Throughout the decade-plus that hoteliers have been battling online travel agencies over control of their room inventory, distribution costs have simply continued to increase.
Should hoteliers catch a slight break on renegotiating a commission structure with one OTA, they’re hit elsewhere with additional costs to be properly displayed on Google and TripAdvisor, for example. Updating content on a hotel’s own website, as well as keeping up with responsive and mobile technology, have hoteliers reaching deep in their pockets to ensure their hotel has the optimal online presence.3 Ways to Improve Your Hotel Distribution Strategy Right Now #hotel #revenuestrategy #tips Click To Tweet
During a recent webinar titled “Maximize Your Hotel’s Profits with the Right Distribution Strategy,” only 7% of hotel attendees reported they were happy with their current distribution plan. Others reported issues such as not receiving enough direct bookings, being too reliant on OTAs and keeping up with rising acquisition costs.
Fortunately, experts from Reknown, ReviewPro, Duetto and Pure Salt Luxury Hotels — all panelists on the webinar — highlighted immediate and specific steps hoteliers can take to right the ship.
1. Start with blocking and tackling
First, ensure you’re tracking the right metrics and setting the right goals for your property, advised Daniel Craig, founder of consulting firm Reknown. The tried and true metrics — Average Daily Rate, occupancy and Revenue Per Available Room — are still crucial because they are shared and reported, allowing hotels to compare their performance against their market and competitive sets.
More recently, however, hotels have begun closely monitoring net RevPAR, or the revenue brought in on each room after deducting the cost of selling and maintaining that room.
See: The Most Important Revenue Management Metrics
“By taking cost into account you get a clearer idea of what you’re making on each room,” Craig said. “The challenge is that it’s not easy to track distribution costs and you can’t easily compare your costs versus your competitors.”
Another quick fix is opening up your pricing capabilities by introducing more flexibility into your rates and rate structures. For example, Dan Yacker, VP of Global Strategic Alliances at Duetto, said hotels should not change all rate segments in lockstep, but rather yield each segment individually. Open Pricing allows hotels to charge more for king rooms when they’re in high demand and more for doubles when they’re in high demand, Yacker said.
All the panelists stressed the importance of involving the entire staff in your distribution strategy. By letting everyone know what you’re doing and why you’re doing it, you ensure that departments will align and employees will work together toward the same goals.
2. Optimize channel mix and drive direct bookings
OTAs simply can’t be ignored, panelists agreed. They are often times your first impression on a traveler and can even help drive direct bookings. Craig quoted Expedia CEO Dara Khosrowshahi, saying: “OTAs are a cheap source for new customers. But return guests are the most profitable if they come back to you. If they come back to me again and again, then shame on you.”
However, direct bookings should drive the majority of your business. To ensure you’re capturing the right amount through your own channels, offer the same rates on your own site and include perks like free parking, free Wi-Fi or late checkout for guests who book direct, Craig said. Experiment with best-rate guarantees and offer incentives targeted toward your CRM database, social followers and loyalty club members.
It’s important that hotels monitor and contain direct distribution costs as well, Craig said, including things like franchise fees, booking engine costs, and website hosting and maintenance.
Ricardo Samaan, revenue manager at Pure Salt Luxury Hotels in Mallorca, Spain, highlighted his company’s recent ability to reduce dependence on tour operators and move that business into more manageable channels.
Over a two-year period, these efforts resulted in a 20% increase in direct business, Samaan said.
Overall, panelists agreed hotels should try to diversify their booking across direct and indirect channels without being over reliant on any one of them.
3. Make data-driven decisions
All of these decisions should of course be driven by data. Key insights can be gained from analyzing market demand and competitive performance, as well as predicting future demand and traveler behavior.
“Pricing by gut feel is certainly not an answer,” Yacker said. “Just blindly following up and down movement by competitors could get you in revenue trouble.”
Yacker suggested hotels look at their guests in finer detail, starting by segmenting them in as many buckets as they can handle. This way you can “tune your revenue strategy to take advantage of specified segments,” he said. “Each segment can have very different demand from the other.”
Having the right data on the net value of each booking and the value of each guest will help you avoid dropping rate at the last minute to fill the hotel, Yacker said. Last-minute discounting leads to guests expecting prices to drop the later they wait.
“Don’t succumb to that pressure,” Yacker said, “and if you are following a well thought-out Revenue Strategy you’re not going to find yourself in that position in the first place.”
Samaan agreed, suggesting hotels adjust their rate structure with flexibility to rise or reduce rates in any demand scenario. Gather data from your tech partners, he said, and fill in the gaps with Google Analytics.
“It’s important to keep this data so you can make the best decisions in the future,” he said.
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Tags: Average Daily Rate, commission structure, Dan Yacker, Daniel Craig, Dara Khosrowshahi, direct bookings, Duetto, expedia, Google, hotel discount strategies, hotel distribution, hotel pricing, Hotel Revenue Management, hotel revenue strategy, hotel sales and marketing, hotel technology, hotel yielding, Pure Salt Luxury Hotels, Reknown, ReviewPro, RevPAR, Ricardo Samaan, RMS, trip advisor