TravelBoom surveyed more than 50 hoteliers with properties of various sizes in the US & CA to ascertain current market trends, day-to-day challenges, and missed opportunities.
With the provided statistics and our long years of expertise, we are combining forces with data and knowledge to first review the obstacles and then provide actionable solutions to maximize end results.
Let’s first examine the three major marketing challenges in the hotel industry:
- Costly competition with the OTAs (Online Travel Agencies);
- Inability to drive more Direct Bookings;
- Limited Budgets for marketing services;
Costly Competition with OTAs
The study highlights the significant impact of OTA competition on hotel profitability, with OTAs driving up to 40% of bookings on average. However, the high commissions charged by OTAs, ranging from 15% to 30%, result in substantial profit loss for hotels on a yearly basis.
This rising competition not only puts pressure on hotel marketing budgets but also undermines profitability, as hotels lose significant revenue to cover OTA commissions. With increasing costs for staffing, amenities, and other resources, these commissions eat into crucial profits needed for reinvestment and scaling.
While OTAs provide valuable exposure, easy booking experience and guest reviews, over-reliance on these platforms as primary booking sources exacerbates the issue. To overcome this costly competition, hotels must prioritize building a robust online presence to drive traffic to their websites and increase commission-free bookings.
Direct bookings not only offer higher profit margins but also afford hotels greater control over pricing and guest relationships. Strategies such as search engine optimization, content marketing, social media engagement, and targeted advertising can help hotels attract more direct bookings. Additionally, offering loyalty programs, incentives or perks for guests who book directly through the hotel's website can further incentivize this behavior, ultimately boosting profitability and reducing reliance on third-party platforms.
Solution #1 to OTAs Costly Competition
To overcome OTAs dominance, hotels need to build a solid online presence, in order to drive more traffic to their website and increase the 100% commission-free bookings.
Here are some of the key working strategies:
- Search engine optimization (SEO): Involves optimizing website content and structure to improve visibility in search engine results. Also, optimizing hotel’s local search presence for the property to be visible for high-demand queries including “hotel + location” (ex. “Hotel Miami”). By targeting relevant keywords and creating high-quality, informative content, hotels can attract more organic traffic and reduce their reliance on OTAs.
- Website Experience: Build a website that offers a seamless booking experience, ensuring mobile-friendly usability with features like an intuitive interface, quick loading times, and responsive design across devices. Provide comprehensive information about local attractions, showcase exclusive rooms and amenities, special packages or experiences, and upscale amenities. By offering a user-friendly platform with valuable local insights and enticing offerings, hotels can attract more guests and drive direct bookings.
- Social Media Brand Identity: Leverage social media platforms to engage with potential guests and promote your brand with creatives and information that resonates with them.
- Perks & Loyalty Program: Incentivize direct bookings by offering exclusive deals or perks to guests who book through your website. This could include discounts on room rates, complimentary upgrades, or loyalty rewards programs.
Inability to Drive Direct Bookings
The inability to drive direct bookings often stems from a lack of understanding of the power of search engines like Google, Yahoo, and Bing. While hotels invest time and resources in building their presence on OTAs, they may overlook the significant opportunities offered by search engine optimization (SEO) to attract cost-free direct bookings.
Optimizing your online presence on dominant search engines like Google can provide a steady stream of free traffic, both for branded searches and generic keywords related to your hotel's location or amenities. By creating a Google Business Profile, optimizing for relevant keywords, and competing for local search results (ex. “Hotel + Miami” or “Hotel with private pool + Miami” etc.), hotels can increase their visibility and attract potential guests who are actively searching to book accommodation.
The key advantage of driving direct bookings through search engines is that these potential customers are intentional and prefer booking directly rather than through OTAs. This untapped market represents a significant opportunity for hotels to increase their profitability, as direct bookings generate 100% profit without any commission fees.
Solution #2 to Generate More Direct Bookings
To overcome this challenge of inability to drive direct bookings, hotels should invest time and resources in optimizing for search engines or consider hiring an expert SEO team to manage this aspect of their online marketing strategy. By implementing effective SEO strategies, hotels can increase their visibility, attract qualified traffic, and ultimately drive more direct bookings, leading to improved profitability and sustainability.
Limited Budgets for Marketing
The third and also very important challenge is to allocate a limited budget for your marketing goals that will not only pay back but also increase your yearly budget.
The challenge of limited budgets for marketing presents a significant hurdle for hotel owners seeking to effectively promote their properties. While paid advertising offers a means to reach new markets and potential guests, rising acquisition costs and competition from larger hotel brands can make it difficult for small hotel owners to compete with a limited budget.
Paid ads provide instant gratification but are often associated with short-term results, as reducing budgets can lead to a proportional decrease in traffic and bookings. In contrast, investing in SEO offers a long-term strategy with a delayed-gratification model. By building a strong online presence and optimizing their websites for search engines, hotels can attract free organic traffic and increase direct bookings over time.
From our own experience, the return on investment from SEO compared to Paid Ads is, on average, 60 times greater for SEO compared to 5-10 times for Paid Ads on a yearly basis, which represents a significant difference in budget allocation and earnings.
The key advantage of investing in SEO is its ability to deliver a high return on investment in the long term. As SEO efforts compound over time, hotels can expect to see sustained growth and outperform competitors in various ways. However, it's important to acknowledge the time and expertise required to see results with SEO because not only has a legacy-oriented foundation but it also deals with potential challenges such as changes in search engine algorithms and competition from larger brands.
Solution #3 to Limited Marketing Budgets
The best way for hotel owners to invest their limited budgets and expect a high return on investment over time is to allocate resources for SEO services. By prioritizing SEO and website optimization, hotels can build a strong foundation for long-term success and maximize their marketing budgets effectively.
Looking for long-term solution for all 3 challenges?
In conclusion, the challenges facing the hotel industry in 2024, as highlighted by TravelBoom's Hoteliers Study, necessitate innovative strategies for sustainable growth. With costly competition from OTAs, the inability to drive direct bookings, and limited marketing budgets, hotels must prioritize building a robust online presence through effective SEO strategies and optimized website booking experience.
Unlike paid advertising, which offers short-term gains, investing in SEO provides a higher return on investment over time. By embracing SEO as a long-term solution, hotels can not only increase their profitability but also strengthen their competitive edge in the ever-evolving hospitality landscape.
