Hotels often rely on Online Travel Agents (OTAs) to attract more guests but, according to a new study, this comes at a significant cost. When OTAs undercut hotels’ direct rates, the price hotels pay for online advertising soars, sometimes by nearly 50%.
Hotels allowing OTAs to undercut their direct rates experience significantly higher pay-per-click (PPC) advertising costs, new research from global hotel technology specialist SHR reveals.
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Analysing 27 million cost-per-click (CPC) impressions, the study shows that hotels pay an average of 47% more per click when OTAs offer the lowest nightly rates.
According to SHR’s report Digital Strategy Secrets for Hospitality, the cost per click rises to $0.97 (£0.79) for hotels where OTAs have the cheapest rates, compared with $0.66 (£0.54) for those offering the best deal directly.
The competition for branded search terms escalates when OTAs undercut hotel prices, as OTAs increase bids, confident their lowest-rate advantage will drive conversions.
Even when hotels maintain rate parity—offering identical rates on direct websites and OTAs—the cost per click remains elevated, averaging $0.89 (£0.73), 35.9% higher than for hotels prioritising direct rate advantages.
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By GlobalDataBalancing OTA partnerships and direct strategies
While OTAs deliver visibility and a broad customer base, the findings highlight the financial trade-offs hotels face.
“Our findings highlight the delicate balance hotels must maintain when working with OTAs,” stated Steve Collins, VP of Digital Marketing at SHR. “While these platforms help hoteliers reach a wider audience, abandoning rate integrity sacrifices marketing spend and profit.” Collins suggests that hotels prioritising direct bookings and fostering balanced OTA relationships can reduce costs and achieve sustainable growth.
This shift enables hotels to reinvest savings from reduced CPC costs into broader marketing initiatives, such as brand-building activities earlier in the customer journey.
The study also underscores the importance of crafting a holistic digital strategy. By strengthening direct booking channels, hotels can enhance profitability and improve overall efficiency in their marketing spend.
Forecasting a direct booking revolution
As the hospitality sector evolves, experts predict a significant increase in direct bookings by 2030, potentially surpassing OTA-generated reservations.
This trend underscores the growing importance of strategies that strengthen direct channels, optimise CPC rates, and reduce reliance on OTA-driven lead generation.
SHR, a global hotel technology leader founded in 2004, assists over 2,000 hoteliers worldwide in maximising revenue. Its report suggests that maintaining rate integrity not only drives down advertising costs but also enhances conversion rates, allowing hotels to allocate resources more effectively.
“Approaches that prioritise direct bookings, while also investing in broader brand-building activities, can help hotels remain competitive,” Collins concluded.
By leveraging a balanced booking strategy, hotels can ensure long-term profitability and a more efficient allocation of their marketing resources.
