The Billboard Effect in Hotels

The Billboard Effect concept was introduced by a Cornell University professor as the result of a research project involving four hotels and Expedia. It is important to understand the dominance of the North American market at the time these experiments were conducted. The result of this experiment, known as the Billboard Effect, was that during three months of connecting and disconnecting these four hotels from Expedia, they observed that sales through direct channels increased by 20% when the hotels appeared listed on Expedia. I have not seen any criticism of this claim; quite the opposite. I myself cannot disagree with it, although I believe it is worth making a few qualifications, as it may lead to misinterpretations. Discovering the role of OTAs as marketing vehicles that generate brand exposure at a variable cost is like reinventing the wheel at this stage of the 21st century. There is nothing new here; after all, OTAs have always told us that one of the advantages of working with them is an increase in direct sales. This argument is occasionally used to increase intermediation costs. The qualifications I would like to highlight are as follows:

• Being listed on OTAs does not guarantee direct-channel sales in any way.
• A presence on OTAs without search-engine visibility, a strong level of guest recommendation, service excellence and competitive pricing amounts to commercial failure.
• There are currently hotels with little or no presence on OTAs that nevertheless generate more than 70% of their sales through direct channels. Naturally, such hotels have a strong online presence, excellent positioning and an outstanding brand reputation.

On the other hand, if we understand what OTAs themselves do to generate sales, we will see that they do nothing other than what any property should be doing, albeit on a larger scale. If OTAs do this to sell rooms, then their intermediation cost must be considered fair and deserved. What does not seem normal to me is complaining about OTA intermediation costs while taking no action whatsoever to increase direct-channel sales, such as SEO, SEM, SMM, etc.