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1 Disintermediation Is It Worth It? Luciano Scauri SKL International Consulting

Ospito con piacere il lavoro di Giovanni Amadei. Date un’ occhiata. è interessante!

abstract

In different forms, there have always been alternative distribution channels to the direct one, and this shows that being present on OTAs is normal and obvious, as well as being an advantage for diversifying the online presence of the hotel. It is all about knowing how to manage this presence. Disintermediation means finding strategies to be able to break away from the big online distribution giants and establish a direct relationship with the customer.

Disintermediation does not mean avoiding the presence on the OTAs, but it helps to acquire a certain independence from them and, at the same time, taking advantage of their benefits.

In order to do this, it is necessary to consider whether or not disintermediation is worthwhile. To understand this, it is necessary to comprehend the scenario in which the hotels operate: why customers or potential ones prefer OTAs to direct bookings and how to change this trend.

what does disintermediation mean

Over the years, websites such as booking.com, expedia, airbnb and other OTAs have helped hoteliers all over the world to find ways of making themselves known to small and large audiences. An unreachable and previously unimaginable showcase. Nowadays, being present and selling rooms on these channels for hotels means above all paying high commissions, often encountering difficulties in monitoring their rates and building customer loyalty (of the OTA, not the hotel). Behind the exponential growth of the OTAs during the early 2000s, there were two main reasons: the first was the period of their birth, during which the trust and means placed in the internet were growing vertiginously. The second was the attack on the twin towers in New York in 2001, which was a huge shock for tourism. In this revolution, hoteliers began to find themselves in a completely new situation where they had to create coherent strategies, to switch to dynamic pricing, to listen to market trends and to balance their distribution. In this sense, all the hotels relied on the OTAs, by offering huge discounts, (much more than on their own website), encouraging the consumer to use them more and more, and creating the actual situation.

Twenty years later, however, the OTAs’ monopoly is being threatened by other players and techniques that are taking more and more space in the market: metasearch, google and disintermediation by hotels [1]. The latter one has gaining primary relevance for hoteliers. Indeed, disintermediation is a technique to avoid placing a large slice of their earnings under the heading “commissions” in their budget.

Disintermediation means generating a direct sale with the customer without relying on third parties, strengthening brand awareness and increasing profit margins. It does not just mean lowering prices compared to OTAs, which only has the effect of making the hotel service less valuable. In order to successfully disintermediate, it is essential to know your target market and create an accurate pricing policy. It will be a mix of services offered, brand reputation and staff training that will define what price the customer is willing to pay for the chosen hotel [2]. 

why do customers prefer to book thorough OTAs

Customers often prefer to book a room through booking.com, expedia and others for several reasons. One of them is that often the hotel’s website does not exist or is not updated, or because the rates offered by the platforms are more advantageous than those on the direct channel. A good example is booking.com. Booking appears as a website in which the information needed to organize a trip is complete, since it contains all the important information for the guest. It is clear, easy to find, and graphically appealing.

Moreover, the website contains all the essential information and, at the same time, implements marketing principle (e.g. The principle of scarcity and pressure, the popular destination banner, the number of bookings, the last available rooms, who have just booked – all of them are great tools to apply to hotels’ websites.)[3]. At the same time, the booking.com works in a smart way since it does not require transfers, emails and waiting for replies. The problem for the hotel owners is that those who book on the platform become customers of booking.com. Not of the hotel.

Therefore, it is difficult to convert them. In fact, customers trust more the OTA than the single hotel where they are staying. Why? The first issue concerns the security of the payment method (credit card and personal data) provided to the platform rather than to a private website that is considered less secure by lot of people. The second issue is in case of misunderstandings or complaints, the customer knows exactly who to contact. The website must meet all the customer’s needs.

Indeed, the most common reason why customers leave a hotel website to book on an ota platforms is the lack of clearness of prices and policies. Moreover, there are the slowness of the website loading and the unclearness of the booking process, etc.[4].

