Three Things You Should Know About Channel Management

By Eric Gourdie Strategic Revenue Director, Sceptre Hospitality Resources | October 27, 2013

With hundreds of distribution channels and many more to come, what is channel management all about and what should be your primary objectives? These are the deliberations of our revenue management and WindsurferCRS leadership teams at a recent Sceptre Hospitality Resources innovation meeting.

Together we came up with three things hoteliers should know about channel management: Know the Facts; Get Connected; and Monitor Costs.

1. Know the Facts

While the textbook definition of channel management (CM) is how companies reach and transact with customers, to hoteliers CM refers to capturing potential booking inquiries and converting them to actual bookings. To sophisticated hoteliers, CM also gives great consideration to cost of sales and channel suitability for property and financial objectives. There are various channels ranging from branded distribution sources to online travel agencies (OTAs) and similar business models such as merchant, retail opaque and even flash sale business drivers.

For the sake of this article, CM will only refer to electronic distribution channels and not other, more sales-intensive segments or distribution sources. However, it is important to note that different channels come at varying costs and trade-offs including guest retention, booking policies, cost of sale and clientele expectations. With consumers increasingly using new channels, we must create a balanced strategy to maximize RevPAR with the most cost-effective distribution plan. So who are the major players in electronic distribution? They are:

  • GDS - Global Distribution System

Any discussion of the electronic channels as a distribution channel for travel needs to start with an understanding of the existing electronic distribution infrastructure, the Global Distribution System (GDS). The airline industry created the first GDS in the 1960s as a way to keep track of flight schedules, availability and prices. Although accused of being "dinosaurs" due to their use of legacy system technology, the GDSs were actually among the first e-commerce companies in the world facilitating B2B electronic commerce as early as the mid-1970s, when Sabre (owned by American Airlines) and Apollo (United) began installing their propriety internal reservations systems in travel agencies. Prior to this, travel agents spent an inordinate amount of time manually entering reservations. The airlines realized that by automating the reservation process for travel agents, they could make the travel agents more productive and essentially turn into an extension of the airlines' sales force. It is these original, legacy GDSs that today provide the backbone to the electronic travel distribution system, including most internet travel sites. The four major GDS systems are Amadeus, Galileo, Sabre and Worldspan. In addition, there are several smaller or regional GDSs, including SITA's Sahara, Infini (Japan), Axess (Japan), Tapas (Korea), Fantasia (South Pacific), and Abacus (Asia/Pacific) that serve interests or specific regions or countries.

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The hotel industry has undertaken a long-term effort to build more responsible and socially conscious businesses. What began with small efforts to reduce waste - such as paperless checkouts and refillable soap dispensers - has evolved into an international movement toward implementing sustainable development practices. In addition to establishing themselves as good corporate citizens, adopting eco-friendly practices is sound business for hotels. According to a recent report from Deloitte, 95% of business travelers believe the hotel industry should be undertaking “green” initiatives, and Millennials are twice as likely to support brands with strong management of environmental and social issues. Given these conclusions, hotels are continuing to innovate in the areas of environmental sustainability. For example, one leading hotel chain has designed special elevators that collect kinetic energy from the moving lift and in the process, they have reduced their energy consumption by 50%  over conventional elevators. Also, they installed an advanced air conditioning system which employs a magnetic mechanical system that makes them more energy efficient. Other hotels are installing Intelligent Building Systems which monitor and control temperatures in rooms, common areas and swimming pools, as well as ventilation and cold water systems. Some hotels are installing Electric Vehicle charging stations, planting rooftop gardens, implementing stringent recycling programs, and insisting on the use of biodegradable materials. Another trend is the creation of Green Teams within a hotel's operation that are tasked to implement earth-friendly practices and manage budgets for green projects. Some hotels have even gone so far as to curtail or eliminate room service, believing that keeping the kitchen open 24/7 isn't terribly sustainable. The May issue of the Hotel Business Review will document what some hotels are doing to integrate sustainable practices into their operations and how they are benefiting from them.