Mr. Filsinger

Revenue Management

Channel Management in 2012: The Top Five Mistakes by Hotels

By James Filsinger, Chief Executive Officer, EZYield

The global hotel market is at a tipping point. Booking windows have shrunk from weeks to days, and the increase in mobile bookings is leaving hotels behind who are trying to stick with the old ways of managing distribution channels.

It is almost impossible for any hospitality professional - using their own intuition and hard work - to accurately and consistently manage all hotel booking platforms for their property over the long term. There are simply too many channels available to make manual processes feasible. Despite the wealth of available research and data that shows how automated channel management systems can improve a hotel’s Revenue Per Available Room (RevPAR), some hoteliers still continue to use manual processes to try and manage their bookings, limiting them to yield across a small number of online sites.

In short, if hoteliers are not using the right tools and techniques to maximize bookings across all available platforms, they are risking a fate of continually playing catch-up to those hoteliers who have embraced channel management technology and the advantages that these systems bring.

To help hoteliers on the road to a successful channel management program, here are the top five mistakes that are commonly made in this field, and how to avoid them:

1. Not seeing beyond the “Big 5” OTAs

While more and more consumers are booking their hotels and holidays through online travel agencies (OTAs), there are still some hotels that are reluctant to fully embrace the benefits that OTAs can bring. And, if they do, they often limit their focus to the “Big 5” OTA players, rather than increasing the number and breadth of OTA relationships they have.

For hoteliers who still manage their online channels manually, it may simply be that they find themselves unable to control more channels. But for those who have transitioned to the next step of channel management by embracing automated systems, a critical error would be to rest on their laurels and not investigate the benefits to increasing the breadth of OTA relationships they have.

Increasing your property’s online presence by utilizing a myriad of sales channels, including smaller niche and geographically specific OTAs, can have significant benefits to the hotel bottom line and is worth investigating.

Undoubtedly, there are challenges involved in working with OTAs. The question of which platforms to promote your hotel on and the varying fees and commissions - along with the issue of rate parity - make it harder for hoteliers to understand the most effective way to approach and work with OTAs. Channel management systems are designed to deal directly with issues involving the delivery of consistent and profitable room rates, despite differing OTA commissions, by having built-in markup algorithms. These algorithms calculate each channel's commission or fee structure automatically so that revenue managers always know what their net rate is - versus the sell rate - they're pushing to OTAs.

2. Generating last-minute bookings through ‘flash sales’ or deep discounts

Discovering ways to increase a hotel’s occupancy by generating last minute bookings is an issue that is constantly on the minds of industry professionals. As a result of the rise in popularity of discount offer sites, like Groupon, and channels that work exclusively on a flash sale basis, many hoteliers are being seduced by the potential of occupancy-driving opportunities that these sites offer and are attempting to capitalize on the change in consumers’ shopping mentality.

While a boost in occupancy is always welcome in the hotel sector, relying on deep discounting and flash sales makes the occupancy-success unsustainable (not to mention the potential harm to RevPAR). Such tactics can even be dangerous, and hoteliers are actually undermining the long-term success of their hotel.

Offering deep discounts or flash sales to try and boost occupancy over the short term means that hoteliers run the risk of damaging their brand value and price integrity by resetting the brand value level for their hotel to a much lower rate. If a hotel guest books a room a number of times at a hotel using price as a primary reference point, there’s a real risk that once the discounted price is no longer offered, and the room rate goes back up, the guest no longer sees the value and may go elsewhere.

Instead of discounting themselves out of the competition, hoteliers around the world should look to clear inventory and secure last minute bookings through value-based, carefully-fenced packages and limited time offers. Potential guests can still be swayed to book with a hotel at short notice if they can see the value they are getting from the transaction, even if the value is not solely price based. Packing room rates with incentives like breakfast or dinner vouchers, a golfing day or discounts on tours can help secure last minute bookings without having to sacrifice all important room rates and setting a low reference level that doesn’t align with a hotel’s pricing strategy.

3. Failing to achieve rate continuity

One of the most fundamental mistakes that hoteliers can make when it comes to implementing channel management strategies for their property is failing to establish price continuity across all channels.

Not presenting consistent room rates across all booking channels can undermine guest trust, and in some cases, brand value. If a guest books a room in a hotel at one rate from an OTA, only to find the same room for the same date offered at a cheaper rate through another site, they are likely to come away from the transaction feeling taken advantage of. It is also likely that their opinion and trust in a hotel will be affected, along with their inclination to stay at the property again in the future.

