Selling Rooms: Hotels vs. Third-Party Websites

TLDR

Hotels sell rooms through multiple internet channels, including costly third‑party OTAs, yet they still rely heavily on OTAs for convenience and price‑parity strategies that many hotels promote. This article investigates how hotels can maximize net room revenues by directing customers to their own websites instead of OTAs. Drawing on eleven interviews, the authors recommend that hotels strengthen their own sites by guaranteeing best rates, optimizing for search engines, mining customer data for custom offers, reserving premium rooms, providing discounts and incentives for direct bookings, withholding loyalty points for OTA bookings, and enriching site content. Tracking 13 hotels over 17 weeks revealed that price parity is uncommon—except for smaller hotels—while room rates decline as the arrival date approaches and individual properties adhere to their chain’s overall pricing strategy.

Abstract

Hotels have a variety of internet distribution channels to help them sell rooms, including sites that have come to be called online travel agents (OTAs), or third-party websites, but the cost of using these intermediaries is considerable. This article examines how hotels can sell room inventory while maximizing net room revenues—chiefly, by steering customers to their own sites, rather than to the OTAs. Even though hotels want to sell rooms via their own channels, the hotel industry relies heavily on efficient and convenient OTAs to sell rooms. Based on eleven interviews (nine hotels, one third-party website, and one airline), we recommend the following ways to strengthen sales on hotels’ websites: maintain a best-rate guarantee, optimize the website for search engines, mine data from customer profiles to provide custom offers, retain premium rooms for sale on the hotel website, offer discounts or other promotions to customers who book on the hotel website, offer incentives for returning guests who book on the hotel website, avoid giving loyalty points for OTA bookings, and enrich the hotel’s website with information. Because the ability to offer low prices is a chief advantage of OTAs, many hotels have promoted price parity as one strategy for attracting customers. The results of tracking room rates of 13 hotels posted by third-party websites and hotels over a 17-week period demonstrated, however, that room rate parity is rare, even though all selling parties espouse such parity. Parity generally was found only for smaller hotels. The study also found that room rates fall as the date of arrival approaches, and it became clear that individual properties in a hotel chain follow the chain’s overall pricing strategy.