Why the CRS Is Fast Becoming the Central Hub of Hotel Distribution Strategy
On the heels of the pandemic, the global hotel industry has experienced remarkable growth. In 2022, online revenue increased by 49% in Europe and by 7% in Asia over 2019 levels, and the numbers continue to trend upward in 2023, according to D-EDGE's 2023 Hotel Online Distribution Trends Report.
However, the pace of growth is expected to slow down this year, and OTA bookings have been increasing at a faster pace than direct bookings, cutting into hotel profitability. And with the majority of online bookings coming from just two sources, Booking.com and website direct, hotels are missing out on revenue opportunities on direct channels, regional and niche OTAs, wholesalers, and the GDS.
Under any market conditions, increasing market share and profitability requires a diverse distribution strategy powered by efficient, agile technology. In today's complex distribution landscape, more hotel companies are transitioning to a CRS-centric strategy to leverage the advantages of integration, consolidation, and automation.
The PMS: Great for Hotel Operations, Not Designed for Distribution
One of the most important decisions in revenue management strategy is determining which software will be the hotel's lead, or master, distribution system, acting as the central repository and source of truth for room rates and inventory. Traditionally, the PMS has filled this role, but in recent years its limitations have become increasingly apparent.
When the PMS was conceived in the 1980s, there was no internet. Distribution was a relatively simple process, and the PMS sufficed. Since then, online and offline distribution channels have proliferated, and the PMS has been unable to keep pace.
Don't get us wrong, we love our PMS partners, but the PMS was built to manage operations, not distribution. As a distribution platform, it can be slow and inefficient, constrained by limited features and connectivity issues. This is especially true for operators of multi-property hotel groups that use legacy PMS platforms, although there has been some progress with newer, cloud-based platforms.
Meanwhile, the CRS (central reservations system) was purpose-built for managing distribution, providing hotels with greater flexibility, reach, connectivity, and control over reservations and revenue across the distribution network.
Perhaps it's no surprise, then, that 89 percent of large hotel chains have shifted to a CRS-centric strategy, according to h2c's 2022 Global Hospitality Distribution Study. Meanwhile, however, 33 percent of medium-sized hotel chains and 58 percent of small hotel chains still use the PMS as the lead distribution system. While the study focused on hotel groups, we can assume that the number is even higher for independent hotels.
The CRS: The Heart of Hotel Distribution
Often perceived as standalone software, the CRS is in fact a connected network of distribution applications that includes the following components:
- Central inventory management - for managing rates, inventory, and content
- Internet booking engine (IBE) - for direct bookings via the hotel website
- Channel manager (CM) - for bookings via OTAs and wholesalers
- Global distribution system (GDS) - for bookings via travel agencies, TMC (Travel Management Companies, or Corporations Travel Managers.
- Central reservation office (CRO) - for bookings via the hotel call centre or reception desk
- Payment gateway - for processing online payments and checking the validity of payment methods
- Business intelligence (BI) - for aggregating raw information from multiple sources and tracking, analysing, and interpreting important data
The CRS is also connected to the PMS to synchronise bookings and inventory. Depending on the hotel's setup, these components may be provided by one vendor as part of an integrated platform or by several vendors and connected by application programming interface (API). Additional third-party solutions, such as a revenue management system (RMS) and customer relationship management (CRM) software, may also be connected by API.
6 Key Benefits of a CRS-Centric Distribution Strategy
Hotel companies that have yet to transition to a CRS-centric strategy are missing out on numerous advantages, including:
1. Centralisation of Hotel Pricing and Inventory Management
The raison d'être of the CRS is to centralise and automate the process of setting and driving the hotel's rate strategy across booking channels. This helps ensure that rates and availability are always consistent and up to date throughout the distribution network.
The hub of the CRS is the central inventory management function, where hoteliers manage rate plans, inventory, room descriptions, system configuration, reporting, and related tasks. Here, revenue managers can view business on the books, analyse performance by market segment, monitor rate parity, and open and close booking channels.
For hotel management companies, these functions can be centrally managed for properties throughout the portfolio, allowing corporate and regional revenue managers to monitor hotel performance and ensure consistency across the brand. With most of the PMS-centric models available today on the market, on the other hand, revenue managers must log into each property's PMS to view information and make changes.
For ARTOTEL Group, a collection of more than 100 hotels based in Indonesia, transitioning to a centralised distribution ecosystem is a key element of growth strategy.
Our goal is to create a seamless and personalised guest journey that exceeds expectations and sets us apart from the competition. By embracing digital transformation, we will establish ourselves as a leader in the industry and position ourselves for continued growth and success. Eduard R. Pangkerego, Chief Operating Officer, ARTOTEL Group
2. Consolidation and Ease of Use
When distribution technology is dispersed among multiple vendors, managing relationships and getting timely support can be challenging for hoteliers. With a CRS-centric strategy, distribution technology can be consolidated under one primary supplier.
Under this model, rather than deal with separate vendors for the channel manager, booking engine, payment gateway, and other solutions, hotels work with one primary vendor. The revenue team collaborates on one integrated platform that is simple to learn, easy to operate, and highly automated, with one customer support centre to go to for assistance.
With cloud-based CRS technology, hardware and software are housed offsite, allowing staff to access the system remotely from anywhere, whether on property, at corporate or regional office, or from a home office.
A consolidated CRS platform reduces technology costs, training needs, and down-time. Revenue managers have more time to focus on analysing data and finding more ways to reduce distribution costs and generate more revenue.