The challenge for hoteliers in achieving room rate consistency, or rate parity, is managing the varying commissions and transaction fees associated with the various booking channels. In addition, pricing strategy must take into account any special offers, different room types or features, and seasonal rates that change monthly or daily throughout the year. Therefore, the management of sell rates and the allocation of inventory to contracted distribution channels must be monitored on a continuous basis in order to achieve rate parity.

While rate parity is of paramount importance when trying to attract bookings across a variety of different channels, and hoteliers shouldn’t look to offer exclusive discounts to one channel over another, this doesn’t mean that smart hospitality industry professionals can’t ‘sweeten the deal’ somewhat to try and attract bookings through particular channels. It doesn’t hurt to make a potential guest feel like they will get something extra if they book now on that channel. Potential sweeteners that hoteliers could consider might be spa vouchers for booking through an OTA, or a free breakfast for mobile bookings.

4. Inadvertently sending guests to your competitors

A key mistake that hoteliers make when trying to maximize their revenue online is failing to create a symbiotic relationship between your own ‘brand.com’ website and OTAs. In fact, as a hotel’s own website is their most profitable channel - incurring no third-party fees or commissions - many hoteliers actively try to drive potential customers directly to their brand.com, without consideration of the OTA value.

Hoteliers would prefer to close out availability early on an OTA, and save the last of their inventory for their own brand.com. While that is a sensible course of action in theory, by doing so, hoteliers are actually risking that potential customers merely move down to the next hotel on the OTA’s list that has available rooms. The big OTAs, in particular, invest a lot of time and money in driving loyalty and brand recognition, meaning that many potential guests are prioritizing OTA preference over hotel preference. By closing out available rooms on particular OTAs, the potential for hoteliers to push potential guests to one of their rival hotels is increased dramatically.

Clearly, there is a fine balance between moving rooms around to generate the best return, and not having enough available inventory listed on a popular OTA. The solution is to be strategic in your inventory allocation, and to support your allocations with real-time occupancy data, as well as knowledge of which channels are of most benefit to you. The advanced channel management systems of today oversee hotel inventory in real time with 2-way integration, and offer the ability to continually assess which channels are the best performing. As a result, rooms can be moved to booking platforms that deliver the best return.

5. Ignoring your own website

The other side of the coin is another common channel management mistake - not focusing enough on your own website. Research done into the ‘Billboard Effect’ by Cornell University has produced evidence that a majority of consumers end up booking on brand websites after comparison shopping with the OTAs.

It is, therefore, important that all hoteliers allocate their inventory in such a way that they have the rooms available to give customers what they’re looking for, when they attempt a direct booking. As demand increases, hoteliers should have the capability to automatically adjust the allocation of their available rooms, ensuring that the last rooms they have to sell are through the more profitable website.

It is essential that all hoteliers deliver true rate parity, not just across third-party booking sites, but also through the booking systems on their own website. If prospective guests believe they can find a better rate for the same room from an OTA, a hotel stands to lose out on the higher-margin booking.

It isn’t enough to build the website and expect potential guests to flock to the online platform and make direct bookings. Hoteliers must also ensure that they market their website properly through relevant sales and marketing channels. Competition for online search space is growing exponentially, and to ensure that a hotel turns up as one of the top search results for the city is a competitive area. Securing a top spot requires a comprehensive internet marketing strategy encompassing both search engine optimization, social media and pay advertising campaigns.

A veteran of more than 14 years in the travel industry, James Filsinger was appointed CEO of EZYield in November 2010. EZYield is the originator and industry leader of automated online distribution management solutions for the worldwide hospitality industry. More than 3,500 hotels in 92 countries utilize EZYield’s advanced channel management software to streamline the distribution of rates and inventory to 500 forward distribution channels in multiple languages and 168 currencies. Prior to joining EZYield, Mr. Filsinger served as CEO and General Manager for Moneydirect Ltd., an international joint venture between Sabre Inc. and Amadeus IT. As launch CEO, he successfully led the company through an aggressive global expansion to proactively address changing market conditions and anticipate client needs and requests for future product and service capabilities. Mr. Filsinger can be contacted at 321-765-8486 or jfilsinger@ezyield.com Extended Bio...

HotelExecutive.com retains the copyright to the articles published in the Hotel Business Review. Articles cannot be republished without prior written consent by HotelExecutive.com.