“Have Your Way With the OTAs”
An Interview with E. Scot Fuller-Beaty of ThinkReservations and The Chadwick Bed & Breakfast
We know that an innkeeper’s relationship with the OTAs can sometimes feel like a battle of dynastic proportions. Will you win the struggle for direct bookings or will you continue to surrender chunks of your profit to the likes of Expedia, TripAdvisor, Orbitz, and Priceline? OTAs are a mighty opponent, with tens of thousands of eyes on their websites every day. To help innkeepers take their rightful place in the kingdom of online reservations, the InnSpeak podcast spoke with E. Scott Fuller-Beaty, the director of Sales & Education at ThinkReservations and owner/innkeeper of the Chadwick Bed & Breakfast in Maine. Scott shared his expert strategies for managing rates and availability to prevail over the OTAs. We hope his tips & tricks can help you win the Game of OTAs.
Key Points from the Interview
Rooms are Perishable
Rooms are not a renewable resource. You’ve only got so many rooms in your property and once you’ve booked them for a night, they’re gone. You don’t have another chance to make a profit unless you get a cancelation. You need to charge like your rooms are perishable. If you are ever at 100% occupancy at some point in the future, the truth is that you probably aren’t charging enough for that date. Ask yourself: How many people am I saying no to that would have otherwise booked room? Who would have paid more?
Do the Math
Next, it’s time to break out your calculator. In order to ensure you are charging the right price for your rooms, take the time to calculate your break even point. The formula is actually pretty simple.
- Consult your accounting software and tally up all your fixed and variable costs (ie. your mortgage, utilities, insurance, employee wages, laundry, repairs, contractors, marketing, and your own salary.)
- Estimate your projected occupancy for the coming year.
- Divide your expenses by your occupancy projection.
Now you have your break even point, or the cost you need to sell that room at in order to make a profit. As an innkeeper, knowing this number is critical to your ability to turn a profit and determine if selling a room night at a particular rate is even worth it.
Invest in Marketing & Advertising
As a rule of thumb, a business should spend about 10% of its revenue on marketing. Revenue, not profit. Comparatively, OTAs spend about 85% of their revenue on marketing. You can’t outspend the OTAs, but you can be smart about your marketing. First step: make sure your analytics can tell you where your online bookings are coming from. OTAs should simply be one channel for getting heads in beds. Examples of additional channels would be search engines, social media, email newsletters, links & listings, PR, sponsorships, etc.
Here’s a couple of tried & true online advertising methods for driving direct bookings: https://www.odysys.com/blog/survey-results-3-basic-effective-ways-to-advertise-your-hotel-online/
OTA Strategies for Pricing & Availability
The following two options follow the basic rules of supply and demand. You can use both at the same time. These methods are great at protecting you against say, a future festival or event date or graduation that you forgot to plan for or didn’t even know about.
Option: Yield Your Rates
Use yield adjustment strategies to make up any money you lose through the OTAs. Yielding your rates refers to adjusting your rates up for a date every time a room gets booked on that date. For example: Your 6 rooms are listed for $100/night on June 1st. This represents $600 in potential revenue. But what if rates are increased by 5% every time a room is booked on a specific night, those same 6 rooms represent $681 in revenue. Here’s how:
Same rooms, same number of room nights booked, same occupancy, totally different profitability. This strategy can protect you against those festival or event dates that you didn’t plan for. Obviously you’ll want to set your base rates for dates like that but sometimes you miss things or you don’t anticipate the demand for rooms correctly, etc. People are used to this type of ‘dynamic pricing’ these days. Early bookers always get better pricing than those that are late to the party whether it is for airfare, concert tickets, or hotel rooms.
What about rate parity? As long as you offer the same rates to all the OTAs you work with there’s no parity issue. Want to offer a different rate on your site? Listen to the podcast recording above.
Option: Limit Your Availability to OTAs
Use OTAs to help you fill rooms when you need it most. Think about the times of year when you might need a little extra help maintaining your occupancy. If winter is your low season, you can open your availability to OTAs during the winter and subsequently limit your availability during the summer high season. If you struggle with a mid-week slump, open your availability to OTAs on Tuesdays and Wednesdays.
And remember, your strategy can change throughout the year. It is vital that you stay up to date on special events in your area. If you know a big festival, marathon, or conference will be happening in town, be sure to both limit your availability on the OTAs and make price adjustments accordingly. Don’t worry if your rooms are slow to fill. Many people might wait until the last minute to book their stay. Trust that your rooms will fill, and if you need help, you can always open rooms/dates up to OTAs.
It is possible to build a peaceful and beneficial relationship with the OTAs. It doesn’t have to be a game of blood and fire. Using these strategies, you can prevail over the OTAs while still using them to book rooms when you need it most.