What role does Revenue Management play in the battle between direct sales and (the pesky) OTAs?

Since the rise of OTAs and the now structural revolution of e-distribution, the battle between Direct Sales vs. OTAs has been fueling debates, conferences and most of all Yield Meetings and sales team discussions. Am I selling too much through OTAs? How much does direct selling really cost me? How can I legally reclaim OTA guests directly?

This article aims to answer some of the legitimate questions faced by hospitality professionals, particularly regarding the role of Revenue Management in one of the industry’s major distribution challenges. It will also help clarify common confusions between e-distribution, yield, OTAs, and CRM confusions we frequently encounter in our conversations with hoteliers, campgrounds, hostels and tourist residences.

Revenue Management either prioritizes demand or releases inventory when demand is low 

The title is intentionally caricatural. Let’s move past this black-and-white vision right away. In fact, every channel, when used properly, can be profitable for the hotel; otherwise, it shouldn’t be part of the strategy. No one is really “pesky.”

In practice, Revenue Management is simply common sense. The main question for a Revenue Manager is as old as commerce itself: “Is there a crowd in front of my store?”:

• If yes, I risk running out of stock I “spill” (overflow). Assuming direct sales are the main entrance, it makes sense not to open other doors if I have to pay a commission.
• If not, demand is insufficient, so I open all doors, post promotions and hope my partners generate business. Some may even suggest increasing the commission to “pull in” customers from further away or divert them from other channels but I don’t have to fall into that trap.

In this context, OTAs are not the enemies of RM. They provide visibility, their commissions are known and they can bring clients our website might not reach, since they are translated and visible worldwide. Plus, we can manage when and how their inventory is displayed.

Pragmatism prevails. As in any partnership, you can’t expect to rely on a partner only when it suits you while simultaneously hoping for exceptional promotion and boosted traffic on their platform.

What Revenue Management actions support Direct Sales?

Tactically, as we’ve said, RM is pragmatic. Its main role is to serve profitability. Yet, strategically, when structuring the price-product offer, a Revenue Manager has the tools and levers to give direct sales a competitive advantage:

• Ensure proper segmentation of rate codes and demand segments. This is the prerequisite for any demand management. It’s useful for reporting but also essential for operational control activating openings and closures at the right level of granularity (date × hotel or date × room type).

• Create acceptable rate disparities. For example, a €10/night difference in 3- and 4-star hotels can sway customers who are hesitating between direct sales and OTAs. OTAs often have more sophisticated member programs and booking platforms. Structurally, it’s advisable to keep a reasonable pricing policy and not simply inflate the price by the amount of the commission. Tactical adjustments are possible, though. For instance, a major French hotel chain recently allowed Revenue Managers to implement tactical price increases of +5% to +15% rather than closing OTAs completely.

• Introduce disparities in booking terms. For example, by loosening conditions for Direct Bookings via Reception or Call Center, the risk of cancellations decreases, since these bookings involve a more committed purchase.

In periods of high seasonality with strong advance demand, RM can restrict openings to direct channels for about two weeks. This window is often accompanied by marketing and CRM actions. Hoteliers in the French Alps regularly use this strategy, particularly to retain British customers directly.

The importance of effective coordination between Revenue Management, Sales, Marketing and Operations

Fortunately, RM is not alone in boosting direct sales. It’s the coordination of RM, the choice of tools, Sales and Marketing that enables profitable decisions for direct channels:

• Offer add-on products exclusively for direct bookings.

• Encourage direct upgrades by using a CRM that supports this.

• Invest time in optimizing the purchase journey on your booking engine (BE).

• Ensure your front desk has at least the same prices as those available on OTAs. This means building your ecosystem around the PMS rather than the Channel Manager.

If your geographic coverage allows, implement a loyalty program or join voluntary chains that provide visibility and offer your direct sales channels competitive advantages in specific markets.

Best RM practices naturally serve direct sales

Uplift pricing is widely recognized as a “best practice” in Revenue Management. This approach allows for a controlled ramp-up in rates, helping to avoid sudden price drops or “panic prices,” which always favor channels with stronger last-minute marketing power and bigger budgets. Indeed, as the check-in date approaches, customers increasingly use OTAs as their search engine. The OTA thus becomes the meeting point between the customer’s panic buying and the property’s panic pricing.

And what about the RMS in all this?

The RMS allows you to understand demand visually. You can also prioritize using built-in filters and alerts. This makes it possible to implement anuplift yield strategy, helping you avoid overreactions and preventing you from focusing solely on competitor pricing whose revenue management practices are unknown. If your RMS, like Revbell, includes forecasting, it can also recommend opening or closing rate classes. And since you’ve potentially segmented them with your distribution strategy, the RMS fully plays its role as a decision support tool… serving direct sales. It also helps you demonstrate to other departments the reasoning behind your optimization choices, creating one of the foundations for perfect interdepartmental synergy.

In conclusion, investing in Revenue Management brings many benefits. It allows you to strategically and tactically create conditions that favor direct bookings especially during peak periods like the post-COVID recovery we are currently experiencing.

Keywords: OTA, Hospitality, Revenue Management, CRM, pricing, RMS, PMS, hotel direct bookings, hotel OTAs