Independent hotels in Europe need to work hard to drive direct bookings and move away from their dependence on online travel agencies. In fact, their very existence might depend upon it, according to a recent survey by Phocuswright and h2c.
The study, which compared the independent hotel markets of France, Germany, Italy, Spain and the U.K. with that of the U.S., found that a large majority of these properties are now reliant on OTAs for their business.
European markets consider direct web to be their most important channel but are more reliant on intermediaries such as OTAs for their online bookings than bigger hotel chains, according to the Phocuswright report.
The Independent Lodging Market: Marketing, Distribution and Technology Strategies for Non-Branded Properties study found that 74% of independent hotels in Europe rely on bookings from OTAs, compared to just 26% from the U.S. However, room for room, the split was more even, with 52% of U.S. hotel rooms being booked with an OTA.
A recent Hotelmarketing.com post stated that independent hotels could greatly reduce that figure if they could only be smarter in the way they connect with the guest. This couldn’t be more true.
Independent hotels in Europe have traditionally been dependent on travel agencies to drive business; first from High Street and now from the Internet and the mega OTAs like Booking.com and Expedia.
However, now the industry is at a make-or-break point in its relationship. OTAs are growing in size and reach, while independent hotels appear to be losing the ability to price or market for themselves. It’s a dangerous situation.
Expedia has been on a spending spree, growing its portfolio with the acquisition of Orbitz, Travelocity and HomeAway. Booking.com is diversifying, with a global inventory deal with Tripadvisor Instant Booking, and the acquisition of Buuteeq and other B2B providers.
And then there’s Airbnb – a hybrid that is neither OTA nor independent hotel, but which could be the biggest threat to the independent hotelier of all.
Lack of Revenue Resources
While independent hotels in Europe understand the need to drive direct bookings, rather than increase their reliance on OTAs, it seems that a lack of tools and resources to make effective pricing and distribution decisions is holding them back. This, coupled with the increasing cost of third-party reservations (sometimes as high as 20%), is having a hugely negative impact on these properties.
According to Peter O’Connor, Professor and Director of the MBA in Hospitality Management at Essec Business School, and one of the senior market analysts on the Phocuswright study, most independents would like to drive an increased percentage of bookings directly, but they are limited by tight marketing budgets.
“While they devote the majority of their marketing budget to online channels, its effectiveness is clearly limited,” he said. “Most are failing to proactively reach out into the marketplace.”
Independents need to understand not only their customers’ demographics but also the marketing channels those people prefer to use, so that hotels can craft the right type of message to appeal to distinct market segments, O’Connor added.
“The problem is that many hotel marketers think like we are still in a print-media era — but we are not,” he said. “They need to produce 50 messages and send these to different people and media. But what these hotels also need to understand is that one of these media may be an OTA.”
Michael McCartan, managing director of EMEA for Duetto, agrees with O’Connor’s points, saying: “Hotels need to do a much better job at engaging travellers online and giving them a reason to book direct. Advances in technology mean they can leverage their knowledge of the local environment, the hotel amenities and the guest, especially if they are a regular visitor, to entice them with a tailored promotion and a unique experience, both at the time of booking and before arrival, that will not be found anywhere else.”
According to the Phocuswright survey, independent properties estimated that 75% of their total marketing spend in 2015 went to online marketing, including their websites, mobile solutions, online advertising, search engine optimization and social media.
The independent hotels of Europe find themselves between a rock and a hard place. The OTAs are driving business for them —at a cost — yet they don’t have the resources or the budget to compete independently against the big hotel chains.
In order to survive and prosper, these hotels need to adopt and implement technological solutions to drive revenue, and they must learn how to manage multiple channels themselves. Hotels must develop the ability to price customer segments independently, and offer packages and discounts that really talk to the customer. They need to learn to think and act like an OTA.
The world is changing and Europe’s independent hotels need to change too. Rather than lose revenue to third-party commissions, they need to price smart, price fair and market creatively to win.
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Sarah McCay Tams, Contributing Editor, EMEA
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Tags: Airbnb, channel management, Duetto, European Hotels, hotel distribution, hotel revenue strategy, online travel agencies, OTA Stranglehold, OTAs
