Mirai blog for hoteliers

Has TripAdvisor become an OTA?

201After the recent launch of instant booking (read our post “What is instant booking and how does it work?” for a complete analysis), TripAdvisor has caused a stir and now wants to compete face to face with the main OTAs.

Therefore, has TripAdvisor become an OTA? Despite them saying that they are not an OTA and that they are happy being a “booking supplier”, at Mirai we believe that TripAdvisor has indeed become an OTA, although with a few subtleties.

Why it is an OTA

  • Because almost the complete booking process takes place within the TripAdvisor page. It is quite clear that the final client is their target; they want to build loyalty with him so that he comes back to make his future bookings. Whether the hotel likes it or not, it seems a correct strategy from the point of view of TripAdvisor.
  • Because, in the eyes of the client, the important thing is that he makes the booking on TripAdvisor as he would in any other OTA like Booking.com. Whatever happens “behind the scenes” is of no interest to the client. The mark of quality and security that the client sees is provided by the TripAdvisor brand.
  • Because they earn sales commissions just like other OTAs. In fact, the hotel or OTA that is offering their stock must communicate all booking modifications and cancellations to TripAdvisor at the end of every month.

Why it is not an OTA

  • Because the confirmation of the reservation, the last of the typical steps of the booking process, is provided by the supplier, not by TripAdvisor.
  • Because the post-sales customer service (modifications, cancellations, questions) is carried out by the real booking seller (the hotel itself or another OTA, who offered their stock and rates to TripAdvisor). In other words, TripAdvisor provides the booking and then moves on.
  • Because the client’s details are fully transferred to the hotel or another OTA, and therefore they too can try to build loyalty, something that TripAdvisor does not forbid you to do by contract (something which other OTAs do).
  • Because despite you paying commission to TripAdvisor, it will not appear as a channel in your channel mix. It is just a sales source but the channel will in fact be another (your website or an OTA). To this effect, it is equivalent to Adwords, the Business Listings or any other traffic source.
  • Because TripAdvisor does not get involved with the payment process, transferring this responsibility directly to the actor involved (hotel or OTA). Processing advance payment on behalf of the hotel is a regular feature of most OTAs except Booking.com and a handful of others.

In any case, the direct nature of instant booking is perhaps not the main issue: While the hotel manager ceases to participate awaiting the resolution of this existential doubt, the real OTAs are gaining market share thanks to instant booking.

Related:

What is TripAdvisor instant booking and how does it work?
TripAdvisor instant booking in detail
What should my TripAdvisor instant booking be

What should my instant booking strategy be?

Once we have analysed instant booking  TripAdvisor’s new product (what it is and in detail) comes the big question: should I participate with my direct sale?

On one hand, the first reaction would be to resist. It does not seem ideal to advance towards a scenario in which the direct sale, whose main objective should be cost reduction and increase of hotel independence, is obliged to withstand a cost level close to that of the OTAs and depend on another industry giant.

It would be ideal if the hotel and its direct sale did not have to endure this but since TripAdvisor is becoming a huge showcase and OTAs (and now, Booking.com especially) are taking part in it, not connecting your website to it would marginalise your business.

As the lesser of two evils, we recommend taking part.

The reasoning is the following:

  • Guaranteed profit. With a CPA model, you will not run the risk of costs soaring (like it can happen in CPC -cost-per-click- investments, especially in hotels with lower-mid costs and short-mid stays).
  • It does not demand a lot of control and monitoring. Due to this guaranteed cost effectiveness, you will not have to monitor it regularly, which results in not having to waste precious time. Also, the hotel does not need to manage it as a new channel because it uses the existing rates.
  • If you do not put your “direct sale”, an OTA like Booking.com will do it instead. Simple as that. To make the most of this showcase (and TripAdvisor is one of the most powerful ones), you have two options: either you pay directly or you pay via Booking.com commissions, which, in any case, will be there anyway.

Where will the client click when he sees this result?

