Ultimate guide to OTA sponsored listings

The tough truth is that as an independent hotelier, at least some (if not a good portion) of your business is likely coming from online travel agents. Before you dismiss OTAs as ‘just another middle-man’ let’s explore a crucial tactic you can use to maximize the efficiency of these channels to ensure that you are receiving OTA stays when you want them, and not relying solely on them when you don’t.

What are online travel agents? (OTAs)

An OTA is an online platform that connects travelers with accommodations, flights, car rentals, and other travel-related services.

For independent hotels, OTAs can be powerful marketing tools. They help you gain additional visibility and bookings from a global audience that might not otherwise find you.

Popular OTAs like Booking.com, Expedia, and Agoda provide a convenient way for travelers to search, compare, and book accommodations.

For hoteliers and short-term rental property owners, these platforms act as intermediaries, showcasing your property to millions of potential guests in exchange for a commission fee (typically ranging from 15% to 30%) on each booking.

What is an OTA sponsored listing?

Sponsored hotel listings are listings that are promoted to stand out against organic listings, usually by appearing higher on the page with attractive messaging, or placed in strategic locations in a search-page where shoppers are known to convert at a higher rate.

If you’ve ever searched for accommodations on an online travel agent, you may have noticed that certain hotels that show up surprisingly high in the search results, or simply catch your eye in a search. These hotels may not have the highest review scores amongst their peers, and might not be the closest in proximity to your searched destination. These hotels are participating in a sponsored listing campaign.

How can you spot a sponsored listing? If you look closely, you’ll see that these listings have an indicator. On some OTA’s, this indicator is an “Ad” tag, or the word “Sponsored”. The example graphic below is a good example of how sponsored listings may appear in an OTA search. The hotels with the orange ‘ad’ tag are sponsored, and the hotels without any tag (shown in the light green section) are known as organic listings.

Sponsored listings command some of the best screen real-estate in an OTA search, and you likely notice that listings at the top and bottom of the page are dedicated to these ‘sponsored listings’. So why is it that sponsored listings take up certain slots on the page?

It all has to do with buyer behavior. Most guests make a booking decision from one of the options they’re presented with on the first page of their search. In fact, OTAs have done their own internal research to determine which spots on the page are most likely to convert, and dedicate those spaces to sponsored listings.

This is why you see sponsored ads at both the top and bottom of the page, book-ending organic listings. Also too, other strategic spots on the page (for example spot #7, or spot #15) might also be utilized for sponsored listings; again, it all has to do with those spots on the page that are most likely to convert.

How do I build my OTA sponsored listing?

When a hotelier determines that they want to participate in a sponsored listing campaign, the process is relatively straightforward.

Let’s walk through these steps in more detail so you can better understand exactly what does into a sponsored ad.

1. Sign up and claim your listing

Hoteliers may sign up with the OTA directly to participate in sponsored listings using a proprietary platform (such as Expedia TravelAds ). Or, a hotelier may approach a sponsored media platform such as Koddi, which centralizes ad management across multiple channels in one place.

2. Optimize the appearance and messaging of the sponsored listing

First, a hotelier will want to optimize their ad to make sure that it stands out from the competition.

Your “sponsored listing” itself can differ from your organic listing in several ways. In addition to the aforementioned ‘tag’ indicating that it is sponsored, you can also choose to feature a different image than your typical organic listing.

We’ll discuss later in the best practices section of the guide, but there are certain strategies commercial strategists use to maximize conversion rates by choosing the most optimized image. Just know that the more attractive and relevant the image, the more likely your sponsored listing will convert.

Another way in which sponsored listings stand out is through property descriptions and messaging. Certain booking platforms allow for custom messaging within the sponsored listing, allowing you to mention a time-specific event, or an amenity that sets you apart from the compset. Be sure to be succinct though! Travel ads are often capped with character limits (usually 100 - 150 words), so this description needs to be hyper-focused on only what will drive conversions for your property.

