The Commission Controversy
Keep your most profitable channels selling until you reach 100% occupancy each day and you will see a dramatic increase in your occupancy levels and revenue earned.
It’s a pretty common occurrence; when revenue managers see that their property’s occupancy has hit a specific, pre-determined percentage, they decide to shut off the channel with the highest commission rates. This percentage could be 50% or it could be 90% depending on a property’s specific revenue management goals, but in most cases, the end result is the same: revenue managers shut off the OTAs with the highest commission rate, which are often also the sites that generate the majority of a property’s bookings.
While I understand the desire to earn as much money as possible from each booking, it is very counterproductive to shut off your highest performing sites at any time even if they are charging you a 30% commission for each booking. The majority of consumers use OTAs to find and book a hotel reservation, and the sites with the highest number of visitors are often the ones who charge higher commission rates.
While I know that many hoteliers feel resentful of the OTAs because of these high commission rates, it’s important to look at the ROI of each channel as a whole – not simply the per-unit price obtained for each room (after commissions have been paid). While you do make 100% of the dollars earned on all direct bookings, the average hotel may only secure a small percentage of their bookings from the direct channel. In contrast, the average hotel secures a large majority of their business from OTAs (and the majority of those bookings come from the sites with the highest traffic AND the highest commission rates). So by shutting off the channels that earn you the most of your business, you greatly decrease the chance of selling the remaining percentage of your rooms for that particular day.
Read full story at: http://www.revparguru.com/the-commission-controversy/