OTA package deals costly but beneficial to UK hotels

A guaranteed reservation and increased spending during the stay are some of the benefits of this type of offering. Data released by Expedia also revealed that customers booking travel deals tend so stay a day and a half longer and book three weeks further in advance than those booking flights and accommodation independently.

Anthony Rawlings, revenue and central reservations manager at Dolan Hotels in Jersey, told BigHospitality: “We started offering package deals with Expedia a couple of years ago to reach a wider audience, and today out of all the bookings we get through Expedia, 50 to 60 per cent are packages. Once customers get to the hotel, because they’ve made a saving on the package and booked well in advance, they tend to spend a little bit more, so we get good incremental spend during the visit. Moreover, if the reservation was cancelled, payment would be guaranteed anyway, which is good for our side: even though we are giving the discount away, we know we will get that business no matter what.”

Discount requirement​

Of course these perks come at a price: though unable to disclose a precise percentage, Rawlings said Dolan Hotels offer “a substantial enough discount” in their package deals – a requirement to get visibility on crowded OTA websites.

Isabelle Pinson, Expedia’s senior director of market management for Northern Europe, explained: “Hotels need to think about the consumer benefits of buying such a package, and the main reason is that they save money. If hotels want to sell through the package path, our advice is to offer a discount.  We work with hotels to determine the best discount depending on the market, the season and what other hotels nearby are doing.”

At Dolan Hotels the percentage remains the same year-round, though based on the standard rate of the season.

OTA fees​

There are no extra costs to offer package deals on Expedia. However, hotels must be a member of the OTA. Contract fees are negotiated on a case-by-case basis, and kept confidential by Expedia, although the site was recently rated the most expensive OTA​​ in a survey by umi Digital. 

In the case of Expedia, hotels wanting to offer packages must have a contract that allows payment to be made to the website upon booking, as opposed to directly to the hotel upon check-in.  One example of such a contract is the Expedia Traveller Preference model, where the consumer is offered the choice of paying at checkout or at time of booking with Expedia.

The reason why the customer has to pay Expedia and cannot pay the hotel later is because of the basics of a dynamic package, in which the consumer pays flight and hotel in one opaque transaction, without knowing whether the discount came from the hotel, the airline or both.

“We currently have 51,000 hotels signed up to the Expedia Traveller Preference programme globally, and they can all offer package deals,” Pinson added.

Expedia launched dynamic packages about ten years ago and business has been growing steadily. In 2012 the site sold about 2.8m packages worldwide, and that figure increased to over 3m in 2013.

Budget airlines growth​

Amongst the factors influencing this growth, Expedia cites strong customer demand for flexible holidays and the increase in European flights offered by low-cost airlines. But for Steve Lowy, CEO and founder of umi Digital, budget airlines are actually removing the need for holiday packages in Europe.

“Because of the European budget airline growth, booking flights and hotel individually is probably more cost-effective. It’s not like a resort in Cancun aiming an American or British market, for which you have to get a flight with a long-haul carrier. What has changed is that there are actually more cities in the UK now that offer long-haul direct flights, where people will be more keen to get a package. For city hotels with international airports, if the package opens up a new market, then they’ll try it. But the regional hotels are focused on how to reduce their cost of sales as much as possible and not putting all their eggs in one basket, so they are trying to reduce their use of OTAs,” he told BigHospitality.

According to Expedia’s report, Q1 package guests to the UK stayed more than three nights on average, over one and a half for standalone bookings. They also booked nearly a month and a half in advance. In the same period the firm reported a 20 per cent year-on-year increase in demand for holiday packages in the UK, with the US, France, Germany and Italy topping the feeder markets. The fastest-growing international markets included Spain, the Netherlands and Japan, and package travellers who stayed the longest came from Canada, Japan and the US.

The UK destinations that ranked top for package stays in the UK were London, Edinburgh and the Channel Islands, while Manchester was the fastest-growing destination with an almost 30 per cent increase in demand.