3. Set rules for when your sponsored listing is displayed

Another interesting feature of sponsored listings is that you can choose which shoppers you want to see your ad. You can achieve this by targeting only certain booking windows, and certain stay dates (weekend or weekday).

For example, you may only want your sponsored listing to show to last-minute weekend travelers, in this case you would opt to only show the sponsored listing to shoppers booking in that time frame, along with only showing the ad to shoppers shopping for weekend stays.

A Quick tip: While sponsored listings also allow you to bid on ‘dateless searches’, be wary! These shoppers are typically the most low-intent, and most hoteliers (especially those experimenting with sponsored listings for the first time) should disable the ‘dateless searches’ feature as it can lead to unnecessary spend.

4. Load a budget, set your CPC and activate!

Once you have your sponsored listing looking attractive, and targeted to only certain guests, it’s time to determine how much you are willing to spend, and in what increments.

At this point you will be expected to load funds on the platform. There is no ‘right amount’ to load, but often independent hoteliers who are trying sponsored listings for the first time will load perhaps $500, or $1000.

From here, you will set a CPC (cost-per-click) amount, sometimes known as a ‘bid’.

For example, the average cost per click in a market might be $1.00. To ensure that your hotel ranks well and shows up in lots of searches, you might set your CPC ‘bid’ at $1.25, to give you an edge vs. the competition. The higher the ‘bid’, the better the placement, and the more frequent your ad will be shown to shoppers.

A Quick tip: When you first load up funds, the platform will likely recommend a CPC bid amount. There’s a good chance that this amount will be aggressively high. Consider setting your CPC at the minimum amount (perhaps $0.50), and then assessing performance after a few weeks. You may find that performance is acceptable at the lower spend level, allowing you to maximize your budget.

Then, independent hotels should always set a budget. This will act as a back-stop preventing you from spending too much too fast. Typically this is a daily amount. For example, set a starting budget of $15 per day and after a few weeks, assess if you still have funds left over or if the budget is too small.

Finally, you can activate your sponsored listing and wait for results! When your sponsored listing is live, it is being shown to shoppers all around the world, so be patient, and give it some time; often it takes a few days before you see results.

Every time a shopper clicks on your sponsored listing, the pre-determined CPC amount is deducted from the pre-loaded balance (in this case $1.25), and any time a guest converts, that data is being collected, and you will be able to see just how many bookers you’ve had in due time.

One note about sponsored listings: It’s important to remember that not every shopper who clicks your sponsored listing will book your hotel!

The good news is: typically enough shoppers do end up booking that the return on investment is worth the expense. Let’s now explore why many hotels utilize sponsored listings.

Why utilize sponsored listings?

Visibility is paramount

Did you know that 75% of bookings on Expedia are made within the first 15 views? Or, that an estimated 80%-90% of bookings occur on the first page of listings in a Booking.com search?

Most high-intent travelers are looking to make decisions quickly, and won’t waste time searching through pages and pages to find a hotel. Most shoppers assume that those hotels on the first page are the best overall, and therefore will ultimately choose one of the first hotels they see in a search.

Independent hotels must also compete with short-term rentals

Keep in mind that as a hotelier, you’re not just competing against hotels these days, OTAs are increasingly including short-term rentals, Aparthotels, and alternative accommodations in a typical search, a phenomenon that we’ve discussed here at Lighthouse. Participating in a sponsored listing can give you a leg-up on non-hotel competitors.

Even the busiest hotels have low seasons

Even if you’re selling out and riding high in the peak season, chances are you still have times of the year where you really could use an occupancy boost. Participating in sponsored listings during the low-season can be an effective strategy for winning occupancy in these low-demand periods.

Build base occupancy as a new or rebranding hotel

If you are opening a new hotel, or perhaps taking over a hotel and working on rebuilding your hotel’s reputation - sponsored listings can be a useful tool for boosting occupancy and building momentum. Often sponsored listings will allow you to put in custom messaging in an ad, allowing you to mention that your hotel is “Newly opened”, or “Under new management”.

