Want a more profitable hostel? Look to direct bookings

August 5th, 2018 | | Accommodation

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Ah, the good old days before the internet when being in the guidebooks was enough for any hostel. I’ve heard industry veterans wax nostalgically about juggling two phones (land lines) and a pencil, taking down reservations in the book. Those days are now gone.

Commissions continue to rise

Instead, earlier this year, Hostelworld’s Chief Revenue Officer Paul Halpenny announced a 3% commission increase for all hostels that were previously paying 12%. Halpenny’s email explained,

“We are continuing to invest in delivering hostel relevant products, services and major hostel marketing campaigns that no other booking provider has the interest or desire to deliver. All this will continue drive future booking growth, occupancy and an increase in new hostel customers.”

This rationale provided little comfort to independent hostels who continue to feel captive to the all-powerful OTAs. With Expedia and forming a near duopoly, it’s easy to understand why some hostels feel powerless. Feeling impotent and resentful is not the answer! There are strategies your hostel can employ to increase direct bookings, reducing its dependence on the OTAs.

The web is number one

Your hostel’s website is the most important tool for attracting direct bookings. The demographic most likely to book a hostel is also the one most addicted to the internet. To many young backpackers, booking over the phone or face-to-face is anathema. If you want to maximize your direct bookings, your website must create the best possible impression and provide an experience as good, if not better, than booking with an OTA. As a web designer, I could talk about this topic for hours. For specifics on optimizing your hostel’s website, read this.

Network effects

Besides the website, the most impactful method of increasing direct bookings is to join a network. Networks enable hostels to pool their limited resources and market on a larger scale. Hostels in a network also benefit from guests booking their onward travel with an in-network hostel. With 80 members and decades of experience, YHA is the most established network, however, they are not the only game in town. The nascent Hostels Australia is establishing a network of independent hostels across Australia. Charlotte from Backpackers @ 1770 has been pleased with the results of joining the Hostels Australia network. “We’ve seen Hostels Australia bring us direct bookings even in winter and I’m sure it will only get better next high season.”

In addition, hostels don’t need to join an official organization to benefit from “network effects.” Connect with a hostel in each of the towns that your guests are generally travelling to or from, and make a serious effort to refer customers to them. Working at a hostel in Port Macquarie, I called on a hostel in Coffs Harbour to make phone bookings for my current guests. I certainly didn’t earn a commission, but my hope was that when a Coffs Harbour backpacker needed a bed in Port Macquarie, the Coffs hostel would give our Port hostel a call in return.

Operate with direct bookings in mind

Look for every possible way to tweak your hostel’s operations to encourage more direct bookings. All your communications, whether phone call, email, or at the desk should encourage guests to book directly. Offer a perk to guests who book directly. A hostel in the Blue Mountains offers guests a free continental breakfast if they book directly. Ask your in-house guests if they plan on extending their stay. If you don’t, they might book an extra night via that handy little app on their phone, costing you an extra commission. Brochures still form an important role in this process as they are an offline marketing tool which can drive traffic to your website.

The choice is yours

Anyone who’s been in the game long enough would love to return to the days when the phone would bring direct bookings, but those days are gone. Today there are new strategies your hostel can employ to maximize direct bookings. The question is, which hostels will embrace them and which will allow OTAs to decide their fate?

Written by Byron Bunda

3 Responses

  1. Duke says:

    You didn’t even mention to ad 15% to your price on HostelWorld. Which means discount for booking direct.
    Offer Free WIFI
    Offer Free Drink
    Offer Free upgrades when available.
    Treat Book Direct Guests Like Gold so word gets around.

  2. Cherie Turner says:

    If Hostelworld see different pricing you will be booted.

    • Byron Bunda says:

      Hey Cherie! First, I think you can offer an incentive that doesn’t involve lower prices. I used the example of free breakfast for booking directly in this article. Second, I don’t think Hostelworld enforces the rate parity clause in Australia. I’ve seen hostels offering lower prices on their own website than Hostelworld. I know one hostel has been doing this for years without any issues. Not openly suggesting anyone do it though 🙂