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  • Cannibalisation risk. By taking part, you make certain users book through instant booking rather than through other existing options. Some of these transfers may take place:
    • Instant booking instead of Business Listings: A negative effect for you, although. You will have the fixed investment on Business Listings and now you will also have the Instant Booking cost. Will TripAdvisor lower the cost of its Business Listing now that it offers another way to reach the hotel direct channel?
    • Instant booking instead of TripConnect: The effect will be:

▪      Positive if TripConnect was costing you (on percentage) more than instant booking would cost now.

▪      Negative otherwise.

    • Instant booking instead of OTA. Positive effect and likely it will happen. It is the great advantage of instant booking: you will reduce distributions costs, since you will go from OTA sales (20% average commission) to 12% or 15% plus the cost of your direct sale. You can save between 1% and 6% on each booking.

Clarification: Your total sales will NOT increase with instant booking, but rather you will be able to distribute them through more cost effective channels. In other words, you will NOT sell more. The advantage is in the transfer of bookings through channels, in that positive cannibalisation from OTAs to your direct sale.

    • Instant booking instead of direct bookings: Negative effect although highly unlikely. Certain users used TripAdvisor as a showcase but they would end up booking on the hotel website on another tab, session, etc. Now, instant booking offers a more immediate and easier way to make that “direct” booking.
  • Compatible with TripConnect. TripAdvisor is the biggest showcase in the world and each square inch gained on its green is pure gold. The cost for you will be one or the other (not both) depending on the user’s choice.

Also, remember that instant booking guarantees up to 50% of appearances. You must protect the other 50%.

 An example of Booking.com on TripConnect and instant booking at the same time:

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  • The best showcase, within your reach. For the most advanced users, the best strategy is not only connecting to instant booking but also removing all of the intermediation from it. In other words, requesting Booking.com and the rest of the OTAs (many of whom you do not have contracts with and feed off bed banks) to give way and not bid to be on instant booking, since it is a showcase where you, as a hotel, can get there by yourself. Remember that the aim of intermediation is to reach where you can’t.
  • Will taking part affect my position in the TripAdvisor ranking? It does not influence the ranking based on rate and reviews. Altering it could endanger its credibility and impartiality in the eyes of the user.
  • However, more prominent ordering factors are being added to the “traditional” ranking: by price, by distance and, above all, “just for you”, which takes into account different criteria: among them, as is to be expected, is probably each hotel’s bookability. 

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TripAdvisor must not be though at “the website with the listings by reputation”. Now, it offers more services to the user and, the more the hotel takes part in them, the more it will benefit from the benefit that it will bring it as a showcase.

Instant booking is a new transformation (the latest of many) of online distribution. As a hotel, you have two options: do nothing -and leave OTAs like Booking.com jump on the bandwagon of change and make the most of the opportunity- or jump on the bandwagon yourself and compete with the OTAs face to face. You decide.

Related:

TripAdvisor instant booking in detail

Once we have analysed what instant booking is and how it compares to Business Listings and TripConnect CPC, we move on to analysing the many questions that this new product comes with.201

  • Will it be available in all markets? For now, instant booking is available only for users in the United States, Canada and United Kingdom, although TripAdvisor will release it for the remaining markets in the next few months. If you cannot see it yet, do not worry.
  • Can I put my “direct sale” connected to instant booking? Yes. All you need is a certified partner such as Mirai. You can see the full partner list here.
  • If I don’t connect to instant booking, do I miss out on sales?  No. The bookings will still arrive via the OTAs. However, you will lose out on a chance to gain direct sales quota against the OTAs.
  • Is it really direct sale? Depending on how you look at it. If a client books on instant booking and therefore never visits the hotel website, he will probably maintain the conviction that he has booked “on TripAdvisor”. Also, for potential customer loyalty actions, the client’s data will be shared between TripAdvisor and the hotel. On the other hand, you can consider it a direct sale because it is not done through an OTA.
  • Is it a site reserved for the hotel website or can OTAs take part too? It is open to all those who want to show their rates, including, and much to the hotel’s disappointment, OTAs (also those whom you don’t want to sell your hotel because they break your rate). However, Booking.com surprised us all by announcing integration with instant booking (which is curiously an allegiance with its main competitor). In any case, if you connect your “direct sale” with instant booking, you guarantee an appearance quota that could reach 50% (in other words, every other time that the book button appears on TripAdvisor), as long as the rate that you have is competitive.
  • If a client books on instant booking, whose is the client? Technically, the client provides his personal data to TripAdvisor, so one might say that the client is theirs. However, they transfer them without restrictions to those that provide the booking (hotel or an OTA), so you could also say that the client is theirs. The question is not as simple and therefore would be “how will each of them use that data?”