The key terms you must know before running a sponsored listing

Return on Ad Spend (ROAS)

ROAS (pronounced row-az) is the holy grail of KPIs when assessing a sponsored listing’s effectiveness. This metric tells you how much room revenue you’re booking vs how much you’re spending on sponsored listings. If you grossed $22,000 in room revenue and spent $1,450 on clicks, your ROAS would be a bit above 15:1.

Click through rate (CTR)

Represented as a %, your CTR tells you what amount of shoppers click on your sponsored listing when it has been shown to them in a search. There’s no hard-and-fast rule for what makes a good CTR, but click through rates of 4%- 6% might be considered standard. An abnormally low CTR signals that the sponsored listing should be revised.

Impressions

This is a count of how times many shoppers saw your ad. Any time that the sponsored listing is displayed in a search, regardless of whether or not the ad was clicked

Revenue Clicked

Revenue clicked represents how much gross room revenue was booked resulting from shoppers who clicked on the sponsored listing.

Revenue Exposed

Revenue clicked represents how much gross room revenue was booked resulting from shoppers who ultimately ended up booking your hotel, after being shown the sponsored listing. These may be shoppers who were shown your sponsored listing, but ultimately ended up booking through your organic listing.

Spend

How much you have spent on ‘clicks’, this is money that is being directly pulled from your balance when shoppers click on the sponsored listing

Average Rank

Average rank is a good indicator of bid strength. The lower the number the better. Your rank is literally your position on the page. For example, if your rank is 1.8, that means that your sponsored ad is consistently being rotated between the #1 and #2 search rank position, which is highly desirable.

Cost per Click (CPC)

This is the amount that you are ‘paying’ every time a shopper clicks on your sponsored listing, regardless of whether they book.

Budget

Your budget is how much you are willing to spend on clicks. Often, hoteliers will set a daily, weekly, or monthly budget to ensure that they aren’t spending an excessive amount on sponsored listings.

Bid strength

The OTA’s perceived ‘strength’ of your CPC bid amount. For example, a CPC bid of $2.00 when the market average is only $1.00 would be considered very strong, and you could expect to consistently receive top placement and high ‘average rank’ on the page for your ad.

Best practices for sponsored listings

Keep content fresh and relevant

You should strive to make sure that the images you choose in your sponsored listing are recent, and high quality. When possible, use relevant photos as well depending on the time of year.

Here’s the classic example revenue love to use: If you’re running a sponsored listing in the heat of summer, use a picture of your pool as the featured image to draw bookers in. If running a sponsored listing in winter, a picture of a room with an inviting fireplace might convert better than a generic exterior shot.

Run a time-sensitive ‘targeted ad’

Sometimes you need a sponsored listing to help stand out over specific times of the year. Often these periods may be correlated with an event, like a seasonal festival or a sports tournament.

Consider updating your sponsored listing to attract shoppers looking to travel for those specific occasions by using targeted ad-copy mentioning specifics.

For example, if your hotel experiences stunningly beautiful foliage in fall - consider adding copy to your ad that directly addresses this demand driver, and offers a reason why your hotel is perfect for travelers traveling for the occasion.

When to not participate in sponsored listings

Sponsored listings may not be appropriate for all hoteliers and there are a few cases in which a sponsored listing campaign may not be worth the spend.

Your ROAS is abnormally low

If you’re actively testing sponsored listings, or have used them in the past and noticed that your ROAS is abnormally low (for example lower than 5:1), then you may want to hold-off on running a sponsored listing. If this is true for you, it can be beneficial to contact your OTA market manager to dig into the ‘why’ behind the low ROAS. It could be due to a variety of factors (for example geographic designations, or insufficient search volume in your market.)

