Why You Shouldn’t Rely Solely on OTA Distribution
Today, we want to try and sway you not to give up on your direct revenue streams, or to sit back and let your distribution strategy be your main driver of growth.
How OTA Commissions Impact Your Profit Margins
So here’s the deal: when Viator sends you a customer, the best case scenario for you is that you get to keep 70%, maybe 80% of the revenue. If you’re lucky, you’ll get a review from that customer (but they’ll probably leave the review on Viator).
Think about what this means for Viator. Not only did they walk away with 20 to 30% commission, but more importantly, they’ve absorbed a new customer – your customer – into their ecosystem. If they get their marketing sequence right (which they often do), they’ll have a lifelong customer booking vacations on their platform for years to come.
Why OTAs Spend So Much on Customer Acquisition
This is one of the main reasons why Viator is so willing to lose a lot of money to acquire new customers.
So sure, maybe they spend $500 or more to make the first hundred dollars on a new customer. But if that person books 10 tours a year on Viator, they have a clear path towards profitability.
On the flipside, what’s that customer’s lifetime value for you? Like we said, in most cases, maybe 75% of the booking, plus a review (if you’re lucky).
Why Direct Bookings Drive Sustainable, Long-Term Growth
This is one of the main reasons why direct bookings are so essential to drive sustainable growth that recurs and grows organically. When you own the relationship from the start, you have an opportunity to nurture that relationship over time, and create a loyal promoter of your brand.
For some brands, it can actually make a lot of sense to have a higher cost of acquisition towards new direct customers than what you pay an affiliate like Viator.
It all comes back to where you’re creating loyalty. Are you creating it with your brand? Are you handing it over to a reseller where all your competitors live?
We’d rather invest a little more at the outset for longer-term wins and loyal brand ambassadors over time.
