When asked to describe their ideal booking experience, most hosts and property managers will likely mention low commissions, complete control over terms and policies, and unrestricted guest communications.
The primary solution to realizing these benefits is implementing direct bookings, which have been making a tremendous comeback over the last few years. However, there are several challenges that stand in the way of successfully accepting direct bookings in today’s hospitality landscape, especially as the primary booking mode.
In this article, we’ll cover what direct bookings are, why they’re on the rise, the challenges associated with them, and how direct bookings fit with Dtravel.
In the context of short-term rentals, direct bookings are reservations that are placed directly with a host or property manager. Direct bookings bypass intermediaries like online travel agencies (OTAs) and other short-term rental (STR) platforms, allowing guests to make reservations on the host’s own website, by email or over the phone.
When a guest places a reservation on an OTA or STR platform, the guest enters into a contract with both the platform and the host. The host also has a standing contract with the platform and enters into a contract with the guest at the time a reservation is made. Each contract covers different aspects of the factors that make up a reservation.
Generally, the primary aspects covered in a contract between the guest/host and the platform are the payment terms and fees. The contract between the host and the guest predominantly covers terms associated with the actual stay, including the applicable house rules and cancellation policy.
In contrast, direct bookings involve a single contract between the guest and the host that covers everything from placing the booking to completing the stay. This streamlines the entire experience and provides numerous benefits for both hosts and guests.
Hosts are increasingly turning to direct bookings for several key reasons:
The most common reason for hosts establishing a direct booking channel is to avoid the 15-20% commission that OTAs and STR platforms take on every booking. This translates to a better bottom line that can be spent to drive more bookings by passing on a portion of these savings to guests, increasing the marketing budget, or renovating the property.
OTAs and STR platforms have set terms and policies that hosts are subject to. Unable to change these, hosts are at the mercy of these platforms when it comes to managing issues between them and the guest. Since the customer is still king in many dispute resolutions, decisions are inconsistent and often go against hosts, even with a lack of evidence. Direct bookings mitigate this issue by enabling hosts to set the exact terms and policies that suit their businesses so that rules can be applied fairly and consistently which guests agree to upfront at the time of booking.
Open communication channels and greater access to guest data means more power to personalize. A more personal relationship enables a tailored guest experience during and even after their stay, which increases the likelihood of return guests and lowers the cost of acquisition. Additionally, guests who book directly are more likely to stay longer, decreasing housekeeping costs and reducing property wear and tear.
On OTAs and STR platforms, hosts have very limited options to attract guests with promotions, especially ones that don’t involve sacrificing a significant portion of profits. With direct bookings, creative promotions can be developed and advertised without restrictions. Hosts — especially property managers with properties in a range of areas — can also consider incentivizing return guests with unique loyalty program initiatives.
On an OTA or STR platform, hosts are constrained by the design of the platform. As travel becomes increasingly commoditized, it’s more and more difficult to make a property stand out when everything (except for the pictures) looks the same. A direct booking website gives hosts an opportunity to build a brand unique to them that reflects their values and personality using distinctive colors, messaging, graphics and multimedia.
The benefits of direct bookings also extend to guests by providing the following:
Since hosts don’t have to pay platform commissions with direct bookings, guests can often receive better rates or special perks. With the intermediary out of the picture, the value is distributed more equitably to the two parties who are directly involved in the booking, freeing up additional funds to spend on activities, dining and other travel-related expenses. Some hosts may even provide special discounts or add-ons when booking directly.
Making changes to a stay or submitting special requests directly with the host is almost guaranteed to be executed considerably faster and with less bureaucracy than lodging these requests through an OTA or STR platform. Hosts endeavor to make each guest’s stay exceptional, and with no third-party policies to adhere to, their flexibility in this respect is greater. Because the message passes directly from the guest to the host rather than bouncing around a customer support team, there’s also less chance of the request being lost in translation (or lost altogether).
The content of a direct booking site is presented in a specifically curated way by hosts, providing guests with the most complete and up-to-date information they may not be able to provide on other platforms, such as videos, virtual tours, high-resolution photos, and an optimized layout. With more information upfront, guests can book with greater confidence when searching for their perfect stay.
