November 1, 2023

Hidden Costs of OTA Bookings

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Online travel agencies (OTAs) are great avenues for hotels to explore. They help you sell more inventory, but there are many hidden costs you should be aware of.

Discover the hidden costs of using OTAs, how OTA bookings might already be costing you unnecessary fees, and why they could hinder your company’s long-term growth.

 

The Main Cost of OTAs

 

OTAs currently control over two-thirds of all online bookings. While they can create a cheaper booking process for guests and increase the online visibility of hotels, online travel agencies charge 15-30% commission fees for each booking made through them. For example, if a guest books at your property through Expedia, Expedia will take a commission out of the total cost. That money could, and should, be in your pocket instead.

That’s just the main cost of OTA bookings. Here are additional hidden costs that you could experience while using OTAs.

 

Hidden OTA Costs and Limitations

 

Cancellation Costs

OTAs often persuade travelers with a “free cancellation” policy when booking. This may not cost the online travel agencies any money or time, but it can lead to wasted resources at your property.

Guests may abuse this system and reserve a room “just in case”, or continue to look for a better deal at the last minute. Not only is the expected income from that booking lost for your hotel, but the cancellation could be too late to fill that room.

Rate Disparity 

Another consequence of OTA bookings is the risk of rate disparity. Rate disparity occurs when lower rates are being offered on OTAs than what you are offering on your own hotel website.

This price undercutting can cause you to lose out on direct bookings, and will also result in frustration for both hotels and guests. Guests think they’re getting a great deal from the OTA they booked, while hotels can’t actually afford to honor that price. 

The hotel will ultimately have to make a critical choice: honor the price and lose what would have been a significantly higher rate for the room, or choose to cancel the reservation and risk reputational damage.

With the help of a hotel PMS like Solonis, you’ll diminish these problems with the most precise pricing tools and integrations designed to get the most return on investment (ROI) per reservation.

 

Limited Personalization and Guest Data 

When guests book through an OTA, hotels typically don't receive guest data and access to their information, such as their email address or phone number. The OTA is not obligated to share that information, making it challenging to reach the guest and communicate with them to address their reservation.

The inability to personalize their stay can hinder your marketing strategies and cost you the ability to provide the best experience for each guest. In comparison, guests who book directly through your website will have more opportunities to customize their experience — if your website is powered by an all-in-one platform that provides an Internet Booking Engine (IBE), such as Solonis.

 

Missed Upsell Opportunities

OTAs may also charge you additional commissions in order to list other services and amenities for purchase during the booking process. For example, if you wish to provide guests the option to add on a spa service, the OTA would charge a percentage of the spa service cost.

With direct booking, however, you can promote upsells and add-ons on your website rather than paying OTAs to give guests more control over their stay. With a hotel PMS built for businesses like yours, like Solonis, you can easily optimize your website to encourage more direct bookings and put more money in your pocket.

 

Balance OTAs and Direct Bookings to Drive Revenue 

 

While the OTA booking process may offer an easy process upfront, it has many significant costs and limitations that could stifle your company's growth over time.

Solonis is cutting-edge, all-in-one software designed to support every aspect of hotel operations, maximize your direct bookings, improve your upsell opportunities, and avoid the many hidden costs of OTAs.

Learn more about the power of cutting-edge hotel technology with our Ultimate Guide to All-in-One Software.

 

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