The first step to proper disintermediation with a website is through trust and loyalty. Trust can be transmitted through the website of the hotel, by improving it and making it clear that the card they leave as a guarantee will be treated with privacy and security. One of the pillars of disintermediation strategies is the presence of a website that allows reservations to be made quickly and easily; that is updated frequently; is translated into several languages and is tailor-made for the hotel[5] . The website of a hotel represents for the customer the first virtual impact with the hotel, and therefore the key disintermediation channel. In addition, the booking engine must be performing and provide a link with the channel manager, i.e. The additional functionality that allows the updating of prices and availability on all ota channels, with the possibility of comparing the offers of local structures and having the best price or benefits compared to its competitors.

how to disintermediate

Disintermediation requires communicating the value of the hotel, starting with a description of its strengths and those of the local area to which it belongs: this will give it the opportunity to build the loyalty of existing customers and consequently implement a balanced disintermediation. Once the target have been identified, their needs and requirements have been understood, and their purchasing and travel planning processes have been studied, a budget can be invested in online and offline promotion, implementing different strategies. Promoting a hotel involves developing a multi-channel marketing plan based on the analysis conducted [6].

The channel manager and booking engine, combined with each other and interfaced with your pms, offer the advantage of saving work by simplifying many of the steps necessary for the reservation, and increasing the number of them as a result. In order to avoid creating confusion for the customer, it is essential not to give too many alternatives when choosing rooms, naming them with a classic generic room type (grt) [7].

It is also important to be present on the metasearch with the website, taking care to diversify the offer or to offer a different quality of tariff, so as not to have to sell at a higher or lower price but at an equal price (price is the third variable when in choosing a hotel). If the same rate is being offered between OTAs and metasearch providers, it will be necessary to distribute an advantage in terms of the customer experience during the stay.

Offline strategies are based on word of mouth. Already existing customers are a great resource in this aspect, and satisfied guests are more likely to return to the hotel or suggest it to other customers.

The most immediate profit-generating reputation and the one that makes the brand reputation grow is the offline one, among personal relationship, friends and family.

A fundamental role in the development of a disintermediation strategy is played by all hotel staff: each of them can encourage direct sales in their own way and for their area of expertise. Knowing how to build a “guest experience”, gathering information and implementing strategies to be able to remember and replicate the stay, influencing future behavior. Whether it is a question of acquiring new customers, building the loyalty of repeat customers, or turning an occasional customer into a possible repeat customer; the human factor of employees is at the heart of this process [8][i].

cost of disintermediation

Recently, the impact of costs has changed. The focus cannot only be on revenues, but also on the related production costs, in order to maximize the whole optimization process [9]. Disintermediation has its cost and its difficulty and attracting customers to the direct channel is not always worth it.

The cost of acquiring a customer can sometimes be higher than the selling price of the room, which is why hotels prefer to rely on OTAs. But if you can get beyond this cost and keep it under control by looking at certain factors that justify the amount, such as having managed to create customer loyalty (lifetime value), then distancing from OTAs will be the best way to proceed.

Variable costs vary according to the channel through which the request arrives. Considering also the human time factor to manage the request, the reservation that costs the less is the reservation through booking engine on the website, integrated

And interfaced with the PMS [10] [10].

In this case you don’t pay any variable costs, while the fixed costs are the set-up costs of the site and the booking engine and the online marketing campaigns that brought the customer to your site. The human time required is reduced to a minimum. On the other hand, the transactions with the highest costs will be the bookings made through metasearch (if you have a business profile), OTAs (average commissions of 18%) and digital marketing actions that require an economic effort as well as time, monitoring if it is done correctly.

Being able to disintermediate correctly and profitably requires a specific budget. Online marketing must be the strategy not only based on rates (equal to or lower than those of the OTAs), but above all on the differentiation of the offer. It is necessary to propose exclusive solutions through direct sales and to benefit those who book directly (free parking, up-selling, late check), reinforcing customer loyalty actions. Every time a hotel acquires a customer (whatever the channel) there is a cost (even for those who return, through newsletters, web reputation). It is impossible to eliminate the cost from the origin of a booking, the only thing possible is to reduce it to a minimum  [11][11] (always through an updated website and a performing booking engine).

Disintermediation is an investment in money,time and skills. It requires personnel training, an adequate website, updated social media and marketing campaigns. If there is no real intention on the part of the hotel owner, it is very difficult to implement it.

The total cost of a proper disintermediation strategy (between consultancy, pay per click campaigns, marketing) is similar to the cost of commissions initially. The advantage is that people come directly to the hotel. They are customers of the hotel and not of the OTAs.

when disintermediation is beneficial

To determine whether or not it is worth considering disintermediation, it is necessary to analyse the historical data and the origin of your customers. In addition, it is important to take into account the destination in which the hotel is located and the type of accommodation (new on the market or leader in the destination) [12] [12].