If something doesn’t go according to plan during a stay, there’s only a single point of contact: the host. Rather than relying on customer support representatives of an OTA or STR platform to sort out any issues between a guest and a host, a mutually agreeable solution can be arrived at by both parties without an extensive process of submitting information for evaluation by third parties.
Given the benefits offered by direct bookings for both hosts and guests, it’s no surprise that the number of these bookings has been on the rise across the globe. This movement is evident across both the hotel market and short-term rental market, with numbers swelling throughout the COVID-19 pandemic.
While the market size of hotels and resorts is still significantly greater at US$1 trillion than the short-term rental market, which was valued at US$74.64 billion in 2021, many trends observed in the hotel market remain influential on short-term rentals.
In 2020, the share of direct bookings increased to 28% across European hotels, up from 21% in 2019. In the Asia-Pacific region, this jump was even greater, with 36% of hotels being booked directly in 2020 compared to 28% the year before.
The leap in travelers choosing to book directly was largely accelerated by the pandemic. Though the shift was already happening, albeit at a much slower pace (increasing by only 1-2% between 2018 to 2019 in each region versus 7-8% in 2019 to 2020), the difficulties many travelers experienced when attempting to cancel or make changes to their reservations demonstrated the inflexibility and inefficiency of bookings placed with OTAs than those booked directly.
With an astounding 83.2% of hospitality industry professionals believing travelers will opt for short-term rentals over hotels in the wake of COVID-19, the market size of hotels and short-term rentals is likely to continue converging more rapidly than before the pandemic.
Like the hotel market, the short-term rental market has experienced a direct booking boom in the last few years.
A 2021 study conducted by market intelligence company Transparent surveyed 133 short-term rental property managers located in 25 countries, with each respondent managing 6.5 properties on average. The results revealed that direct bookings placed with respondents’ properties skyrocketed from 2.29% in 2018 to 21.75% by 2021.
Leading the movement is Europe and the UK, with almost 30% and 40% (respectively) of respondents’ bookings coming via direct channels in 2021. However, the US is lagging behind most other regions, with the 2021 direct booking figure totalling only 9.16%.
Dtravel’s first property management system partner, Hostaway, also confirmed similar trends. With customers around the world (including a large US user base), Hostaway’s recently published booking data shows direct bookings more than doubled from 7.8% in Q4 2019 to 16.8% in Q1 2022. The value of direct bookings also increased by 300% during 2021 alone, demonstrating travelers spending considerably more on direct bookings than in earlier years.
While direct bookings are on the rise due to the numerous benefits they offer both hosts and guests, several notable challenges come with accepting direct bookings. These additional considerations, usually taken care of by OTAs and STR platforms, include:
The biggest challenge is ensuring that potential guests know that a direct booking option exists. Expedia spent US$5 billion per year on marketing prior to the pandemic, and many hosts choose to keep their property listed on an OTA/STR platform because of their unmatchable marketing power. Knowing how to optimally utilize a marketing budget and increase ranking results requires specific knowledge that goes beyond spending money on paid advertising (which can return underwhelming results if inadequately implemented).
Guests want hosts to remember them and hosts want return guests. A quality experience continues beyond the stay itself, which boils down to how effectively guest data is managed. By having this information readily accessible on a database, hosts can personalize communications and incentivize return visits based on a variety of factors, such as when a guest last visited, how long they stayed for and how much they spent. Setting up this data to be captured on a database and subsequently interpreting that data to generate leads requires dedicated technology and time.
A resource that’s an excellent starting point for hosts considering making the move to direct bookings is Boostly, which provides hosts with tips and tools to drive traffic to their own direct booking websites.
Dtravel offers hosts a solution that combines the freedom of direct bookings with the simplicity of OTAs, creating a new web3 ecosystem that empowers hosts rather than controlling them.
Since web3 is built on decentralized blockchain technology, there’s no middleman when using Dtravel. Instead, Dtravel functions as a tool that facilitates direct transactions between hosts and guests using automated payments via smart contracts.
This approach drastically reduces the barrier to entry for deriving the accompanying benefits of direct bookings, enabling hosts to be part of an interconnected, direct-like ecosystem without the challenges associated with setting up and managing a direct booking website.
As hosts around the world continue to reclaim ownership of their businesses and guests seek better experiences, Dtravel will provide the technology required to make these goals accessible to all, creating a better travel experience for everyone.