When a booking on TripAdvisor instant booking is complete, the client must accept no fewer than four conditions: (1) the TripAdvisor terms and conditions, (2) the privacy policy (which refers to the data), (3) the conditions of the channel that enabled the booking (the hotel or an OTA) and (4) the rate’s cancellation and payment policy.

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  • How much does it cost? Unlike TripConnect CPC, instant booking is based on a model of commission on materialised stays. TripAdvisor offers two options: 15% or 12%. With the former, you will ensure 50% of the appearances. With the latter, 25%. To this, you will have to add your direct-sale cost which will depend on the provider.
  • Is the commission based on RRP (like on Booking.com) or on taxable income like it should be? It is based on taxable income. In Booking.com’s case, the 15% commission is in fact 16.5%. On instant booking, it is actually 15% (1.5% less). The difference in comparison to being a Booking.com Preferred Partner is 3.7% (from 18.7% to 15%). If you subtract the cost of your direct sale to this difference, you will get the real margin that goes directly to the GOP (gross operating profit).
  • Does TripAdvisor charge the final client? No. It only puts the client into contact with the OTA or direct-sale provider, who will charge the chosen rate to the client.
  • How does it affect cancellations and after-sales management? TripAdvisor discounts cancellations and allows the OTA you work with or the hotel to manage them (as well as its cost).
  • How to I inform of modifications, cancellations and no-shows? TripAdvisor is placing an extranet at your disposal to make these modifications and so that you do not get charged for cancelled bookings. If you work with Mirai, you can save yourself doing this task because if you modify it on our extranet, these changes will automatically synchronise with TripAdvisor. One less job and worry.
  • Who sends the confirmation e-mail to the client? TripAdvisor or the OTA/”direct sale”? TripAdvisor sends a basic confirmation e-mail and it is the OTA or “direct sale” that sends the detailed confirmation. In the test booking for this analysis, this was the e-mail that was received:

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  • How does a booking by a client who booked through instant booking through an OTA -like Booking.com for example- reach the hotel? You will receive it like any other Booking.com booking. OTAs do not want to help you understand what is happening or where bookings are being generated. In the same way that they do not tell you whether they are coming from Trivago or Adwords, they will also not tell you whether they are coming from instant booking.
  • And if the booking comes through my “direct sale”? It depends on how each company does it. From Mirai, we clearly indicate it on the booking, so you know at all times that the sale has come from instant booking.
  • If I connect my “direct sale”, can I publish all my rates on instant booking? All of them with two exceptions: those that imply payment with EFTPOS (electronic funds transfer point of sale), PayPal or bank transfer (TripAdvisor does not support these payment types). To make your job easier, at Mirai we exclude these rates in the integration with instant booking so you do not have to do anything extra.
  • What do I have to do to connect my “direct sale” to instant booking? The first thing is to have a certified partner such as Mirai or any other (see complete list). From there, you can manage it directly with your regular TripAdvisor account (the same one you use to manage your Business Listings and TripConnect). From www.tripadvisor.com/instantbooking, you can activate your participation in instant booking. Payment will be direct from your hotel to TripAdvisor through credit card or direct debit in some countries such as Spain.

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