Cost of Distribution: Out of control or a real expense

By Michael McCartan Managing Director Europe, the Middle East, and Africa, Duetto | December 02, 2012

2013 could be a turbulent year for the hotel industry should the price-fixing fiasco take a further step forward. Proving yet again, following the collapse of the financial markets in 2008 and 9/11, that while hospitality maybe an old industry dating 1000’s years, the environment of online sales is still in its infancy and terribly immature.

Online travel sales channels have taken as much as they can since the internet launch of 1995 subjecting properties to insane rates of commission during tough trading periods – that made these resellers big beasts and created a David and Goliath scenario. Big brands have at various times tried to contend by withdrawing from these sites which resulted in lost market share and reduced volume bookings. Yet it wasn’t only the hotels who suffered, these sales channels couldn’t live without their big brands either. Hotels have found their way to handle their Goliath, but is he someone they have to live with?

On both sides of the Atlantic there’s be a tough price war- between the consumer and hotel to push rates lower, and between hotels and suppliers to get the Best Available Rate, resulting in this accusation of ‘price-fixing’ within the industry. Whatever the result of the current inquiries in Europe and America times are changing, as even Expedia appears to look to move from its traditional Merchant model to Agency model.

These changes, with the constraints of rate parity removed, could be the start of hoteliers gaining back control of their prices and inventory as they focus on developing relevant products for the selected resale channels to make the best yield possible. But the challenge now is retaining occupancy while pushing that revenue up, without being caught in the crossfire of commission rates and volume booking websites.

The Distribution Challenge 2012

In a recent market research report by Ecole Hoteliere de Lasuanne, The Distribution Challenge 2012, it found that hotels in Europe and North America have had to deal with fickle demand while experiencing increasing costs to from sales distribution channels. Making the balance between rate, revenue and production incredibly fine. The survey identified a reasonably wide spectrum of challenges facing hoteliers - increased exposure to new markets, shifting demand from the group travel segment, developing new corporate contracts, pushing direct sales, managing faster availability and rates on distribution channels, and reinforcing rate parity and rate integrity.

Coming up in February 2018...

Social Media: Engagement is Key

There are currently 2.3 billion active users of social media networks and savvy hotel operators have incorporated social media into their marketing mix. There are a few Goliath channels on which one must have a presence (Facebook & Twitter) but there are also several newer upstart channels (Instagram, Snapchat &WeChat, for example) that merit consideration. With its 1.86 billion users, Facebook is a dominant platform where operators can drive brand awareness, facilitate bookings, offer incentives and collect sought-after reviews. Twitter's 284 million users generate 500 million tweets per day, and operators can use its platform for lead generation, building loyalty, and guest interaction. Instagram was originally a small photo-sharing site but it has blown up into a massive photo and video channel. The site can be used to post photos of the hotel property, as well as creating Instagram Stories - personal videos that disappear from the channel after 24 hours. In this regard, Instagram and Snapchat are now in direct competition. WeChat is a Chinese company whose aim is to be the App for Everything - instant messaging, social media, shopping and payment services - all in a single platform. In addition to these channels, blogging continues to be a popular method to establish leadership, enhance reputations, and engage with customers in a direct and personal way. The key to effective use of all social media is to find out where your customers are and then, to the fullest extent possible, engage with them on a personal level. This engagement is what creates a personal connection and sustains brand loyalty. The February Hotel Business Review will explore these issues and examine how some hotels are successfully integrating social media into their operations.