The Mews Blog > How to reduce your hotel's OTA commissions
Oh no, not another blog about OTAs, I hear you cry. Well, yes. And with good reason. Under 30s make over 80% of their travel bookings online, with OTAs scooping up a huge number of them. The problem, as you well know, is that this means a hefty amount of revenue goes from your pocket to theirs in the form of commission.
Of course, it’s right that they receive some money. They’re offering you a service after all, increasing your reach to millions more people. But the rates are high. Even five years ago we were writing about the rising costs of OTAs, and things haven’t changed since. So what can you do?
This article will give you practical ideas about how to lower the amount you’re paying through commissions. Let’s go.
Can you negotiate OTA commission rates?
The most logical way to reduce the amount of commission you pay is to reduce the percentage. Commission tends to vary between 15-20%, although in some countries like the UK, you have to pay tax on top of that, so the costs become even higher.
So can you go straight to the source and negotiate your commission rates with your friendly OTA? Not really. Yes, it’s a contract, but they’re holding the aces. These sites typically have tens of thousands of hotels on offer, so if you refuse to pay their prices they’re usually willing to cut you off. You might have a little more power if you’re part of a big group, but even then your chances are slim.
Sorry about that.
How to lower OTA commissions by boosting direct bookings
If the last paragraph burst your bubble, don’t despair. We also come bearing good news. There are still plenty of actions you can take when it comes to reducing the amount of commission you pay, minimizing your reliance on OTA bookings in favor of booking direct.
Diversify your booking channels
It can be easy to rely on OTA bookings. After all, they do the advertising, handle the reservations, and manage the digital guest journey. But the higher your proportion of OTA bookings, the less revenue you make.
Calculate each channel ROI. If you’re using more than one OTA, look at how many bookings and how much revenue each brings in and crosscheck that with the respective commission rates. As a general rule, it’s good not to have all your eggs in one OTA basket; if you rely on Booking.com for 80% of your third-party bookings and they change the algorithm, you’re exposed to a sudden loss of reservations.
A sure-fire way of protecting yourself from algorithm voodoo and other third-party site tricks out of your control is by boosting your direct booking numbers. That means your own hotel booking engine, as well as encouraging guests to book through channels like social media and live chat.
If you want to broaden your variety of OTAs (while restricting your inventory, of course), these are the ten best OTAs to consider. Oh, and make sure you have both a good hotel distribution strategy and a strong hotel pricing strategy.
Optimize your website
Your website is often the first impression that gets have of your property. If it doesn’t load quickly, look good, and make it easy to navigate and book, then your potential guests are likely to go elsewhere.
SEO optimization is also hugely important. If you haven’t already set up a Google My Business page, do it right now. Without it, you won’t appear in the Google hotel search. And you don’t have to be an SEO expert to get the basics right. Just a little attention can ensure you boost your ranking, and our friends at SiteMinder put together this very helpful SEO guide. The goal? More traffic to your site which means more direct bookings and fewer commissions.
Provide a seamless mobile journey
This is old news but we’re going to keep saying it because it’s so important: Optimize. Your. Site. For. Mobile.
80% of travelers use a mobile app during the research phase of a trip, leading to 50% of searches and bookings being made on mobile. All the OTAs have been optimized for mobile because they know it’s worth it, and you’re losing out on direct bookings if you don’t make the same effort.
Offer something guests can’t get from OTAs
It’s usually not as simple offering a lower rate for direct bookings. Rate parity agreements mean that you’re prohibited from doing exactly that. But that doesn’t mean you’re weaponless.
First of all, make sure your rate isn’t higher than the OTA rate. That’s a no brainer. Then, sweeten the deal to encourage a guest to book direct. Small offers like a free drink at the bar or a later check-out time won’t have much effect on your bottom line, but are good enough reasons for a customer to choose you over another site offering the same price but with none of the extras.
Elevate your branding and marketing
One of the drawbacks of your property being listed on an OTA is that it looks the same as every other property on there. Everything has to confirm to their format, which makes it difficult for you to stand out. But this is not the case when it comes to your own channels.
Your website, your social media and your marketing and advertising is the where you need to highlight what makes you special. Imagery, content, and tone of voice are all important. If you can capture a guest’s imagination and connect with them emotionally through your messaging, they’re much more likely to book with you.
And the more segmented and targeted you are with your messaging, the better. For example, to attract Millennial guests, you could run a targeted ad campaign based around the idea of FOMO (fear of missing out). An image of a guest relaxing in the pool on an inflatable unicorn with a tagline like, ‘Don’t just wish this was you. Make it you.’. The faster you can inspire a decision, the better your chances of landing a direct booking and skipping commission.
Pro tip: you can find out much more about how to nail your brand's marketing in our guide to Perfecting Guest Communication.
Build guest loyalty
The more engagement you have with your guests, the more buy-in and loyalty they’ll develop for your brand. Loyalty programs are an obvious way to ensure that guests return and book direct – in fact, the major OTAs all already run some sort of reward program – and you can read more about effective hotel loyalty program strategies.
Even if you’re not running a loyalty program, good marketing helps to keep guests away from OTAs. Pre-stay communication is key to building loyalty and engagement, with the added bonus of boosting the lifetime value of the guest thanks to tailored add-ons and upsells. And don’t forget your post-stay comms either: encourage reviews and remind guests that they’re always welcome back and that they’ll find the best rates with you.
Pro tip: even if a guest books through a third-party site and generates a temporary email, it’s often still possible to get real guest emails from OTA bookings. That means you can fold them into your customer database and encourage direct bookings through email marketing.
Get help from integrations
You don't have to battle OTA commissions on your own. There's plenty of smart hospitality tech that will act as your ally. Here are a few ideas for integrations that could help with all of the above.
Upselling apps like Oaky allow you to capture guests with standard rooms and then upsell them with smart offers (discounted a little more than online pricing), ensuring you don't pay commission on the upgraded ADR amount.
Offer vouchers on your site through solutions like Vouchercart, and people will be able to purchase them presents, leading to additional direct revenues.
Be proactive with corporate guest details by ensuring you check newly created company profiles daily to find customers who booked from a company in your city. Try to capture those guests and sign a direct local contract, to prevent heavy GDS and OTA costs.
Get creative with alternative services, such as day-use for meetings and co-working – services that OTAs don't currently offer – so you can be very competitive on pricing and special offers. Read more about hotel day use.
It's unrealistic to target an overnight reduction in commissions – unless you go completely cold turkey on OTAs, which we don’t advise. Implement the above, however, and you should see a steady adjustment of your direct booking to OTA ratio.
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