Limiting the possibility of distribution to OTAs (e.g. Booking.com), they will lower the visibility, placing the hotel at the bottom of the rankings. By decreasing the sales window, a hotel could end up with empty rooms, so disintermediation is not really worthwhile. This depends on the type of hotel and the destination it is in, a good balance is needed. In secondary destinations, where there are few competitors, it can be a good strategy to do nesting closed to the date, if an increase in last minute bookings is expected. By using historical data and forecasts that confirm and predict high pick-ups in the last few days, it is possible to optimise sales in the various booking windows, allowing rooms to be sold at high rates even at the end. This is something that cannot happen in destinations with highly competitive hotels, where on the last day the destination rates drop significantly (e.g. Riviera romagnola).

The cost of disintermediation is higher than ota commissions and there is a risk of being left with free rooms and a lot of money spent. Another balance can be between midweek and weekend, depending on whether the hotel is a business/leisure hotel. In this way you provide more contingent on OTAs in the period when demand needs to be stimulated, and capitalise (by disintermediating from OTAs) in periods ofhigh demand. Before deciding whether or not to disintermediate, an analysis of the competition and the market must be carried out. In each case there are two actions to be taken. The first is at the strategic level, where a certain amount of rooms are distributed to different channels at certain times or in certain occupancy situations. The second is at the operational revenue level, where if at the strategic level the allocated distribution contingent is wrong, the error is remedied at the operational level [13]  

conclusions

Giovanni Amedei Revenue
Giovanni Amedei

The right approach is to commercialize the hotel according to a revenue and marketing strategy (which are increasingly complementary [14][14]) that is well set up for a good disintermediation, by using the OTAs to advantage through their visibility. the costs of successful disintermediation are high. people travel a lot (or rather, used to travel) but rarely return to the same place and in the same hotel (except for business customers).

Consequently, the balance of disintermediation is shifting from reaching customers loyalty to diversifying hotel distribution through a sustainable online presence. it is important to take advantage from the visibility provided by reservation portals, by selling at a higher rate or less services. then, promote the hotel website through marketing campaign (pay per click, metasearch, etc.) and encourage direct bookings with all the customer benefits mentioned above.

The strategy is to distribute the same number of rooms on all OTAs, without favouring a single channel. in this way, the risk of being dependent on a particular portal wil be reduced. choosing to be present online with only a brandized website may not be advantageous (except in extremely case). the visibility of portals will be used at times when there is a need to reach market segments that the direct portal is unable to acquire. in other words, when the cost of disintermediation is greater than the OTAs’ commissions. by making good use of intermediated distribution, you can obtain results from direct sales and, therefore, from your official website. “good disintermediation should be achieved through good intermediation” [15][15]. 

references

[1]Travaglini, A., D’amico, V., & Puorto, S. (2015). Digital Marketing Turistico.

[2] Travaglini, A. (2019). “Prenotazioni Dirette: Quanto Mi Costano?”. Hospitality360

[3] Puorto, S. (2014). Point Break – Il Giusto Equilibrio Tra Prenotazioni Dirette E Intermediate.

[4] Mauro, O. (2018). Disintermediare Non È Una Scienza Per Astronauti. 5*Stelle

[5] Travaglini, A., D’amico, V., & Puorto, S. (2017). Hotel Digital Marketing.

[6] Caldari, E. (2019). “I Fondamentali Del Revenue”. Hospitality360.

[7] Scauri, L. (2020). Iulm Lesson On “Room Inventory”.

[8] Travaglini, A. (2019). Obiettivo Disintermediazione

[9] Scauri, L. (2020). Iulm Lesson On “Cost In Revenue Management”.

[10] Travaglini, A., Scauri, L., Caldari, E., Strati, B. & Vidoni, L. (2018).”Disintermediazione Dalle Ota: Disintermediare Conviene Davvero?”. Hotelguru

[11] Travaglini, A. (2019). “Prenotazioni Dirette: Quanto Mi Costano?”. Hospitality36

[12] Travaglini, A., Scauri, L., Caldari, E., Strati, B. & Vidoni, L. (2018).”Disintermediazione Dalle Ota: Disintermediare Conviene Davvero?”. Hotelguru

[13] Puorto, S. (2014). Point Break – Il Giusto Equilibrio Tra Prenotazioni Dirette E Intermediate.

[14] Scauri, L. (2020). Iulm Lesson On “Cost In Revenue Management”.

[15] D’amico, V. (2018). Una Buona Disintermediazione Deve Passare Da Un’ottima Intermediazione. 5*Stelle

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