Direct Versus Indirect Business for Hotels and the Costs Associated With Each
By Loulu Lima Principal, LL Consulting | November 09, 2014
As I write this article, I am working with a plethora of hotels and daily being asked to justify distribution. While I work for Travelzoo, (Nasdaq: TZOO) my background is revenue management based as well as hotel distribution through the Online Travel Agency side. I get it and understand where you sit. So without adding bias, I came up with the following points to help them understand where they should focus their strengths based on what they are capable of affording and managing.
First, let us define distribution as outlined for commerce in businessdictionary.com: The movement of goods and services from the source through a distribution channel, right up to the final customer, consumer, or user, and the movement of payment in the opposite direction, right up to the original producer or supplier.
Distribution in our industry is highly fragmented and costly. To bring this definition into the hotel business we have to review today's options of channels, the cost associated with each one, and where the synergy of brand alignment lives within your marketing plans and finalized budgets.
You are the direct channel; however, in today's world you cannot just live and expect to be found. There are efforts needed from various sources to bring awareness as well as convert lookers into bookers. So we have evolved from word of mouth to social media and independent reviews from various sites, mobile apps, relationships with the retail and wholesale and their billboard effects (think of how many times you need to see an ad before you recognize or buy something), SEO, SEM, Google's ever changing rules, and the list keeps growing... Wait a second here, now these are blending into indirect channels.
Consumers today are savvy. They do their homework, so now your marketing plan and budget need to factor in the cost of the guest. The tug of war begins. Let us review in an informal way each category and the potential cost.