In the complex relationship between hotels and Online Travel Agencies (OTAs), the “Billboard Effect” represents a fascinating phenomenon with significant implications for direct booking strategy. This concept refers to the marketing dynamic where a hotel’s listing on an OTA inadvertently acts as an advertisement, driving potential guests to the hotel’s own website to make a direct booking.
But in today’s rapidly evolving digital landscape, is the Billboard Effect still relevant? Has it diminished to the point of irrelevance, or does it remain a viable opportunity for hotels seeking to increase direct bookings?
The Origins and Evolution of the Billboard Effect
The Billboard Effect was first identified and quantified in seminal research from Cornell University. Studies in 2009, 2011, and a 2017 paper referencing earlier work showed that OTA listings could increase a hotel’s direct reservations by anywhere from 7.5% to 26%, or result in three to nine additional direct bookings for every booking received via Expedia.
A 2018/2019 study further indicated that 65% of consumers who booked directly with a hotel had visited an OTA website prior to making their purchase, providing additional evidence for the effect’s existence.
The Great Debate: Has the Billboard Effect Diminished?
More recent analyses have suggested a significant diminishment of the Billboard Effect, with some sources claiming an 80-90% reduction. This decline is attributed to OTAs implementing more sophisticated strategies to retain users within their own booking funnels, such as:
- Enhanced loyalty programs that incentivize users to complete bookings on the OTA platform
- Improved user experience designed to minimize the likelihood of leaving the site
- Features that discourage navigating away, such as price guarantees and cancellation flexibility
However, a follow-up study from Cornell University (“The Billboard Effect: Still Alive and Well”) contested claims of its demise. While the study acknowledged that the effect might have lessened (with 65% of direct bookers visiting an OTA prior, down from 75% in 2011), it concluded that the Billboard Effect remains a relevant factor in hotel distribution.
Additional research from Otamiser supports its continued existence, claiming that 65% of all direct bookings originate from guests who initially discovered the property through an OTA.
Why the Billboard Effect May Be Weaker
Several factors contribute to potential diminishment of the Billboard Effect:
- OTA Retention Tactics: OTAs have invested heavily in features and programs designed to keep users within their ecosystem once they’ve discovered a property.
- Suboptimal Direct Experiences: If a hotel’s own direct booking experience is not compelling—lacking in ease of use, value, or trust signals—guests who discover the hotel on an OTA may simply choose to book there rather than switch to an inferior direct channel.
- Mobile Booking Behavior: The rise of mobile booking may contribute to reduced channel switching, as users are less likely to open multiple tabs or windows to compare options.
- OTA Loyalty Programs: OTAs now offer their own compelling loyalty programs with cross-brand benefits that can compete with hotel-specific programs.
From Passive Benefit to Active Strategy
Regardless of the precise current quantitative strength of the Billboard Effect, it should no longer be viewed as a merely passive benefit. Hotels must adopt an active strategy to convert OTA-generated awareness into direct bookings.
This involves assuming that a guest who discovers their property on an OTA is likely to also visit the hotel’s direct website for further investigation or validation. This “moment of comparison” is a critical conversion opportunity. The hotel’s direct channel must be meticulously prepared to capture users who were initially “advertised to” by the OTA.
Strategic Implications for Hotels
To capitalize on the Billboard Effect in today’s market, hotels should implement several key strategies:
1. Optimize OTA Listings
Hotels should treat their OTA profiles as vital extensions of their own website, ensuring:
- Consistency in branding between OTA listings and direct channels
- High-quality images and comprehensive information
- Accurate details about amenities and policies
- Strategic use of the property description to highlight unique selling points
2. Strengthen Direct Booking Proposition
If guests do navigate from an OTA to the hotel’s site, there must be clear, compelling incentives to complete the booking directly:
- Best rate guarantees to establish price confidence
- Exclusive perks available only through direct booking
- Enriched content about the property and local area
- Seamless, mobile-optimized booking experience
3. Utilize Website Analytics
Hotels should diligently track referral traffic from OTAs in their website analytics to:
- Measure the extent of the Billboard Effect for their specific property
- Identify how many “lookers” convert into direct “bookers”
- Optimize the direct booking pathway based on user behavior
- Calculate the ROI of OTA participation beyond direct commissions
4. Implement Sophisticated Retargeting
For visitors who discover the hotel on an OTA but don’t immediately book directly:
- Deploy targeted retargeting advertising to bring them back to the direct site
- Create specific messaging that addresses common hesitations about booking direct
- Highlight direct booking advantages in retargeting creative
Calculating the “Net Billboard Value”
To achieve a more nuanced understanding of OTA participation ROI, hotels should endeavor to quantify the “Net Billboard Value.” This involves tracking direct booking conversion rates from OTA referrals using website analytics.
The profit generated from these “Billboarded” direct bookings should then be compared not only against the potential commission saved but also against the estimated cost of direct marketing that would have been necessary to achieve similar levels of visibility without any OTA presence.
This more holistic calculation—weighing commissions paid on actual OTA bookings against the sum of (Profit from Billboarded Direct Bookings + Avoided Marketing Costs due to OTA visibility)—provides a more sophisticated assessment of the overall value derived from the OTA relationship, moving beyond a simple commission cost analysis.
The European Travel Technology Services Association (ETTSA) estimated that the increased direct marketing expenditure required to compensate for lost OTA exposure could potentially nullify any commission savings, or even leave hotels worse off. This suggests that a balanced approach, rather than complete OTA disintermediation, may be optimal for many properties.
A Strategic Resource, Not a Silver Bullet
The Billboard Effect remains a relevant factor in hotel distribution strategy, though likely diminished from its peak impact. Rather than debating its existence, hotels should focus on maximizing its potential benefit through strategic actions.
By optimizing OTA listings, creating compelling direct booking propositions, implementing effective tracking, and calculating the true net value of OTA participation, hotels can transform the Billboard Effect from a passive hope into an active driver of direct booking growth.
In today’s complex distribution landscape, success comes not from choosing between OTAs and direct channels, but from understanding how they interact and leveraging each channel’s strengths in a cohesive, data-driven strategy.
