It’s easy to forget that hotels started selling their rooms online just 20 years ago. Over the past two decades, hoteliers have learned a lot about how to distribute their inventory in the most cost-effective way. We learned the importance of last room availability and rate parity, we learned how to negotiate to reduce commission costs, and we learned how to drive traffic to our direct sites and capture that demand through best conversion techniques.
Then COVID hit, and it looks like we’re starting from scratch. Hotels are courting any demand they can find, but they can find it, and the temptation to rely on high-cost channels is here again. It’s imperative that we build on the best practices we’ve developed over the past two decades and stick to the distribution strategies we’ve spent countless hours developing. Trust your knowledge and experience, trust your product and find the optimal distribution mix for your individual hotel.
Don’t forget it
Here’s a checklist of things we’ve learned about distribution over the past 20 years. These best practices are still relevant today, and if we stick to these principles as demand slowly returns, we won’t be relying on high-margin channels to capture it.
1. Remember the valuable lesson that discounts don’t drive demand.
Especially today, travelers base their decision whether or not to travel on many important factors, the least of which is the price of a hotel room. They want to know that they will be safe on the road and they want to know that we as hoteliers are taking the best precautions to keep them healthy. Lowering your rate a few dollars less than the neighboring hotel will not generate enough demand to make a difference.
What it will do, of course, is stimulate a race to the bottom. Once you drop your rate a few dollars, your competitors will be forced to do the same, and all of a sudden the whole market loses value.
OTAs have accelerated their discount programs and are offering deals, specials, or margin enhancements. Beware of these “opportunities”, as they are experiencing the same drops in demand as you. Fare integrity is crucial today when the entire industry is at the mercy of a travel lockdown.
2. Remember how to best execute your direct trade strategy.
Driving direct business should always be the goal, but you can’t stay static in your approach here. Adapt to demand and create digital marketing strategies and packages to speak directly to the traveler.
Make sure your revenue system, CRS, booking engine, and channel managers are all in sync and sharing rates and inventory in real time. Think beyond simple data transfers and consider artificial intelligence and automation. For example, a reservation that goes through the CRS can trigger an action in your CRM.
The basis of a good distribution strategy consists of an elegant and user-friendly website, a low-click booking engine and a pricing strategy in which the direct channel is equal to or greater than what is distributed to OTAs. Use tiered rates based on loyalty status, length of stay, or qualifying discounts. Increase added value like dynamic upgrade rates, free parking, and mortgages to increase value without lowering the rate.
If you happen to pass a guest through an OTA, remember your strategies to ensure the guest comes right back the next time. Let them know about the benefits of direct booking and enroll them in your loyalty program so you can continue to interact with them after the stay.
3. Remember to measure and track performance.
Quality tracking and reporting is essential to avoid overreliance on OTAs. Hoteliers must have a clear idea of the revenue generated by each channel, down to the type of rate on each channel per day. Understand the impact of this activity throughout the year. Understand the acquisition cost of each channel on which you distribute your fares and factor this into the contribution to the bottom line that each channel makes.
Armed with this knowledge, work hand-in-hand with your marketing team to reduce promotions and lower opaque pricing where possible. Feel free to shut down channels that aren’t producing enough to justify the extra costs.
What’s up this time
Even since the onset of COVID, hoteliers have been introduced to new techniques that will improve their distribution strategies.
For example, today there is a lot more data to help you target travelers earlier in the booking window. We can start measuring traveler intent by analyzing traveler search behavior – on Google, on your direct website, and on various OTAs. This research data tells us when travelers plan to travel, where they are heading, and how long they plan to stay. We can even capture detailed flight information that shows precisely how many travelers will be visiting your market in the future.
Cloud technology also allows hoteliers today to connect their CRM, RMS, and CRS so they can create guest profiles and implement strategies to directly target their best guests. Once you’ve determined your hotel’s value propositions and segmented your business to identify the types of travelers who book the most, you can target new but similar travelers. With a few clever marketing techniques, you can even start creating gated packages and offers with tailored rates specific to your most valuable customers.
Keep in mind that, at least for the foreseeable future, vacationers will be the bulk of your business. And these vacationers will most often drive to your hotel, which means promotions targeting weekend getaways will often attract the most business.
Unfortunately, the last 20 years of industry-wide RevPAR growth was wiped out in a matter of months. But we can always focus on what is within our control. Make sure the countless hours you’ve spent developing an optimal distribution strategy aren’t wasted by a few short-term mistakes.
SHR is a leading provider of meaningful technologies that help hotels execute their best revenue generation strategies. With a scalable suite of AI-powered solutions, SHR enables hotels around the world to use applications ranging from distribution to revenue management to guest management, including: Windsurfer CRS, Windsurfer Booking Engine, Wave RMS, Maverick CRM, in addition, Revenue Management for Hire services to brands, chains and management companies. For more information, visit www.shr.global.
SHR is the trading name of Scepter Hospitality Resources, LLC, a Delaware limited liability company.