Study reveals direct bookings are not cheaper for hotels

A new study has revealed that shifting consumers from indirect to direct channel has no measurable impact on hotels’ costs, but could instead impact occupancy rates.

The report, published by travel industry economists Infrata, showed a 0.03% difference in net profit contribution between the direct €80.92 (£71.14) and indirect channel €80.94 (£71.15), based on an industry average daily rate of €112 (£98.46).

The study took into account customer acquisition, customer services and technology development costs as part of the comparison. It reviewed literature and trends shaping the industry, tested channels’ sensitivities to costs, revenue and profitability and created a data platform to model costs and revenue per channel.

Ian Lowden, author of the study, said: “Servicing consumer needs while attempting to switch different consumer types between channels can be complex. When cost, revenue and consumer behavior dynamics are accurately modeled, it is clear that the cost of moving indirect bookings to ‘direct’ is marginal and possibly negative in terms of a revenue impact for the hotel.”

The study also found that losing the ‘billboard effect’, where hotels benefit from being listed on OTAs, requires hotels to materially increase spending on customer acquisition, online marketing, technology development and other customer services.

Christoph Klenner, European Technology and Travel Services Association secretary general, said: “The widely held belief that direct distribution is cheaper for hotels than indirect distribution has been debunked once and for all in this study.”

He added: “It seems that the major incentive for hoteliers to push direct sales is to reduce transparency and comparability for consumers, reducing competition between hotels. Customers must be given the choice of which channels they use that best suits their needs.”