What is a direct booking?

  • Jul 09, 2024
What is a direct booking?

Direct booking is a business strategy within the hospitality industry which involves a company selling its products directly to consumers.

Direct booking means the situation where a guest chooses and pays for a room directly to an individual hotel or another service provider without using an OTA’s services. Thus, the direct booking has emerged as a critical topic across the hospitality industry over the past few years. This is a closer look at what direct bookings are, the significance that they hold for hotels as well as the benefits and drawbacks that come with direct bookings for travelers.

How Direct Bookings Direct bookings are the process of making a booking directly with the hotel without using third-party intermediaries.

A direct booking involves a guest who has not gone through any third party to check if there are rooms available and then make a booking with the hotel. Instead, they submit their payment details and finalize the booking without the intervention of an intermediary. This is different from OTAs, which is a guest searches on multiple platforms to compare for the price and book through this third party.

So in summary:

- Direct booking: Official hotel website or by phone directly at the hotel where guest books and pays.

- OTA booking: Guests book and pay online through a third-party travel site such as Expedia.

Whether the customer dials the extension or uses the key pad, the hotel enters the reservation in their main reservation system. However, when it comes to directly booking a guest, no commission or fees are paid to anyone in the middle.

Why hotels need to sell direct bookings.

Hotels strongly prefer direct bookings rather than OTA bookings for a few key reasons:Hotels strongly prefer direct bookings rather than OTA bookings for a few key reasons:

Lower Distribution Costs
OTAs take a commission on every booking made for a hotel, which is between 15-25% of the total cost of the room. This drastically reduces the profit levels in the hotel business since the prices of the food and beverages are low. In direct booking, 100 per cent of the guest payment will be directly received by the hotel.

Guest Relationships
In direct bookings hotels deal directly with the guests, thus eliminating the third-party stakeholders. This facilitates them to offer each of the clients a customized service, promote the loyalty program and offer the clients marketing offers for future accommodation. OTAs extend ownership over the customer relationship to a significant degree.

Control & Flexibility
This is advantageous to hotels since direct bookings are not constrained by third party commission or service charges and also provide better control on the pricing and room availability. OTAs pose the danger of rate parity agreements meaning that the hotels cannot easily change their rates or availability without breaching the contracts with the OTAs. The last advantage of direct booking is more freedom for making exceptions for customers required in some cases.

Data Collection
First-party data on guests is one of the valuable assets that hotel businesses rely on. It enables hotels to enhance operations by having compiled data on sources of reservation, proposed guests, spending patterns and more. Remaining in the possession of this customer data is OTAs.

In other words, direct hotel bookings guarantee the superior quality of the guest experience and increased revenues for the hoteliers. This is the reason behind promotions like free-wifi or loyalty program discounts to book directly through the hotel. The large brands are also shifting consumers towards their booking engines as opposed to OTA lists.

Advantages of Direct Hotel Reservations for the Travelers

Is it really beneficial for hotel guests themselves, however, is booking direct actually better? this is because there is evidence to support both arguments. Potential benefits of direct hotel bookings for travelers include:Potential benefits of direct hotel bookings for travelers include:

- Best Rate Guarantees: Most hotels publishing their lowest price guarantees when you book directly with them. This ensures you get the same or better rates than any OTA listing; if not, you can create your own listing.

- Loyalty Benefits: Booking through the official website is helpful in keeping track of a traveler’s loyalty program and obtaining points and free nights. Some of the sleeping facilities’ rewards programs bar reservations through third-party platforms.

- Value-Adds: From free breakfasts, Wi-Fi, parking, and much more, to threatened cancellation of bonuses and other perks, to name but a select few, hotels invariably add extras to the mix in order to encourage direct booking.

- Requests: When booking directly, using an online request form, it is easier to provide additional preferences like accommodations on higher floors, not near elevators. No third party to stand between you and the waiters or the managers of the hotel.

- Changes/Cancellations: It may cost a little extra or may not be subject to restriction and penalties especially if it a direct booking.

The disadvantage is that in order to compare the rates and availability of a hotel, the consumer will need to visit the website of each hotel to do so rather than being able to see all the different rates in one place as on an OTA. However, with rate parity no longer practiced as frequently, and major brands even providing best price guarantees, this is not as much of an issue anymore.

Advantages of OTA Hotel Bookings

While direct booking has its advantages, OTAs still offer some benefits for certain travelers:While direct booking has its advantages, OTAs still offer some benefits for certain travelers:

- Comparison Shopping: OTAs help to make it quite easy and quick to Compare Multiple Hotels under Different Brands at Once. It is more reliable compared to visiting the individual websites of the hotels and reading about their services.

- Rewards Integration: It has been established that some OTAs such as the Expedia enable guests to accumulate and use hall hotel loyalty program points.

- Package Deals: Actually, one can purchase more inexpensive flight + hotel combo offers via OTA travel channels most of the time.

- Filters & Reviews: OTAs provide top-level/data-level search criteria, traveler reviews, and user-generated content that help in decision making.

- Pricing Variability: However, these days and as a rule, OTA rates can still be lower than direct booking rates. The absence of rate parity, for example, provides OTAs with the leverage to begin pricing.

- Consumer Protections: While some consumer protection laws such as cancelations, changes and other related policies, may be stronger with OTAs in some jurisdictions.

Therefore, OTAs are not entirely irrelevant for bookings as they are suitable for scenarios where travelers are more concerned about the price and are leisure travelers. However, the direct bookings are most beneficial for those, who visit a hotel quite often, become a loyalty member, or travel for business purposes.

Daily, Weekly, Monthly and Yearly Direct Booking Numbers and Days or Months Trends

Which type of bookings are more common – direct or those made through online travel agents? Here are some telling statistics on the hotel booking split:Here are some telling statistics on the hotel booking split:

- OTAs’ influence was even greater in 2020 where on an average, they were responsible for 44. 2% of the hotel bookings. The direct bookings thus stood at 39. 6% of the total bookings. And that still leaves roughly 17% which goes through group and corporate sales channels (Phocuswright)

- OTA for now plays a significant role in the US hotel industry as revealed by the fact that it currently captures 61% of hotel bookings, in the year 2022. Direct bookings account for only 23%, the lowest level among all the mentioned factors. (Hotel News Now)

- However, for US luxury hotels, that is reversed with 72 percent of bookings accessed through direct sales. Once again, the midscale and economy hotel segments continue to rely on OTA dominance. (Hotel News Now)

- In direct bookings, the market share rose from 33% in 2016 to between 39% in 2020, thus reducing OTA’s market share. Many expect this to happen in the years to come as more guests go directly to hotels to book their accommodations. (Phocuswright)

Several forces favor this trend in direct bookings, for instance, improved booking tools, expanding customer loyalty programs, and hotel reduction on the overreliance on OTA. They do it again by going with their wallets and as such, hotel brands need to persuade the guests to book directly.

VI. Conclusion – Three Takeaways On Why Direct Hotel Bookings Matter

Direct bookings refer to arrangements where guests book hotels through the hotel’s direct website or by calling the hotel directly without the intervention of online travel agents. Hotels have a lot more incentive towards direct bookings because of greater revenue and better control over guest interactions. However, OTAs are not completely without any benefits and current hotel brands attempt to use guarantees, loyalty rewards, and greater numbers of added values for guests to entice them into making direct bookings. By analyzing the data, one can observe that the variable corresponding to the direct booking share has been increasing gradually. Thus, direct bookings offer a more satisfactory experience for the hotel stay especially for the frequent and high-end users.