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Should Casinos Bet on OTA Demand?

by Jason Q. Freed, Managing Editor |

Traditional hoteliers have been debating the costs versus the benefits of third-party hotel room distribution for nearly two decades now. Since 2001, hoteliers have relied on online travel agencies like Expedia, Booking.com and Travelocity to reach more potential travelers than they can on their own. And they’re often outspoken about the cost of using such channels.

Meanwhile, market share for the likes of Expedia and Priceline, which continue to gobble up smaller distribution companies, has soared past that of the hotel suppliers themselves. Using the Internet to sell travel has become big business.

So how about gaming resorts or casinos with attached hotels? Should your casino hotel be listed on Expedia, Priceline and other third-party distribution channels, and, if so, how much demand should you expect?

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 OTA demand is almost non-existent.

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Las Vegas is a market unto itself, and given its dependency on tourism, it makes sense for the extravagant Strip resorts to be listed on any and all travel channels. As such, companies like Caesars, Wynn and MGM have optimized their OTA distribution strategies to target only guests who would not consider them otherwise, such as international guests and those who do not belong to a gaming loyalty program.

Outside of Vegas and the few other top gaming destinations, however, very few casinos rely heavily on OTA business and most avoid third-party distribution altogether.

There are two reasons why most casino hotels don’t push their rooms via OTAs.

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One is because casinos have typically been able to effectively drive their own direct demand through promotions, discounts and rewarding big players. Casinos often run 100% occupancy, and if you don’t fill your casino hotel on any given night it’s generally considered a failure.

“For regional markets the OTAs are pretty much useless,” says Daniel Lofton, associate director of casino services at Duetto. “To use an OTA just means a lot of work on my part and then giving up some margin.”

As Lofton notes, why pay Expedia 15%-25% of your room revenue to acquire a guest you don’t know when you can discount your own rate 15% to convert someone you know enjoys playing on the casino floor?

And that leads us to reason No. 2 why casinos aren’t keen on giving inventory to OTA partners: because getting the right people in your casino is more lucrative than getting the most people in your casino. 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, who’s expected to arrive tonight, and how much those guests are worth to your bottom line.

In fact, casinos have made much bigger strides in getting to know their customers and valuing each and every guest’s worth than their hotel industry counterparts. While hotels currently work on personalization strategies to recognize frequent guests, casinos continue to improve guest-spend tracking and build their overnight demand through loyalty, therefore aiming to get the most valuable guests through the door.

Handling OTA business

Of course, there are some exceptions to the rule.

At Silver Sevens casino hotel just off the Las Vegas Strip, management recently began segmenting their business in new and different ways, taking a closer look at demand driven by third-party distribution partners. Now in a position to yield and control rates and inventory much better, Silver Sevens has experienced remarkable growth. Double-digit revenue increases are the norm, driven mostly by optimizing the property’s rates, inventory and packages through OTAs.

So if you’re in a market where third-party distribution makes sense, what are the most effective ways to work with OTAs?

Unfortunately, you’ll have to start by treating guests who booked on Expedia just like any other cash-paying guest. You’ll have no past-history data and very little information on the guest whatsoever.

Fortunately, casinos have plenty of tools and tricks to convert OTA bookers into loyal guests. This is another area where casinos are outperforming traditional non-gaming hotels.

At check-in, it’s important for the front-desk agent to recognize that the guest booked through an OTA and suggest they sign up for a loyalty membership right away. Casinos can use upgrades and perks — like free play, dining or spa discounts — to entice membership.

Once the guest information is in the system, your casino marketing team should use follow-up or direct mail promotions to ensure when that person comes back, they’re booking direct.

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.

Casinos are not always making the smartest revenue decisions. For example, we’ll often comp low-rated players just to get heads in beds. But when it comes to OTAs, casinos have for the most part been able to avoid turning over their inventory to third parties. Knowing when to list your inventory with an OTA, and how to treat third-party demand, will help you drive profitability.

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Jason Q. Freed, Managing Editor

Jason Q. Freed, Managing Editor

Managing Editor at Duetto
Jason joined Duetto as Managing Editor in June 2015 after reporting, writing and editing hotel industry news for a decade at both print and online publications. He’s passionate about content marketing and hotel technology, which leads to unique perspectives on hotel distribution and revenue management best practices.
Jason Q. Freed, Managing Editor

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Jason Q. Freed, Managing Editor

Jason joined Duetto as Managing Editor in June 2015 after reporting, writing and editing hotel industry news for a decade at both print and online publications. He’s passionate about content marketing and hotel technology, which leads to unique perspectives on hotel distribution and revenue management best practices.