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To OTA or Not OTA

Casinos get smarter with hotel room distribution

To OTA or Not OTA

Spending equal parts of my career in the casino and hotel spaces leaves me often comparing the two worlds.

Casinos have always led the way in loyalty marketing, and hotels are starting to learn from their best practices. More hotels are realizing they can differentiate their loyalty programs from boring points-based systems by adopting segmentation and reinvestment strategies from the gaming industry. However, casinos have been slower to innovate in disciplines like revenue management and distribution.

At Duetto, we advocate the two worlds become one, and for casinos in particular, that means embracing a revenue strategy where the hotel team is working much closer with the operations, marketing and player development departments. More gaming properties today should be considered resorts, where hotel rooms and amenities are an equal or greater driver of demand than gaming.

This means casinos have to push innovation around hotel room distribution. Fortunately, with revenue management, loyalty and distribution colliding, the time is right for aligning the teams and devising a game-changing strategy.

Should your casino hotel be listed on Expedia, Priceline and other third-party distribution channels, also known as online travel agents (OTA)?

Like many other aspects of the casino industry, the answer depends on where you’re located. Outside of major destination markets like Las Vegas, Atlantic City and Biloxi, casino demand on online travel agencies is almost nonexistent. Las Vegas is a market unto itself, and given its dependency on tourism, it makes sense for the destination-based resorts to be listed on most travel channels, including OTAs.

There are two reasons why many casinos outside of Vegas avoid third-party distribution altogether:

  • Casinos typically have been able to drive their own direct demand effectively through promotions, discounts and rewarding big players.
  • While OTAs are masters at advertising, converting and driving leisure demand, they are typically reluctant to share guest information with their suppliers, especially in advance. And nothing’s more important to a casino than knowing who’s in the house and who’s expected to arrive tonight.

I would argue that, until recently, these issues would have been adequate reasons to avoid OTAs. But historically, casinos have been a step behind in digital marketing, and currently many are managing OTAs incorrectly, often looking at them like a traditional travel agent or wholesaler.

If you look at the OTAs for what they are, develop and execute a strategy to use them correctly, and understand the costs involved, there’s definitely a time and place to work with an OTA.

Some important things to remember:

  • Use OTAs on the right terms. The so-called “bllboard effect” can be used to your advantage if you’re competing with other hotels in nearby markets. But don’t hand over the keys to your house; use them to run specific promotions for a limited time and target the right demand.
  • Getting the right people in your casino will always be more lucrative than getting the most people in your casino. You’ll have to start by treating guests who booked on an OTA just like any other cash-paying guest, but once you get them in the door is where you refer back to that casino loyalty expertise.

Casinos have made much bigger strides than their hotel industry counterparts in getting to know their customers and valuing each guest’s worth. While hotels are currently trying to better recognize frequent guests, casinos continue to improve guest spend tracking and build their overnight demand through loyalty, aiming to get the most valuable guests through the door.

And that can extend to your room distribution strategy. Consider a partnership like the one between Red Lion Hotels and Expedia, where travelers who visit and will see Red Lion’s Hello Rewards members-only rates as well as a non-member rate. Travelers who book the member rate are automatically enrolled in Hello Rewards. Similarly, casinos could publish their loyalty rates on OTAs—and make it easy to sign up for the program via the OTA.

With a revenue strategy that aligns casino and hotel teams, management can be more informed and more strategic about distribution channel mix and yielding each channel appropriately. If a booking date is approaching and your hotel is forecasted to run low occupancy, it’s OK to accept OTA demand, because you most likely would not have sold that room otherwise.

However, as the saying goes: If guests book your property once through an OTA, they’d better book direct on their return visit. Once you’ve accepted that third-party booking, it’s up to you to capture guest email addresses and give departing guests a bounce-back offer. Fortunately, casinos have plenty of tools and tricks to convert OTA bookers into loyal guests. Casinos can use upgrades and perks—like free play, dining or spa discounts—to entice membership.

A loyalty database is a major weapon for casinos. Consider that travelers who join non-gaming hotel loyalty programs rarely return to the same exact hotel. A Hilton Honors member, for example, may stay at an Embassy Suites the first time and a DoubleTree the next time. But at most casinos, if that guest returns, it will be right back to the same property, making data storage easy and paving the way for a more personalized experience.

When it comes to OTAs, casinos have for the most part been hesitant. But knowing when to list your inventory with an OTA and how to incorporate third-party demand into your loyalty strategy will help you innovate and drive profitability in the long run.

Marco Benvenuti, a principal with Duetto Consulting, has extensive experience in revenue management, business analytics and IT. In June 2008, Benvenuti founded and managed the Enterprise Strategy department at Wynn and Encore in Las Vegas. He oversaw revenue management, data analytics, direct marketing and the online channels. Prior to his tenure at Wynn Las Vegas, Benvenuti was part of the Business Strategy department at Caesars Entertainment (formerly Harrah’s Entertainment), where he built the business intelligence platform for revenue management decisions that is still in use today. Benvenuti has patented two unique inventions: the pricing engine for one-to-one dynamic pricing (sole inventor) and the enterprise value algorithm for calculating the value of every customer (co-inventor).