Pablo Delgado3 minutes read
Post tags:

What should my instant booking strategy be?

Once we have analysed instant booking  TripAdvisor’s new product (what it is and in detail) comes the big question: should I participate with my direct sale?

On one hand, the first reaction would be to resist. It does not seem ideal to advance towards a scenario in which the direct sale, whose main objective should be cost reduction and increase of hotel independence, is obliged to withstand a cost level close to that of the OTAs and depend on another industry giant.

It would be ideal if the hotel and its direct sale did not have to endure this but since TripAdvisor is becoming a huge showcase and OTAs (and now, Booking.com especially) are taking part in it, not connecting your website to it would marginalise your business.

As the lesser of two evils, we recommend taking part.

The reasoning is the following:

  • Guaranteed profit. With a CPA model, you will not run the risk of costs soaring (like it can happen in CPC –cost-per-click– investments, especially in hotels with lower-mid costs and short-mid stays).
  • It does not demand a lot of control and monitoring. Due to this guaranteed cost effectiveness, you will not have to monitor it regularly, which results in not having to waste precious time. Also, the hotel does not need to manage it as a new channel because it uses the existing rates.
  • If you do not put your “direct sale”, an OTA like Booking.com will do it instead. Simple as that. To make the most of this showcase (and TripAdvisor is one of the most powerful ones), you have two options: either you pay directly or you pay via Booking.com commissions, which, in any case, will be there anyway.

Where will the client click when he sees this result?

301

  • Cannibalisation risk. By taking part, you make certain users book through instant booking rather than through other existing options. Some of these transfers may take place:
    • Instant booking instead of Business Listings: A negative effect for you, although. You will have the fixed investment on Business Listings and now you will also have the Instant Booking cost. Will TripAdvisor lower the cost of its Business Listing now that it offers another way to reach the hotel direct channel?
    • Instant booking instead of TripConnect: The effect will be:

▪      Positive if TripConnect was costing you (on percentage) more than instant booking would cost now.

▪      Negative otherwise.

    • Instant booking instead of OTA. Positive effect and likely it will happen. It is the great advantage of instant booking: you will reduce distributions costs, since you will go from OTA sales (20% average commission) to 12% or 15% plus the cost of your direct sale. You can save between 1% and 6% on each booking.

Clarification: Your total sales will NOT increase with instant booking, but rather you will be able to distribute them through more cost effective channels. In other words, you will NOT sell more. The advantage is in the transfer of bookings through channels, in that positive cannibalisation from OTAs to your direct sale.

    • Instant booking instead of direct bookings: Negative effect although highly unlikely. Certain users used TripAdvisor as a showcase but they would end up booking on the hotel website on another tab, session, etc. Now, instant booking offers a more immediate and easier way to make that “direct” booking.
  • Compatible with TripConnect. TripAdvisor is the biggest showcase in the world and each square inch gained on its green is pure gold. The cost for you will be one or the other (not both) depending on the user’s choice.

Also, remember that instant booking guarantees up to 50% of appearances. You must protect the other 50%.

 An example of Booking.com on TripConnect and instant booking at the same time:

302

  • The best showcase, within your reach. For the most advanced users, the best strategy is not only connecting to instant booking but also removing all of the intermediation from it. In other words, requesting Booking.com and the rest of the OTAs (many of whom you do not have contracts with and feed off bed banks) to give way and not bid to be on instant booking, since it is a showcase where you, as a hotel, can get there by yourself. Remember that the aim of intermediation is to reach where you can’t.
  • Will taking part affect my position in the TripAdvisor ranking? It does not influence the ranking based on rate and reviews. Altering it could endanger its credibility and impartiality in the eyes of the user.
  • However, more prominent ordering factors are being added to the “traditional” ranking: by price, by distance and, above all, “just for you”, which takes into account different criteria: among them, as is to be expected, is probably each hotel’s bookability. 

303en

TripAdvisor must not be though at “the website with the listings by reputation”. Now, it offers more services to the user and, the more the hotel takes part in them, the more it will benefit from the benefit that it will bring it as a showcase.

Instant booking is a new transformation (the latest of many) of online distribution. As a hotel, you have two options: do nothing -and leave OTAs like Booking.com jump on the bandwagon of change and make the most of the opportunity- or jump on the bandwagon yourself and compete with the OTAs face to face. You decide.

