Distribution Challenges: Perspective From Hotels

By Michael McCartan Managing Director Europe, the Middle East, and Africa, Duetto | August 18, 2013

We live in the age of information. The internet explosion has touched upon nearly all areas of human life, and infiltrated nearly every country and culture worldwide. With information of any sort being available through a simple Google search, emergence of new technologies, empowered customers and superior connectivity has fundamentally altered the way of doing business. More so for the hospitality industry!

In the last 18 years since the launch of Expedia, the exponential growth of online booking has been un-nerving for the industry. From a mere 4% in 2000, online sales have come a long way to contribute over 32% of revenue of the lodging industry (Forrester Research). With the continuous shift to online business coupled with changed consumer behavior pattern, hotels are finding it difficult to cope up with the challenge not restricted to competition with the neighborhood properties anymore, but far beyond that – to capture and retain the attention of the consumers who would spend an average of 20 to 29 days researching their trip before hitting the ‘Book’ button. For hotels, online sales channels have become a potential threat, trying to disturb the equilibrium they used to enjoy before the advent of internet.

The e-commerce landscape has leaped ahead in the last decade. From traditional OTAs to discounted sites to same-day booking channels to mobile – online distribution for the hotel industry has expanded beyond the capabilities of most hotels, leaving them struggling with complexities of finding the optimal distribution mix.

In a market research study with revenue managers conducted in association with Ecole Hoteliere de Lausanne (EHL), Switzerland we have seen that while discussions in the press and at hospitality conferences have moved onto new topic areas of social media, flash sales and mobile, revenue managers are still fumbling with the basics. The economic downturn has taken a huge toll on the industry’s confidence level, with price replacing value as the key strategy for filling beds. Hotels have been forced to expand their sales and distribution networks and thereby surrendered their marketing into the hands of third parties. This has resulted in complex revenue strategies and pricing structures that are preventing hotels to achieve their full product value.

We interviewed those responsible for managing distribution channels of both independent properties and large chain hotels in France, Germany, Spain, UK and USA to understand the key challenges faced in distribution and sales management. While in parts the interviewees acknowledged that technology has delivered capabilities to meet the new demands in the sales landscape, many revenue managers continue to struggle with and comprehend some of the essential strategies to maximize bookings and revenue.

Instead of developing strategies to drive maximum value from new channels of social media, mobile, GroupOn, eBay, Travelzoo etc, hotels are trying to gain control of rate parity. The retail sites are continuously monitoring rate, and any breach has a serious impact on the hotel’s ranking on the OTA site along with a hefty penalty. For hotels, the key challenge is to lower costs of distribution while raising rates and occupancy with rate parity.

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.