Increasing occupancy in hotels
OTAs: friend or foe?
How hotels can make the best use of their capacity in this tough time is an ongoing debate in the hotel sector. The progress of the pandemic and how well the world can get it under control will be decisive in this. Ever changing customer demands and how hotels harness the power of online travel agencies (OTAs) will also be decisive moving forward.
Trade shows and large events have been cancelled, kneecapping city hotels, while holiday hotels are suffering from travel restrictions and the threat of quarantine requirements. Occupation dropping to a third of capacity is more the rule than the exception during the coronavirus pandemic. Is it time to give up or push forward? And how?
Booking hotels using online travel agencies is just so nice and easy. Simply enter the location, dates and perhaps the hotel type to get an overview of what accommodation and services are available.
Any hotel not offering rooms via these platforms is simply invisible. Cooperation with OTAs opens doors. On the other hand, the commission of up to 20% per guest booked takes a significant chunk out of hotel profits. OTAs are a rip off.
Marketing Consultant and HSMAI member Tim Peter believes OTA influence will shrink. In the June 2020 edition of industry magazine ‘Hotels,’ he said that OTAs would continue to have a part to play in future but would not gain further sizeable market share. Sloan Dean, CEO and President of Remington Hotels, holds a different view. In the very same publication, he argues that one cannot ignore the role of OTAs in opening doors. Mr Sloan believes that the influence of OTAs will continue to grow even if hotel companies try to bring in guests using their own channels.
Jürgen Gangl, Chair of the German Hotel Directors' Association (HDV) and General Manager at the Park Inn Hotel in Berlin, also believes that hotels need to work with booking platforms. They accommodate customer booking habits and occupy the rooms in his city hotel. You can read more about Mr Gangl's strategy during lockdown and how it panned out below.
For many years, the outsized influence of OTAs in the industry has been a thorn in the side of HOTREC, the umbrella association for hotels and hospitality establishments in Europe. Now, with an eye on the precarious situation in which many hotels find themselves, the association has brought back its campaign to book direct.
Generating sales revenue starts with bookings. HOTREC and the various national hotels industry associations all agree on that. That is why they are encouraging hotels all over Europe to get on board with the ‘book direct’ campaign.
The concept: guests are encouraged to book their holidays direct with the hotel rather than through one of the big OTAs. This would save hotels the brokerage fee of up to 20% per night sold.
And guests can benefit, too. They deal direct with the hotel for prices, as well as any confidential questions or special requests. There is a question mark over whether that alone will be enough to motivate guests to book direct with the hotel.
Hoteliers interested in the campaign can order advertising materials such as flyers, displays and stickers in a range of languages from the association's online shop. Free material can also be downloaded from the webshop.
Even Jürgen Gangl, Chair of the German Hotel Directors' Association (HDV) – also General Manager of the Park Inn Hotel on Alexanderplatz in Berlin – welcomes direct bookings from guests. However, as a hotel manager, he is dependent on OTAs for good occupancy. At 25% during the week and 40% at weekends, occupancy is currently excellent – of course it is terrible by comparison with last year but outstanding in comparison to occupancy figures from other hotels in the German capital.
‘Guests book online and often on the road. For that, they use OTAs. If a hotel is not listed on a booking platform then it has no real presence and it cannot be booked.
Jürgen Gangl, General Manager at the Park Inn Hotel in Berlin, Germany
Following a truly dead period, the hotel is working at higher occupancy each month. When ITB was cancelled in March, occupancy quickly dropped from 90% to 45%. But the worst was yet to come. Lockdown arrived in April and had occupancy figures in single digits until May. June saw travel warnings lifted and tourists were allowed to stay, as well as business travellers. That saw occupancy climb to 14%.
Mr Gangl's campfire strategy seems to be working. The operational side of the business kept running, as did sales and marketing. That meant that the hotel remained visible and bookable online and did not drop down the Google search pages, in fact it has risen higher than other hotels. The Park Inn Hotel is expected to break the 30% barrier over the course of the summer.
Mr Gangl is familiar with hotel industry efforts to push guests towards direct bookings. They aim to increase the proportion of direct booking at hotels and this is a noble goal. ‘But the reality is different,’ says the hotelier. Guests book online, often on the road and they use OTAs for that. If a hotel is not listed on a booking platform then it has no real presence and it cannot be booked. ‘That means that as a hotel manager I have to accept the booking portal commission of 15 to 20%,’ he concludes. In his eyes, the benefit to the guest is that they receive detailed information about their stay firsthand. Especially at the moment, it is important for many guests to know what hygiene measures are in place in a hotel and whether special requests can be accommodated. Only direct bookings make space for this personal service.
Austrian hotelier Georg Reif would also welcome guests booking direct with the hotel. He is fortunate to have loyal regulars, meaning he can manage fine without OTAs – even in these tough times plagued by coronavirus. Only 10–15% of his guests book using portals and Hotel Urdlwirt in Premstätten, Austria, has reported consistent improvements in occupancy since July.
‘It is good to work with OTAs; they deliver lots of guests that you cannot reach any other way. I don't think it would be sensible not to work with online booking platforms, even though the proportion of our guests coming in that way remains relatively low.’
Georg Reif, Managing Director at Hotel Urdlwirt in Premstätten, Austria
Hotel managers and associations are not giving in without a fight. A variety of approaches ought to persuade guests to book holidays and increase occupancy in hotels. Hotels which managed to build a loyal customer base before COVID-19 hit will find it easier to gradually increase occupancy again and work more and more independently of the big OTAs.
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