Why The CMA Investigating OTA's Is An Opportunity For Hotels To Thrive
6th November 2016
It’s hot off the press that consumers may have fallen victim to being misled when booking hotels. With the latest news reports highlighting the need for hotel booking sites to be investigated by the consumer watchdog, it’s more important than ever for hoteliers to understand the role hotel marketing services can play in driving direct bookings.
Being proactive in successfully marketing your hotel will give your guests peace of mind; they should feel confident that they have managed to get the best possible rate. Given that this news report not only includes Online Travel Agents but also hotels’ own booking engines, it’s a conversation that needs to be had.
OTAs Media Spend Can Run Into The Millions
For the last 3-4 years, hotels have had to step up their game when it comes to generating direct bookings. Many have done this by providing guests with incentives as to why they should book direct – while this is certainly a great way to generate bookings, OTAs have still been poaching direct bookings and revenue by offering what appeared to be cheaper rates. If you take into account that an OTAs media spend can run into the millions every year, they clearly have a large enough budget to advertise to the correct target demographic. Hotels can’t realistically compete with these adverts especially when their direct revenue is in decline, so it becomes a vicious circle.
It goes without saying that a hotel’s direct bookings tend to be their most profitable guests – many of whom will return frequently and show loyalty to the brand. Therefore, every direct booking being obtained by OTAs is taking its toll on the hotel’s bottom line.
Your Chance To Thrive
As concerning as this news will be for potential guests, it’s a brilliant opportunity for hotels to further showcase the transparency of booking with them directly. Some OTAs (and even hotels) are neglecting to offer key information – sometimes through deliberate omission – and these important details, such as hidden charges, will be a game changer for guests.
Concerned about “the clarity, accuracy and presentation of information on sites”, the Competition and Markets Authority wants to avoid the misleading of customers and the potential breaking of consumer law. They will examine several practices including how hotels are ranked and what search results influence the ranking (including the amount of commission a hotel pays the site.)
For example, when you search location-based keywords such as “hotel in Wiltshire”, the first page of Google is filled with PPC adverts as well as booking engines. Since Google has changed the search function to feature many more adverts, it isn’t until you reach the second page that you begin to see organic results and actual hotels. Consumers are not usually aware of this, so no matter how well your website is optimised, it is extremely difficult (close to impossible) to be on page one of Google anymore without paying. This gives Online Travel Agents a significant competitive advantage.
Understanding The Tactics
One of the key misleading features on some booking sites and OTAs include stating a discount. We’ve all seen it – some boast ‘10% off today!’ yet if customers were to research and check on the hotel’s site directly, they would see that the discounted price is already the rate offered by the hotel direct. In some cases, this is the rate the hotel gave the OTA to begin with! These discount claims are usually based on higher prices that were only available for a brief time or have no relevance to the customer’s search.
With OTAs, it has become more common for hidden charges to cause a shock. The CMA want to make sure that this is investigated too, detailing on their website what needs to be looked at – “the extent to which sites include all costs in the price they first show customers or whether people are later faced with unexpected fees, such as taxes or booking fees.” Other hidden charges include a cancellation policy which isn’t very well advertised, a fee for use of facilities or breakfast (if not stated) and an additional fee for more guests.
70% of people used OTAs in 2016 to book hotel rooms
Senior Director at the CMA, Nisha Arora, has made their position very clear. “We are concerned about the clarity and accuracy of these sites. Rather than helping consumers they may actually be making it more difficult for them. When you put in your criteria – which room you want, when you want to stay – they are listed in a certain order. This is not just influenced by consumer preference but by commission – commercial considerations – and consumers might not be aware of this.”
With 70% of people using OTAs last year to book hotel rooms, Andrea Coscelli, Chief Executive of the CMA, believes customers should be fully aware of whether they are getting a good deal or not, and we couldn’t agree more. Over the last 2-3 years, we have been working hard with our hotels. Not only to ensure that we helping to generate more direct bookings, but to help guests understand that the hotels are more capable of being completely transparent. We believe this is an important practice; this can and will affect their brand if guests feel otherwise.
It’s also worth noting that the booking engines used by hotels themselves have similar features to OTAs – but there is a difference. When guests see ‘hurry only two rooms left’ on some OTAs, they are encouraged to buy their stay at an inflated price. This pressure selling makes claims about how many people are looking at the same room, influencing availability and creating an unfair sense of urgency.
When this appears on a hotel’s own booking engine it can be an inaccurate reflection of the hotel’s room stock – they need to be on the ball when it comes to presenting their availability to ensure full transparency for guests. Their full stock needs to be shown on their own direct booking engine – this can help stamp out OTA inflation, build trust and ensure loyalty from guests who see the value in booking direct.
We know a thing or two about marketing for hotels – that’s why we welcome the watchdog’s intervention and encourage any hoteliers thinking about ways to drive their direct bookings to contact us directly on 0117 930 4365 or drop us an email us and one of the team will get back to you.