The hospitality industry across the globe has witnessed strong growth levels in the last decade, mainly due to the explosion of the internet. This made it much easier for consumers to find and book hotels. With this change, also comes increased expectations for hotels to perform better than ever. The success depends on the profitability of rooms sold. Any room left unsold is a lost money-making opportunity. Setting the correct hotel distribution strategy can help to ensure that hotels live up to the increased expectations of performance. However, ensuring the right mix of business is a very intricate process, especially now when the industry is swarming with competition, technology has become compulsory and the traveler has endless options.
The Internet has taken the industry by a storm, where a majority of hotel bookings come via the online route. In fact, more than 148.3 million people use the Internet to make reservations for their accommodations, tours, and activities. That is more than 57% of all travel reservations each year! (Statistic Brain). You cannot overlook the role of OTAs here, given the fact that they have been successfully driving a major chunk of online hotel bookings.
As there are multitudes of online channels to market and sell hotel inventory, it is important to choose the right channels for your hotel. Basing your choice on a variety of factors like the commission OTAs charge, the volume of business that they could fetch, the location of the OTA, main feeder markets, and ability to shift business away from the larger OTA players.
An OTA directing more bookings and business to the hotel, but charging huge commissions (which typically ranges 15% to 30%) might not be a cost-effective option, as the profit margins go very low. It is important for to define a clear online hotel distribution strategy for better yield management. However, you have to keep few things in mind to get it right –
- Forecast demand – Yield management is based on the principle of supply and demand. In times of high demand, revenue managers have the flexibility to take the room prices up in an attempt to maximize revenues. Conversely, when demand for rooms is on a low, prices too take a down slope, which helps in attracting guests through specially discounted prices. Whether the demand would be high or low, if predicted well in advance, it can allow for hotels to plan strategically. Forecasting is one of the most important drivers of any Revenue Management Optimization approach or in simple words Yield Management.
- Decide the right mix of online channels – With OTAs taking the main stage, hotels of today have to be prepared to sign fat commission cheques in their names, parting away with a significant part of their profits. Therefore, it is important to select the right kind of online channels and effectively manage rates across all these distribution channels.
There are certain strategies that hoteliers can employ in order to get the right OTAs to work as partners. Go with the ones who invest in marketing, have widespread reach including international reach. Try and negotiate the conditions of the contracts and commission levels the OTAs are charging. Having the right mix of OTAs will ensure that you have a well-spread hotel distribution strategy and are not putting all your eggs in one basket.
- Direct bookings vs OTAs – Direct hotel bookings are, of course, the preferred mode of selling rooms, mostly due to lower cost and direct contact with the guests. In order to drive direct bookings, hotels need to adopt a portfolio of smart approaches, which include ensuring best rates on the hotel website, having a mobile-optimized website and booking engine, providing multiple language support, implementing full-fledged SEO strategies, etc. Define a winning strategy for your hotel to drive direct, commission-free bookings. That is the way to go!
- Track the progress – Have a look at the production by each channel per month and see if you can find any trends. Look a bit deeper into each channel and analyze things such as booking window, ADR, room types sold, arrival and departure patterns, feeder markets. Deep diving into this kind of data can give you some strong insights on your hotel distribution strategy and help you fine-tune it.
- Know the consumer behavior – As technology rules the world with full fervor, travelers worldwide are glued to the Internet for all things, including researching about their stay and finally making bookings online, all to be done in a quick and easy way. By analyzing the search patterns of the tech-savvy traveler, especially the millennial traveler, and designing special packages customized to their needs and preferences, hotels can benefit by catching their attention. A better understanding of these well aware travelers of today, knowing their purpose of travel can also help you manage your inventory in a better way. Whether they are leisure travelers or business ones, both entail a different strategy. Leisure travelers are often price-sensitive and hotel management, therefore, works to create different value-add packages for them, adding free amenities like breakfast, free local pick-ups etc. Moreover, business travelers require high connectivity (through mobile phones and other devices) to be in constant touch with their colleagues and clients. By ensuring speedy Wi-Fi services, and offering other special amenities and loyalty programs, hotels can win hearts of these strata of travelers and make them return to your hotel each time.
The increasing complexity of electronic distribution poses a challenge, however, by following the steps above hoteliers can successfully spread strategies across different channels and have a better hotel distribution strategy. Good luck!