The math of working with OTAs

By the BlackDog Internet Marketing team

Advertising Agency

Image created using generative AI

Counting the costs: The price of collaborating with OTAs

In the realm of modern travel and leisure, the online travel agency (OTA) has emerged as a pivotal player. Tripadvisor, Viator, and Yelp are some well-known examples of OTAs that serve as powerful intermediaries connecting tour operators and attractions with a global audience seeking seamless online ticketing experiences. While these platforms offer a rapid route to driving online sales, it’s crucial to recognize that this convenience comes with a notable recurring cost. Furthermore, while opting to establish your tour or attraction on OTAs can involve a significant upfront investment, the benefits for your brand’s long-term growth and autonomy are undeniable. This article delves into the intricate landscape of OTAs, weighing the benefits of immediate exposure against the strategic advantages of owning, and controlling your online tourism marketing sales channels.

Balancing immediate sales and brand integrity: Avoiding overdependence on OTAs

While working with OTAs can offer an immediate boost to sales, it’s crucial for tourism brands to recognize the potential pitfalls of relying solely on high-cost sales channels that can erode their unique branding at the expense of effective attraction marketing. The allure of quick sales should not overshadow the long-term value of building a distinct brand identity. Now, let’s dive into some of the pros and cons of working with an OTA.

Pros of OTAs

  • Quick setup

One of the most compelling advantages of working with OTAs is the swift and hassle-free setup process. With established platforms, your tour or attraction can be made available to a global audience almost instantly. This speed to market can be particularly beneficial for new businesses aiming to make a rapid entry into attraction marketing without complex technical setup.

  • No upfront cost (only on commission)

Working with OTAs often involves operating on a commission-based model, which can be a boon for businesses looking to minimize upfront expenditures. Instead of bearing the full financial burden of tourism marketing and promotion, you only pay a percentage of sales when a booking is made. This allows you to generate revenue before spending on attraction marketing efforts, making it an attractive option for those with limited initial resources.

Cons of OTAs:

  • Pay-to-play model

The “pay-to-play” nature of an OTA means that you’re essentially paying for visibility and access to their customer base. While this can provide a quick boost to sales, the ongoing commissions can add up over time, affecting your profitability.

  • Limited to no control over branding

When you rely heavily on OTAs, your branding often takes a back seat to the OTA’s own platform branding. This can dilute your unique identity and make it challenging to differentiate your business from competitors in the crowded tourism marketing arena. Building a strong, consistent brand can become difficult in this scenario, impacting long-term customer loyalty.

  • Limited differentiators during shopping stage

OTAs typically present a standardized format for showcasing products, often leaving little room to highlight what sets your tour or attraction apart. This lack of differentiation during the shopping stage can make it challenging to communicate your unique value proposition to potential customers.

  • High costs

While the absence of upfront costs is a positive, the cumulative cost of commissions paid to OTAs can become significant as your business grows. As your revenue increases, the percentage-based commissions might end up being more substantial than anticipated, impacting your bottom line.

Diversify your sales channels to amplify long-term attraction marketing success

BlackDog Advertising understands the complexities of working with OTAs for everyone in tourism marketing and attraction marketing. That’s why our approach is rooted in harnessing the advantages of OTAs while safeguarding your brand’s integrity and long-term growth. Here are BlackDog Advertising’s top five recommendations for working with OTAs:

1. Diversify placements, don't remove

Our recommendation is not to stop working with OTAs altogether. Instead, focus on diversifying your placements when building out your attraction marketing plan. While OTAs offer a valuable sales channel, it’s essential to avoid dependency. BlackDog Advertising helps you strike the right balance by expanding your reach through multiple tourism marketing platforms while maintaining control over your brand.

2. Invest in a compelling online presence

Invest in a professional website and robust digital marketing strategies that amplify your brand’s essence. Your website serves as your brand’s digital home, allowing you to showcase your offerings authentically and differentiate yourself from competitors. BlackDog Advertising works closely with our clients to create a digital ecosystem that reflects a brand’s uniqueness.

3. Secure your business' autonomy

It’s vital to own your business and establish stable sales channels outside of working with OTAs. By diversifying your revenue streams, you’re less vulnerable to arbitrary commission hikes or changes in OTA policies.

4. Prioritize high ROI marketing initiatives

Identifying marketing initiatives with a high return on investment (ROI) is BlackDog Advertising’s specialty. Instead of funneling excessive resources into OTA commissions, we guide you toward strategies that yield better results. Based on our experience, many marketing avenues can be much cheaper than the average OTA commission.

5. Optimizing media spend for optimal returns

BlackDog Advertising has found that optimizing your media spend to around 3-5% of your tour’s gross revenue can often yield better results than relying solely on OTAs. This approach allows you to achieve a lower cost per conversion due to reduced commission expenses. This data-driven approach fine-tunes your tourism marketing efforts for optimal efficiency.

Informed decision-making amplifies your outcomes

As you’re drawn toward making sales quickly, it’s also crucial to focus on creating a strong and lasting brand identity. This means you need to use a well-rounded strategy that considers both aspects. At BlackDog Advertising, our goal is to empower your business with a well-rounded approach to tourism marketing and attraction marketing that capitalizes on the benefits of OTAs while preserving your brand’s identity and long-term success. By working with us, you can navigate the OTA landscape with confidence and achieve the sustainable growth necessary to elevate your brand.

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