Blog / Travel: What's the cost of incompatibility and not booking direct?

Travel: What's the cost of incompatibility and not booking direct?

Many of our users are Hotels, Airlines, from the Travel domain, and time-and-time again, we're asked two types of questions: 

i) How fast (or slow) is my site? (and how much faster can you make it!), and

ii) What's the ROI - or how much more revenue will this drive? 

While the first question is quickly answered as "We can bring it down to 3-4 secs", the second questions requires a deeper analysis. 

Book Direct!

Having customers 'Book Direct' is of critical importance in the Travel industry. While Online Travel Agencies (OTAs) like Booking.com, Tripadvisor.com, and Trip.com, provide flexibility, depth, and breadth of choice, it's costly to the Hotel, which pays up to 15% for each referral. 

The network effects of the meta-search (i.e. OTA technology) are strong - as more hotels are listed on the platform, more consumers use it, and vice versa. 

This, however, commoditizes 'hotel stays' and makes it difficult for hotels to differentiate themselves based on their brand - or other features that may not be easily communicated via customer reviews. 

Hotels with significant direct bookings can not only eliminate referral fees, but it also allows them to build a direct relationship with the end-buyer, enabling them to perhaps prepare the room with custom amenities prior to arrival, offer suggestions on a range of local experiences, or more. 

The China Traveller

China has been the top spender in International Tourism since 2012, with 21% of global tourism receipts as of 2017 with the top destinations being: 

Source: https://www.travelchinaguide.com/tourism/2017statistics/ 

Spending last week in Singapore, I had the privilege of speaking first-hand with a number of GMs and Digital marketing managers for Hotel chains. 

This week, I met with a handful in Tokyo and in both markets, they're at a loss on how to target, and build direct relationships with Chinese travellers. 

Omni-Channel Marketing & Inability to Run Campaigns

In an ideal world, Hotel chains that operate within an offshore model (i.e. no Chinese booking entity, ICP Licence, or partnerships) and those with few resources, are limited in what they can do onshore.

In an ideal world, companies would have a healthy marketing mix, splitting their efforts across multiple channels, nurturing prospective customers at different parts of the Marketing and Sales funnel. 

The China Marketing Funnel Source: Chinafy

For offshore companies, and those in Travel specifically, the call-to-action is to ultimately book a room directly on their website. Given the limited profit margins, if the targeted client books on the OTA site the ROI is still positive, albeit only marginally. 

The problem is that the most important part of the funnel - the point of conversion: the website, just doesn't work in China. 

Sites are just so incredibly slow that any marketing efforts result in the customer booking via the OTAs, and in many cases, considering an alternative brand. 

Customers are left with no choice but to book via OTAs Source: Chinafy

For this reason, foreign brands don't engage in much onshore marketing, as the possibility of booking directly just doesn't exist. 

What is the Cost of a Slow Website?  

To calculate this, we'll be looking at the % of travellers coming from China, multiplying this by gross revenue, and again by the OTA referral fees. 

What % of Travellers are from China? 

In Singapore, where the question first came up of "How much top-line revenue is paid to OTAs?", a whopping 20% of travellers are from China, representing the single-largest geographic segment. In Japan, where this conversation continued, it's almost 27%, with South Korea taking the top spot at 31.2%. If we take these % China Traffic and multiply it by the 15% commission, we end up with the % of Total Revenue paid to Chinese OTAs below. 

Across Asia, the average hotel is paying between 3-4% of top-line Revenue to Chinese OTAs. 

Source: Wikipedia

What is this in Dollar Terms? 

To convert this to dollar terms, we need to factor in the total revenue for a given hotel taking into account the # of Rooms, the Average Room Rate, and the Occupancy. Let's assume we have a 200 room hotel charging $200 per night, with 20% of their visitors from China (and hence 20% x 15% = 3% Fees paid to OTAs). 

That's sadly over US$350k per year lost: 

For convenience, we created the table below which allows hotels of any size, in any location calculate their dollar opportunity cost. 

The table assumes an 80% Occupancy, $200 per night, and 15% fee to the OTAs. Simply look up the # of Rooms, and the % of visitors from China to calculate the rough annual cost. If your average stay is $100 per night, simply divide the numbers below by 2. 

