and that ultimately control will remain in the hands of the brands themselves but let me make a case against this fallacy of thinking by providing several psychological, logistical and technological reasons why OTAs are slowly but steadily eating the luxury hospitality industry.
Similar to programmatic advertising in the case of left-over digital media inventory, OTAs (online-travel-agencies) started out in the beginning by leveraging the fact that lots of hotels and resorts even in high-season usually had left-over rooms after receiving most of their bookings back in the day from analogue sources like b2b relationships with tour operators, airlines and travel agents. It seemed like a low risk, high reward deal. The OTAs approached the hotels and stated that they could get these left-over rooms booked in full via online marketing for just a small share of the profit per room. In the early days of search engines and social media platforms most hospitality companies hadn’t yet scaled up their internal efforts to populate these channels with campaigns themselves so these scrappy start-ups just had to exploit the fact that impressions and clicks were cheap, algorithms were simple and competition was minimal.
In just a few years these companies scaled up in terms of teams, market share and dominance when it came to search, social and programmatic advertising. More and more online bookings started to come from these OTAs and their margins increased and increased until their market power today has reached the level where they can regularly outspend and outmaneuver most big hospitality companies themselves when it comes to activity on these channels. It is official, most (luxury) hospitality companies completely and utterly over rely on these OTAs to drive the majority of their online bookings and are loosing brand equity, pricing power and control of their messaging by the day.
This flow of relatively cheap online bookings led to a variety of problems when it came to pro-active luxury hotel marketing management. Organizing photo and video shoots, writing or hiring copywriters and maintaining even a templated luxury hospitality website as well as being a product owner for all the integrated OTAs takes time and effort. The amount of work every hospitality marketing team or manager has to do on average has just increased, not decreased over the last decade. Especially if you add regular reports, training junior hires and corporate events to the mix there is just not enough time to do pro-active things like innovation, testing new tactics and channels, researching affluent guest profiles, quality control and so on. Finding time and energy to deep dive into modern psychological models of luxury brand and neuromarketing, upskilling in digital areas like advertising, search, social, programmatic, video, analytics and CRO as well as hiring and onboarding more staff or external partners is nowadays more often than not left behind or de-prioritized due to the fact that the steady flow of OTA bookings is coming in regularly with relative minimal effort apart from the lost profit.
So far we have talked about time, talent and teams mostly as reasons for the lack of direct control most luxury hotel marketers exercise over their direct bookings. But resources of course also play a huge role. Most owners, general managers and management companies operate on a “keep the costs low and generate enough profits in the short and mid-term to show profitability” model. This is usually opposed to the more long-term approach most marketing investments require to see actual returns. So instead of providing luxury hotel marketers and their team with resources, headcount, budgets for external partners, technology, coaching and time to develop strategy, execution and measurement, they push them towards short-term profitability which of course forces their hand to prioritize OTAs and quick wins instead of deep diving into the psychology of their affluent guests and improving their technology stack and online presentation over time.
A large part of luxury hospitality companies don’t spend enough time and resources on their digital marketing. These marketers are located on the left side of the curve below and never really drive a lot of performance from their efforts and eventually give up in most cases (they start relying again on OTAs). Especially when it comes to direct-to-market strategies. Then there are the peak performers, the people who realize what channels work for their hotel, what long-term campaigns will pay off and how to built funnels and lifecycles that actually work with affluent guests. These people reach the maximum possible return and output with their media mix and would just decrease in performance if they blindly increase spending. These people live at the very top of this bell curve. The people on the right tend to overspend or allocate their budget to the wrong initiatives or vanity projects, so ultimately their performance decreases over time. Balance and smart decisions are key here.
The last layer of complexity which promotes overreliance on OTAs and endangers the luxury industry is the accelerated development of new martech features, platforms and technologies in general. Most marketers due to time and resource constraints opt for getting trained on the job exclusively instead of investing their own time and money into upskilling (At Jadewolf for example we encourage skill development and certifications. We have a CXL subscription and attend events like Adworld to stay current with our skillsets just to name two things we do). To maintain a decent work-life balance especially in stressful upper management roles most executives end up delegating research and adoption of new platforms to lower ranks (entry level people aka young people) instead of deep diving and getting familiar themselves with what is new on the market. In smaller teams this then obviously leads to a very slow or non-existent adoption of new skills and technologies. Since most OTAs offer relative simple interfaces or even done-for-you account management services we can assume that this just makes it easier to go for the “junk food” choice when it comes to direct bookings.
Now that we shed a bit of light on some of the reasons why OTAs are so popular and why their prolonged use promotes bad habits in terms of direct-to-market effectiveness let’s list quickly some ways luxury marketers can wrestle back control from these companies. The first step must be a budget re-distribution. Some of your brand, website or content budget needs to start flowing into skills, talent, partners and platforms that can yield direct traffic, bookings and MICE leads through targeted campaigns WITHOUT taking a cut of your profit margin. This requires to get better at creative ad design, to learn about direct media buying, programmatic, social media and search engines as well as conversion rate optimization, web design and proper attribution modelling through UTM parameters and marketing analytics. Of course your content (images, videos, copy, interactivity etc.) needs to be following the rules of luxury marketing psychology for this to work in general. Only by taking direct control of all of these areas can luxury hotel marketers increase their direct bookings and become less dependent on OTAs and their huge digital marketing media spend.
Source: https://www.jadewolfmarketing.com/2022/01/29/why-otas-will-eat-the-luxury-hospitality-industry/