Will reducing acquisition costs maximize hotel revenue?

hotel-distribution.jpg

Every business regardless of the sector is ultimately about profit. Only with profit can you pay your bills and invest in the business for the future. The level of profit is also a key indicator to success and shows you whether your business is stagnating or growing.

You might be mistaken to think a full hotel is a profitable hotel, however the cost of acquiring customers nowadays can be expensive, and only hotels that understand and monitor their Cost per Acquisition (CPA) will see an impact on their revenue.

Every hotel should perform a regular analysis of their distribution channels, especially the online channels, including their own website, Booking.com, Expedia and other online travel agencies.

It’s important to know the different clientele that each channel is bringing to the hotel. You should know the variances geographically and the type of guests be they business or leisure visitors, families or couples. Also take note of booking lead times for each channel, seasonality, cancellation rates and most importantly, the Cost per Acquisition. All this information allows you see how each channel affects your bottom line.

One of the most key aspects to look at is how the OTA’s affect the bottom line – i.e. how much does a booking cost from each channel and the impact this has on the profit you are making from this sale. OTA commissions vary between 15% and 23%, so when looking at your ‘Direct’ business, event after you add the cost of your marketing strategy to the commission paid on your website, these costs should still be lower than your OTA commission.

Another benefit of generating a direct sale is the opportunity to develop a relationship with your guest, as opposed to the guest’s relationship being with a multinational intermediary. A minimal number of OTA users will ever book the same hotel twice, because they are loyal to the platform not your hotel, but win the customer direct the first time and you can set loyalty through amazing service and personalised follow up emails.

Read more: Why do hotel revenue managers need performance analytics?