For example: If 20% of travellers are from China, and Hotel has 200 rooms, this is $350k per annum in fees

It's important to take back into account the key assumptions above which are that i) Chinese travellers cannot book directly on your website, and ii) they therefore book entirely with Chinese OTAs. There are indeed alternative ways to booking hotels (i.e. one could simply call a hotel - on the phone, and book a room although rare nowadays).

Does Everyone book via OTAs?

In the West, about 49% of bookings are direct with 51% going via OTAs according to Phocuswright data. More importantly, 52% of those who browse on OTA sites end up actually visiting the Hotel website, meaning Hotels at least have the opportunity to recoup about half of those fees above. In China, the possibility to book direct has never really existed, and we'll be gathering more data as we open up this new revenue channel to more hotels each day. 

What's Next? 

Chinafy can accelerate, almost instantly, your Hotel website from "Incredibly Slow" (or broken) to "Pretty Fast" bringing it down to more normal 3-5 seconds. If you're not getting direct bookings from China, you're not alone. Virtually every foreign hotel's site is super slow in China - but this is changing. 


Read more about how Chinafy worked with hotel & tourism businesses like Ayana Resorts, Swire's House Collective & Plaza Premium Group to reach visitors in China

With Chinafy in place, and your site now fast, this opens up the broader spectrum of SEO, SEM, Social, and Influencer marketing for you to facilitate direct bookings, improve brand affinity, and build direct relationships with your guests.  

Some next steps:

Step 1: How slow is your site in China? See our Speed Test

Step 2: How does it Index on SEO? See our China SEO Basic Test

Step 3: Reach out, and let's start getting your visitors to book direct


Got questions? Click here to get in touch with Chinafy.

Don't get left behind.
Optimize your website for the world's fastest-growing consumer market. Start today, cancel anytime.
Make your website work in China
Fill out the form and one of our Chinafy team members will reach out to you within 1 business day to book an initial call or with a plan for next steps.
check30%-40% faster compared to using a CDN alone.
checkVerifiable results in just 2 weeks, instead of 1-2 years.
checkLittle to no action required from your IT teams.
"Chinafy has made it possible for us to be sure that our web visitors in China have the same good experience as all our other visitors in the rest of the world."
Michela Nalin Francek, Marketing Manager for Nolato
"Over 1 million engineers use SnapEDA each year all over the world. We were attracted to Chinafy's service because of how easy they made it to support the Chinese market."
Natasha Baker, CEO & Founder of SnapEDA
We are very happy with working with Chinafy. They went above and beyond to ensure we help MIT Professional Education deliver world-class online education in China.
Ignacio Cerro, CFO, Global Alumni for MIT Professional Education
"Consistency is crucial for us.
Chinafy fits the bill of what we were looking for."
Jonathan Rhodes, Marketing Technology Manager of Registrar Corp
"The process was super easy and I'm really glad we selected your team. The experience has been beyond my expectations."
Nicolas Duchesne-Lafoest, Product Marketing Manager 
"Chinafy went above and beyond to help me produce my event. I'm not sure I would have been successful without them. The client was elated that we managed to fulfill the request to live-stream into China so quickly."
Kevin Denham, Technical Director at ADM Productions
To start, please share a bit more about you.
Which website do you want to Chinafy?
Tell us your name?
What best describes your company role?
What's your Work Email Address?
What would you like to discuss?
Have a discount code?
By clicking 'Get Started', I also agree to Chinafy's Terms of Service & Privacy Policy.
close
Thanks for getting in touch!
One of our China experts will be in touch with you via email within the next 24 hours with

1 - Expected post-Chinafy results
2 - Your Custom Plan
3 - Next steps.

P.S. Make sure to check your promotions inbox in case our message lands there.

Please feel free to check out our case studies or blog in the meantime.
[[embed: get started form inline type]]

Related Stories

Load More
×

Notey will use the information you provide on this form to be in touch with you and to provide updates and marketing. Please let us know all the ways you would like to hear from us:

You can change your mind at any time by clicking the unsubscribe link in the footer of any email you receive from us, or by contacting us at community@notey.com. We will treat your information with respect. For more information about our privacy practices please visit our website. By clicking below, you agree that we may process your information in accordance with these terms.

We use Mailchimp as our marketing platform. By clicking below to subscribe, you acknowledge that your information will be transferred to Mailchimp for processing. Learn more about Mailchimp's privacy practices here.