Related:

Leave a Reply

4 thoughts

  1. Great article!
    I think taking advantage of 2 points of sale as mentioned in this article is the ideal solution. Why would you not want to show up twice?

    Another question a hotelier should ask themselves is how effective is their own booking engine? That can be a hard question to ask because nobody wants to say theirs is not optimal. However, one of the reasons assisted booking models have been so popular quite simply because they often provide better conversions than your own website. They are quick, easy, and efficient.

    This may be an easier solution than spending thousands of dollars trying to revamp your own booking engine.

    That said, I can recall many other times our industry has let OTAs handle our bookings just because it was easier. More often than not, we ended up trying to figure out how we could get that traffic back to our own website.

    • Hi Dean,

      Thanks for your comment. I’m glad you liked the article.

      Regarding your comments.

      Advantages of having 2 points of sale: Several indeed. Instant Booking (IB) guarantees up to 50% of all displays. Therefore you need Tripconnect CPC (CPC) to cover the 100%. For the cases that both IB and CPC happen at the same time. Think that for a client IB is not the “direct channel”. For a client IB is the Tripadvisor Booking engine. Therefore, it’s good that you cover the CPC space and the IB space to maximize the options that a client clicks in any of them. You can see that booking.com is already doing so bidding for both CPC and IB.

      I totally agree with the issue about how effective is the hotelier’s website booking engine. You cannot definitely bid on CPC without having a good booking engine. Having one is the first thing in order to compete with OTAs. However, the argument made by OTA that their conversion rate is higher than the hotel website is not as that valid either. In my opinion, conversion rate is a inadequate index to compare hotel websites with OTA.

      Finally, I think hotels are letting OTA gain the battle because they do not want or know to compete. Life is easy when OTA do all the work for you.

      Once again, thanks for your comment

      Pablo

  2. Hola estimado Pablo.

    Gracias por el excelente artículo, muy bueno la verdad como todos los que has publicado sobre Tripadvisor.

    Tengo una duda (sabiendo de antemano que debemos hacer nuestra oferta en Tripadvisor tanto por IB and CPC para completar el 100% nuestra oferta) no tendría problemas YO con las OTAs si por ejemplo pongo mi precio más bajo que las OTAs en IB y CPC para ganarle a las mismas. Porque en teoría cuando tu trabajas con BOOKING, DESPEGAR o EXPEDIA ellos te piden las tarifas más bajas del mercado, y a pasado a veces que ellos pueden encontrar alguna DISPARIDAD entre las mismas OTAS e inmediatamente se comunican contigo para que lo corrijas.
    Es que sino la otra opción es ofrecer tu oferta pero al mismo precio que las OTAS? Lo cual por precio por lo menos ya no te eligen a ti antes que las OTAS… pierdes cierta ventaja uqe ganas al estar en el mejor de los escaparates.
    Gracias por tu respuesta anticipada.

    • Hola Douglas, me alegro que te haya gustado.
      Respecto a tu pregunta. Mi opinión es que la paridad de precios es un gran cuento que han montado las OTA (con aceptación por parte de los hoteleros) y que está matando la venta directa en detrimento de la intermediación.
      Sin duda tienes razón con que las OTA te llaman la atención cuando ven que no tienen el mejor precio. La pregunta es ¿tanto les afecta el precio en su capacidad de venta? o dicho de otra manera ¿es que el cliente compara precios entre varias webs y reserva donde vea mejor precio? y dicho de una última manera ¿para qué quiero las OTA si sólo venden cuando tienen el menor precio?
      La realidad es que las OTA generan venta a la que el hotel nunca podría llegar. Pero también es realidad que las OTA están destrozando la venta directa de los hoteles y robándole la venta legítima del hotel.
      Esta espiral el hotelero tiene que romperla de algún modo y debe atreverse con el precio y a ponerlo mejor en su web. Tendrá que aguantar presiones de las OTA pero se puede hacer. No es nada del otro mundo. Cientos de hoteles lo están haciendo en Europa y en USA y no es el fin del mundo. En el fondo las OTA necesitan más a los hoteles que los hoteles a las OTA. Por tanto te amenazarán pero luego no actuarán en la medida de lo que dicen. Cuando vean los hoteles que su venta directa crece se animarán y serán más agresivos cada vez. La realidad es que sólo los hoteles pueden romper este dominio de las OTA. Si no lo hacen acabarán perdiendo el poco control que ya tienen ahora.
      Un saludo
      Pablo