How hoteliers navigate evolving distribution channels
How hoteliers navigate evolving distribution channels
13 SEPTEMBER 2018 7:25 AM

A panel at the Hotel Data Conference discussed the various distribution channels available to hoteliers and the benefits and challenges they offer.

NASHVILLE, Tennessee—As hoteliers navigate the different distribution channels available to them, their goal is to guide guests to the one that costs their companies the least.

During the “Distribution: A hotelier’s guide to channel surfing” session at last month’s Hotel Data Conference, panelists explained their approaches to managing and lowering the cost of customer acquisition.

Leticia Proctor, SVP of sales, revenue management and digital strategies at PM Hotel Group, said her company is working toward understanding booking windows better.

Often, pricing in a segment is the result of an assumption that did not materialize, so hotels are forced to dump inventory to an online travel agency, which increases the cost of guest acquisition, she said.

By understanding the booking window better, companies can avoid false positives and shift their business to lower-cost channels, Proctor said.

“You have to have a longer forward-facing lens for the booking window,” she said.

Before that first room is sold, it’s necessary to lay the base business, Proctor said. Hoteliers living only in the 30- to 45-day window will be forced into the higher-cost channels.

Nooshi Akhavan, director of revenue performance and distribution at Coast Hotels, said her company began an education program with all of its ambassadors so everyone would know the cost of a room request and the channel it comes in through. Employees know the cost of, the call center, its OTA partners, wholesalers and GDS, she said. Coast Hotels has large urban hotels as well as smaller properties in urban locations.

“Educating everyone across the brand was one of the big things we did,” she said. “Once the light bulbs went on, I think that’s when the pressure came on to successfully change some things.”

Getting everyone on the team to understand the cost of customer acquisition, even for walk-in guests, has been eye-opening, she said.

Loyalty and direct booking
Coast Hotels also has changed its focus from direct-booking promotions to its loyalty program, which has resulted in significant growth over the last 18 months, Akhavan said.

Tammy Peter, SVP of global distribution at Wyndham Hotels & Resorts, said while other brand companies have focused on direct-booking campaigns, Wyndham has been making the loyalty play.

“Those who are loyal book direct,” she said, adding that Wyndham has succeeded in adding new loyalty program members.

The focus of the industry has been on mass customization, Proctor said. The brands’ apps and loyalty programs offer free Wi-Fi, customization for streaming and casting, and free breakfast, and having all these experiences tie together has helped brands meet the overall goal of reducing OTA spending, she said.

“It’s moving in the right direction,” she said. “It will allow for a more guest-centric focus.”

On the other side, owners are bearing more of the cost for the increase in loyalty program members that has been baked into the franchise fees, Proctor said. Accommodating these experiences has doubled the cost, percentage-wise, so it’s assumed more owners will see an almost flat return, she said.

Wholesaler challenges
Another challenge with distribution is wholesalers trying to undercut pricing, which Peter said is something hoteliers can control.

Hotels should get wholesalers’ package business months in advance with longer stays, but sometimes that business comes in two days before guests’ arrival, she added.

Akhavan said her company has changed its contract for affiliates of wholesalers, taking the stance that if they are feeding inventory into the wholesalers, they are still responsible for them. However, a major OTA recently partnered with a wholesaler, she said, so hoteliers are always playing catch up.

Wholesalers that violate the contract face a financial penalty on the first offense, she said, and her company reserves the right to terminate the agreement and remove access to inventory if there is a second violation within 12 months.

Hoteliers do have leverage over inventory, and as a result, wholesalers are moving in the right direction, Proctor said.

OTAs and soft brands
Having mastered the booking process and established a breadth of products, OTAs are heading down the path toward creating soft-brand collections, Peter said.

Some OTAs have already started making moves into the soft-brand space, Akhavan said, adding in her company, owned unaffiliated properties have been approached by OTA partners with that option.

“It’s scary trying to compete with that, especially for a brand our size,” she said. “That is a challenge. We’re looking at it. We’re rebuilding our technology platform. That’s our major investment for the next 12 to 18 months, so we have a fighting chance.”

The soft-branded hotel space is a strong move for the OTAs, Proctor said. Two years ago, the brands wanted to remove inventory from OTAs, and the OTAs had no leverage, she said. The OTAs could gain leverage through creating a soft-brand collection with low barriers to entry, and they already have a captive audience that is brand-agnostic and is moving toward customized and unique experiences.

If OTAs can leverage the infrastructure of soft brands, they’ll likely focus on hotels in the upscale and luxury range, she said.

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