A Proven Approach to Hotel Channel Distribution

A Proven Approach to Hotel Channel Distribution

Finding the right balance between channels when developing or evaluating your distribution strategy is crucial to optimizing your funnel for new room reservations.

 9min read

The distribution strategy of a hotel is part of an integrated plan comprising of sales, marketing, and revenue management. An optimized distribution strategy is designed to reach the optimal number of potential guests, use marketing strategies to entice commitment to booking, leverage yield management to secure the best room at the best price and, finally measures acquisition costs.

There are offline and online channels available to hotels. There is no blanket strategy or universal application rule, and the success of each channel will vary by property style, location, and market segment. Top of mind when considering distribution channels is the notorious squabble of OTA or Direct. Hotels will have to work both direct and OTA distribution, into their strategies to best optimize their revenue and occupancy. Besides, there are costs associated with both platforms. Success rests in finding the right balance.

The best distribution strategies are balanced

A Balancing Act

Managers must consider all channels when developing a strategy. Each used in the right measure is rewarding. There are many channels; OTA’s, Meta Search Engines, Wholesalers, GDS, Telephone, email, websites to name a few. To achieve a strong digital identity, develop a balanced distribution mix by utilizing several channels.

  1. The starting point, as with any strategy, is to really understand who your ideal customer is. The characteristics of this ideal guest will help you identify your preferred channels. When selecting your channels ensure that you use a variety of platforms such as, direct, OTA, Metasearch engines, Wholesales and GDS. Creating a diverse strategy optimizes your distribution and builds a strong online brand.

  2. The second step is content and messaging and this is a multi-part process. Your content must be relevant to your target market, your message must be consistent across channels to gain market confidence, and content must be personalized to resonate with the observer. All websites and channels are not equal. If you are positioning yourself as a luxury hotel with graded facilities and features listing on a website featuring budget accommodation will not prove fruitful. Similarly, the sites that you do decide to list on needs to all deliver the same message of your USP’s. It is possible to keep your message consistent while personalizing for different segments, such as corporate vs leisure vs event or online vs agent.

  3. Next is getting connected, or risk leaving money on the table. Consider the average cancellation rate, especially OTA and GDS. When cancelled rooms are not immediately made available for resale you could be losing out on bookings. On the reverse, overbooking your rooms can result in costly relocation fees, especially during high demand periods.
    Using a channel manager, with 2-way connectivity, can simplify restricting inventory and optimizing fenced rates over certain dates to increase traffic to you more preferred booking channels.

  4. The fourth step is setting your prices. Although many find this to be a daunting task, a structured approach will set you on the right track. The 3 key factors in this step is – integrity/parity, dynamic and testing. Integrity and parity are not the same thing. They are grouped here because you should have the same rate on all your channels, parity, while integrity refers to the elasticity of the market or supply and demand. It is all right to discount rates if you apply the same strategy across channels (not for the booker but the distributor’s sake). Be mindful not to damage your brand by dropping rates too much.  Dynamic pricing allows you to apply yielding strategies depending on the market demand and increase ADR even if your occupancy is not 100%. Testing is essential to determine which rates, policies and value adds are heightened per channel. Set various packages and options to entice a larger audience. Sift out what does not work and focus on the strategies that yields the highest return.

  5. Step five, measure acquisition costs. Each booking has a cost associated with it. Even direct bookings have costs, maintaining your website, SEO, e-mail marketing, social media etc. OTA’s normally charge a commission as a percentage of the booking value but can also charge advertising fees depending on your arrangement. Meta search engines mostly charge per click even if a booking did not realize. Keeping track of your acquisition costs helps you to determine your net income per booking or channel which can assist with evaluating the channel performance and identifying specific channels to dedicate more attention to.  

  6. The final step to developing a winning distribution strategy, using it to build your brand. OTA’s and Meta Search engines have the capabilities and budgets behind them to reach every corner of the world, in several languages! Furthermore, their analytics and testing are based on consumer behavior and their sites and marketing is optimized to best entice changing human behavior. Learn from them, copy them.

    Over half of OTA customers will check your website for more information about your hotel, the Billboard effect. Keep your website and especially room descriptions simple and in parity with your OTA sites. Few people have the time to search whether your Pinotage room has a bathtub or shower. Keep it simple, easy to navigate and easy to book. Use images in prominent positions, it strengthens your position. Feature value adds and favorable policies to encourage direct bookings. Optimize for all devices, mobile, tablet and desktop. One more trick to be learned and copied from OTA’s is leveraging guest feedback to stimulate confidence in your product. Make sure to pull feedback through to your website and social media pages, make sure feedback is excellent. OTA’s do not share guest contact information with you. If you are serious about retargeting past guests be sure to collect personal contact information.

Develop a distribution strategy alighned with your marketing and revenue plans.

Key Take Away

There is no magic percentage for which channel gets the biggest share of bookings. If you are unhappy that a third-party booking share is too big, evaluate your other channels and optimize in the areas where you are lacking.

  • All channels have acquisition costs, even the often-overlooked direct channels.
  • Do not rely solely on OTA’s. Apart from often high commissions, they do not share guest information, and you will have to collect this direct if you are to maintain a valuable database.
  • Use dynamic rates and packages to boost ADR even when you are not fully booked.
  • Monitor and forecast demand, closing inventory, or setting restrictions on less desirable channels when you know you will be busy.
  • Use a variety of platforms and channels so that you can engage with a larger audience.
  • Keep your message clear and aligned to your marketing plan.
  • Promoting your business in a variety of ways is key to optimizing distribution and sales at your hotel. 

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