Cost of Distribution: Out of control or a real expense
By Michael McCartan Managing Director Europe, the Middle East, and Africa, Duetto | December 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.