Straight Talk About OTA’s and Channel Managers
By Michelle Marquis, Chief Revenue Officer at Lexicon Travel Technologies
First of all, we are so excited to partner with Track. We feel we are in such great company with them and you, their client.
As I thought about what to write for this articlenewsletter, I decided to not do any marketing fluff and just give it to you straight. Anyone who knows me, knows I am direct, to the point, and trustworthy (I do not BS).
I was on the phone today with a property manager I know well and really respect. They have a wealth of experience in the industry, but in the end, they had the same impressions about distribution that most people do. It was at that moment I realized what I wanted to do with this article — address those questions and concerns.
But first let’s agree on some working definitions.
“Channel” in the context of a vacation-rental business is a catch-all term for any discrete path between your company and a customer. If they call to book, the phone is the channel. If they book directly through your website, the website is the channel. Each online travel agency (OTA) is its own unique channel, and each vacation rental listing site is a channel.
The next term to keep in mind is “channel mix.” Your particular allocation or revenue from each channel is your own channel mix.
Finally, when we talk about “Channel Distribution,” we’re specifically referencing distribution on OTAs or listing sites. Channel Distribution is becoming as important as it is complicated.
Now, on to the questions / comments…
I tried listing on an OTA site with another channel manager before, and it did not work. I had double bookings, taxes and fees were incorrect, it was difficult to audit the invoices, and more…
It’s true that the early adopters in this area paid the price of innovation. I had someone say to me – is the juice worth the squeeze? I don’t just think it is, I know it, because I’ve seen the proof.
So many things in the vacation rental industry have been because of the OTAs, technology chief among them. Lexicon has solved so many of the issues through our technology and human intelligence that makes distribution a much more effective and profitable option.
We are so confident in what we do, we guarantee our quality content score, and we pay any costs to the client if we make a mistake. How can we do this and stay afloat? We don’t make many mistakes.
How can I pay for the cost of OTAs when my margins are so small?
Let’s start with my philosophy of what an OTA really is within this space. OTA’s are websites where a potential guest can search across multiple lodging options. OTAs initial focus was on hotel guests. Many would argue that’s still their primary focus, but I don’t believe these sites actually increase demand for hoteliers. This is where the win is for the Vacation Rental Industry. Most of these guests aren’t considering a vacation rental home or condo, but when it’s presented to them on an OTA, it’s now a viable, and often, especially now, a more attractive option. The OTAs allow you to reach a whole new audience (one you would not otherwise capture through your direct efforts). This new audience creates additional demand.
An interesting fact about the OTA channels is they only have a 27% overlap, so exposure on the two majors OTAs (Booking.com and Expedia) will allow you to capture new guests on both of the channels.
The end goal of any marketer is to find new guests at the lowest cost possible.
With this in mind, we should evaluate this expense like any other marketing expense.
The first place to start as you evaluate this investment is to understand how many marketing dollars it takes to secure a new guest. With Track, this information should be at your fingertips. In my experience with MarquisEffect, something as basic as Pay Per Click in AdWords traffic alone will cost anywhere from 10–20% (depending on your market) of the overall revenue.
Once you know what it costs to acquire a new guest, you should work with your Channel Manager to discuss how to close the gap in that investment and the cost to use an OTA. At Lexicon, we have many strategies to help our clients reach their goals.
There are so many listing options, where will I get the best return on my investment?
This is really a question of quantity vs. quality. If strategy has not been taken into consideration, you will need to have listings in as many places as possible. You will need more listings to shore up your lower rate and lower conversion, which means you will also need to dedicate more personnel resources to track and manage these channels.
If you partner with a quality Channel Manager, you can distribute on fewer sites and have higher rates and revenue.
The best plan is to have an overarching revenue strategy that helps make these decisions for you. Lexicon can help with that too! Our revenue strategy team has more than 50 years of experience at every level of the vacation rental industry.
Why do I need a Channel Manager? Why would I pay someone for this when Track has direct connection with the OTAs.
To be honest, you don’t. But if you want to increase revenue year-round, distribution needs to be part of your overall strategy.
The basics of a channel manager is to push availability, rates, restrictions, and inventory out to different OTAs and listing sites. This is done automatically with no effort from the PMC. Changes and cancellations are also pushed into Track.
But I’ll be honest, it’s hard to get your listings to really shine with direct connections. If you want pristine listings, a guaranteed quality content score of 90% or higher, an experienced revenue strategist to advise and ensure higher conversion, you will need Lexicon as a channel manager.
What’s the difference between the different channel managers?
I’ve tried to keep this as non-salesy as possible, but I do work for a channel manager, so, here’s my honest pitch…
Lexicon is a very different kind of company. We don’t just do channel management, we do channel marketing. We’re laser-focused on performance and our compensation is aligned to our clients’ revenue. If we don’t perform, we don’t make money. It’s that simple.
We can do this because we know how to make our clients money. Our system includes people, process, and technology that has proved itself by:
- One of Booking.com’s best performing contectivity partners.
- Being the 4th highest ranked channel manager in the WORLD with Expedia.
- Being one of two channel managers in the WORLD to achieve excellence in all categories rated by Expedia.
- 90% of our clients come to us from our competitors.
- Having three Lexicon clients who used to sit on one of our competitor’s’ board of directors.
- By having an attrition rate of less than 3% over two years.
- Having an intimate knowledge of the channels and what the algorithms are looking for. This means our listings outperform the competitors.
I could honestly go on for hours, that’s how much I believe in Lexicon, but in the end, the results speak for themselves.
I want more direct business. This goes against that strategy.
Here’s the real secret — only about 6% of searches on an OTA book there. The rest of those searchers are booking in other ways. I’ve always said, anything that is high consideration (expensive, important, or complicated) will require interaction (phone calls). When you brand your business on the OTA and listing channels, you are now in the guests consideration funnel. This will create more direct bookings — an indirect benefit of listing on the channels at no additional cost.
While we may not have a precise percentage to attribute to this indirect benefit, best practice is to include some of these bookings (and revenue) into your ROI evaluation for OTAs. When I was a property manager, I estimated I received one offline booking for every three OTA bookings. I knew it was larger than that but wanted to be conservative as I evaluated against other marketing investments.
Lexicon does the heavy lifting. We brand your listings and all descriptions to give your brand a power lift and more chance of bookings through the Billboard Effect.
I do not have the time to add and manage another area of my business.
This is a valid concern with most channel managers and with direct connections. This ultimately comes back to deciding how much OTA business you want and what resources or investments you’re willing to make.
As I said earlier, Lexicon does all of the hard work. From pricing suggestions to building promotions and tracking down questions with the different channels, we do it FOR you. This not only saves you time but also increases the performance, because we’re experts in distribution. We know what performs, why it performs, and what changes need to make/made to increase performance.
Please let me or any of our team members know if you would like to learn more about OTA channel distribution. We would even be willing to do an audit for you, free of charge. All you have to do is pick up the phone or shoot us and email to get started. And for a limited time, Track clients can choose their own discount. Click on the image below for details.