Giving a 15% discount for hotel direct bookings will make more money than a booking from the OTA with 15% commission.
I was recently looking at one of our customers accounts and noticed he had ZERO offers available for people to book direct.
I reached out and offered to fix this problem:
“Hey I notice you don’t have any offers on your website and booking engine, shall we set a few up for you?”
The reply shocked me!
“Nope. We are full without any :)”
His occupancy is amazing, it’s currently on 95% for the next 30 days. So his answer made sense on a lot of levels, but to me it doesn’t and here’s why:
You are making more money by giving discounts on your booking engine than paying the 15% commission. Lets go through some simple maths.
OTA Booking:
1 Night for £120
VAT 20%: £20
Commission 15%: £18
Net Booking Value: £82
Direct Booking
1 night £120 with a discount of 15%: £102
VAT 20% (£102): £17
Net Booking Value: £85
(+£3 for Direct Booking)
So here we have it folks, you can make more money by giving a 15% discount by booking direct.
Just for the record there is no other fees as our booking engine is free of commission.
After sending him this information he quickly said set up lots of offers on his behalf. We will keep the 15% discounts for the good bookings of 3 nights or more. 1 nighters can get 5% discount which makes you considerably more money than the same OTA booking would.
I realised after his quick turnaround upon learning the maths that most hotels don’t realise this fact and one of my reasons to write this post.
Please guys if you reading this make plenty of direct booking offers on your websites that is 5–15% cheaper than the OTA and you cannot lose!
FAQ
Wont these offers cannibalise my current direct booking via email and phone?
Yes, simply put you will find some business that was coming to you paying full price now paying less with the discount. Is that a good enough reason not to do it? no, because you are losing these email and phone bookings rapidly to the OTA’s anyway. Also why not give your good customers a small discount?
Will the OTA get all pissed off and cut me off?
No, well they might give you a nasty phone call (maybe) but if you do things right they can’t do a thing about it. As long as you are doing things even slightly different you are comparing a green apple with a red apple.
Example: OTA cancellation policy has 24h free cancellation while your offer has 15% off and 3 day policy attached.
My booking engine is not flexible enough, what can I do?
Booking engines are easy to replace, if your using the one that came with your PMS then you can probably look at getting one attached to your channel manager instead. even the most basic booking engines can find some way to give discounts to your direct bookers.
I don’t have a booking engine, am I losing money?
You are losing money and you don’t even realise it, get one up and running and I promise you it’s worth it. Try to get one without a commission.
Do people even look at hotel websites anymore?
Yes Yes YES! Of course they do! Maybe some1 nighters won’t bother looking but it’s estimated around 50% of bookers will at least visit the hotel website to get a bit more information. Make it count!
How much discount can you give and make the same money?
For the UK at 20% VAT it’s simple. 18%. whatever your tax is just add it the the commission and you will find out how much is the maximum you can discount. UK 20% VAT = 15% commission +20% which is 3%: 18% Total.
