Study Reveals Hidden Costs of OTA Partnerships for Hotels

A new study has revealed that hotels experience a surge in advertising costs when Online Travel Agents (OTAs) offer lower rates than they do. The research, conducted by global hotel technology specialist SHR, analyzed 27 million cost-per-click (CPC) impressions and found that hotels pay, on average, 47% more per click when OTAs provide the lowest nightly rates.

The research, featured in SHR’s report “Digital Strategy Secrets for Hospitality,” shows that the cost per click rises to $0.97 for hotels where OTAs have the cheapest rates, compared with $0.66 for those offering the best deal directly. The competition for branded search terms intensifies when OTAs undercut hotel prices, as OTAs increase bids, confident that their lower prices will drive conversions.

Interestingly, even when hotels and OTAs offer identical rates, the cost per click remains high, averaging at $0.89, which is 35.9% higher than hotels prioritising direct rate advantages.

While OTAs can provide visibility and a broad customer base, the research indicates that hotels face significant financial dilemmas. Steve Collins, VP of Digital Marketing at SHR, explained that while OTAs help hoteliers reach a wider audience, sacrificing rate integrity can result in higher marketing spend and reduced profit. He suggests that hotels focusing on direct bookings while maintaining balanced relations with OTAs can minimize costs and promote sustainable growth.

The study also emphasized the importance of a comprehensive digital strategy. By strengthening direct booking channels, hotels can improve profitability and enhance overall efficiency in their marketing expenditure.

As the hospitality sector evolves, experts predict a significant increase in direct bookings by 2030, potentially surpassing OTA-generated reservations. This trend underscores the importance of strategies that strengthen direct channels, optimize CPC rates, and reduce reliance on OTA-driven lead generation.

The report suggests that maintaining rate integrity can drive down advertising costs and enhance conversion rates, enabling hotels to allocate resources more effectively. Collins concluded that strategies prioritizing direct bookings, combined with investment in broader brand-building activities, can help hotels stay competitive. By adopting a balanced booking approach, hotels can ensure long-term profitability and efficient allocation of marketing resources.

Discover more at Hotel Management Network.