3. Flexibility in Pricing and Inventory Controls
When managing rates and inventory from the CRS, hotels have more flexibility to set pricing and controls by distribution channel. They can prioritise channels that offer lower commissions and fees and create special promotions and packages that are only available on the hotel website. This helps drive direct bookings and reduces distribution costs.
Hotels can sell inventory by class of room rather than by room type, allowing the flexibility of committing only to a class of room, such as standard or deluxe or king or double, rather than a specific room type. This makes it easier to manage inventory.
Since moving to an integrated CRS platform to ensure a seamless booking process, Ekosistem Hotels & Villas in Bali has seen direct bookings increase by 300 percent year over year, now representing about 35 percent of total rooms business.
4. Seamless Connectivity Across Distribution Channels and Software
By pursuing a multichannel distribution strategy, hotels gain exposure to a broad range of travellers in regional and global markets, attracting more bookings, more revenue, and higher ADR. Critical to the smooth, timely flow of reservations, rates, and availability across channels and software is real-time connectivity.
According to the h2C study, hotel chains distribute inventory on 18 third-party distribution channels on average, including 26 channels for large chains, 23 for medium chains, and 12 for small chains. However, an average of almost 20 percent of these channels are not connected to the CRS.
When a distribution channel isn't connected to the CRS, rates and inventory must be updated manually via an extranet, a time-consuming and error-prone process. If channels are connected but there are lags or inaccuracies in syncing, it can lead to discrepancies in availability, rates, and inventory (ARI), resulting in duplicate reservations, overbookings, and missed sales opportunities.
While some PMSs offer limited connectivity to distribution channels, a portal must be developed and configured for each property. The CRS, on the other hand, is built for easy integration of channels and software. Connecting is even easier when the CRS features an open API. Advanced platforms like D-EDGE CRS provide rich connectivity features, including more direct connections and increased reach via local and global sales channels. Once connectivity is set up for a channel or application, it can easily be rolled out to all properties within the group, saving hours of setup time.
5. A Seamless, Secure Payment Process
Payment processing has always been a major pain point for hotels. As more booking shifts to online channels and new payment methods emerge, the playing field is getting even more complicated.
A CRS with an integrated payment gateway can simplify the payment process for hotels and guests alike, removing the friction from reservations made through the hotel website and OTAs via the channel manager. This includes automatically verifying credit cards, taking pre-payments, and accepting a broader range of payment types, all within a secure payment environment.
6. Guest-centric Sales & Distribution
More hotels are investing in Customer Relationship Management (CRM) or, better still, Customer Data Management (CDM) systems to effectively manage guest profiles, loyalty, and communications. According to the h2c study, 54 percent of hotel chains now have a CRM and 45 percent operate a loyalty program.
With so many touch points along the customer journey, guest data is often incomplete, inaccurate, or dispersed across multiple profiles. A robust CDM connected to the CRS features tools to automatically sort, cleanse, structure, and organise data under one consolidated profile. Hotels can personalise pre-stay, in-stay, and post-stay communications and have the confidence that the right messages are getting to the right guests.
Effective CDM practices not only boost profitability through direct bookings, upsells, and sales of ancillary services, they also boost guest satisfaction, loyalty, and online reputation. In the future, enhanced connectivity with the POS will provide valuable insights into guest spending on property, enabling further customisation of offers and pricing.
What to Look for in a Central Reservations System (CRS)
Given the many benefits, it's inevitable that more hotel companies will shift to a CRS-centric strategy in the coming months and years. However, not all CRSs are the same. When exploring the options, hoteliers should prioritise the following features.
- An innovative solutions provider that specialises in hospitality distribution technology and supports a CRS-centric strategy.
- A PMS-agnostic CRS platform that is user-friendly, secure, and fully connected, with an open API for easy third-party integrations.
- A channel manager that connects with hundreds of distribution channels from a single extranet, including global and regional OTAs, wholesalers, and bed banks.
- Direct connectivity to all major GDS providers: Sabre, Amadeus, Galileo, and Worldspan, providing access to travel agents and corporate buyers worldwide.
- A customisable website booking engine that is fully integrated with the hotel website and offers visitors a seamless, multilingual booking experience from any device.
- A secure, fully integrated payment gateway that accommodates a range of payment methods, authorises more transactions, and simplifies the reservations process.
- A provider that also specialises in digital marketing, metasearch, and direct distribution, helping hotels drive more direct bookings and reduce distribution costs.
- A global company with a highly responsive, multilingual support team of hospitality specialists available to assist hoteliers when and where they need help.
Laying the Foundation for Future Growth
As the hotel distribution landscape becomes increasingly competitive and complex, hotels need solutions that maximise efficiency and sales through improved connectivity, consolidation, and automation.
Transitioning to a CRS-centric strategy requires careful planning and won't happen overnight. Now is the time to put the strategies and technology into place to maintain a more balanced, diverse, and profitable distribution strategy that positions properties for growth in the years to come.
ARE YOU READY TO SWITCH TO A CRS-CENTRIC STRATEGY? - Our experts are here to help you identify the best option for your hotel(s). Enter your contact info and they will get back to you with a tailor-made solution. Visit www.d-edge.com.
About D-EDGE Hospitality Solutions
Marketing & Communications Director, Asia Pacific
D-EDGE Hospitality Solutions
T: +65 97904185
E: [email protected]