Your market is overly competitive, and CPC cost is prohibitive

Some markets are notoriously competitive, and due to the amount of hotels participating in sponsored listing campaigns, cost per click can be high (in excess of $5 for a single click!). Costs this high can sometimes make sense for hotels with extremely high-ADR, but often aren’t worth it for ordinary hotels. For example, if your hotel’s typical ADR is $100, a $5 CPC would represent an additional 5% channel cost on an OTA booking, which already has a relatively higher channel cost to begin with.

You’re already running high occupancy with lower-cost channels

Some hotels are fortunate enough to not need much OTA business. While very rare, if you find that you are already consistently selling out, and selling a majority of your rooms via direct channels, you may not need to add a sponsored listing strategy, as it will only raise customer acquisition costs and channel costs.

Frequently asked questions

What happens if I click my own sponsored listing

Be sure not to click on your own sponsored listing! You will be deducted your CPC bid amount, just like you’re any regular shopper.

Why is my sponsored listing not appearing when I search my own market?

Keep in mind that in most markets, many hotels are participating in sponsored listings. Unless your bid strength is extremely strong, your hotel won’t be presented in every search. Your sponsored listing will only show up in searches some of the time, and at various positions on the search page.

Will my hotel’s sponsored listing show to searchers using an ad-blocker?

No, your ad will not show up for bookers who are using an effective ad blocker.

Why do I hit my sponsored listing budget so quickly every morning?

Consult with your OTA market manager and ad platform to investigate why this may be. It may be that your destination is being searched for frequently by travelers in another time zone, and search you burn through your budget quickly due to international shoppers.

How much should I be spending on OTA sponsored listings?

There’s no right or wrong answer. How much you spend on sponsored listings is very market-dependent, and depends on your marketing budget. Some small independent hotels in less competitive markets may spend only $500 a month and experience strong ROAS of more than 20:1 utilizing a minimum CPC bid. On the other hand, large branded hotels in top markets may spend in excess of $5000 a month on sponsored listings alone. Always use ROAS as your guide, as it indicates whether or not you are receiving an appropriate ROI on the ad dollars you put in.

What is a good ROAS for my hotel sponsored listing?

As a former revenue manager I suggest the following rubric when it comes to assessing your ROAS:

< 5:1 - Consider stopping all sponsored listings. Schedule a call with your OTA to discuss why performance is so low, and proceed only when major changes have been implemented

5:1 - 10:1 - ROAS below 10:1 but above 5:1 should warrant a strategic deep-dive. Check images, ad copy, and pricing to ensure the ad is effective. Review on weekly revenue calls and tweak strategy until ROAS is consistently above 10:1

10:1 - 20:1 - This is strong ROAS for a sponsored listing. Continue to participate and keep your balance topped up to ensure that you don’t experience any missed booking opportunities. In periods of very high demand it may be appropriate to pause spend, but for low-seasons and shoulder-seasons keep sponsored listings active.

>20:1 -This is superb ROAS, enjoy the performance while you can! You are likely in a market where your hotel is already a preferred choice, there isn’t much competition, or your bid strength is particularly strong. Keep sponsored listings unless there is a good reason to turn them off.

Can I click on my competitors ads to deplete their balance?

Don’t do it! No matter how tempted you are - it’s not the right thing to do! Abnormal click activity can be tracked at the IP-address-level, and if you are caught participating in unethical behavior you can be permanently banned from participating in sponsored listings.

Summary

Sponsored listings are one additional tool that you can use to help boost visibility and bookings at your independent hotel. They are useful for boosting visibility, converting more OTA guests and ultimately leading to stronger occupancy performance. Keep in mind that sponsored listings are not the only way to boost OTA bookings, but can be useful when used strategically.

While not always a required strategy for independent hotels, sponsored listings can be useful during slower periods when occupancy is low, and additional bookings are needed. Independent hoteliers should utilize sponsored listings in a way that is most efficient - maximizing ROAS and bookings, while minimizing spend. Ultimately sponsored listings do contribute to overall channel costs for bookings, so the decision to participate shouldn’t be taken lightly.

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