Chains and independent hotels have at least one thing in common: to sell hotel rooms you must be visible within online booking channels. To achieve this visibility, hotels have to meticulously curate their own direct booking channel, as well as participate in the same third party channels as their competitors. As new booking channels emerge, hoteliers have to decide whether to jump on the bandwagon or “get left behind”. This is the game of hotel distribution but with the right data insights it’s less like crossing your fingers hoping for the best and more like gaming the system.
The Major Distribution Players
It amazes me how quickly the online distribution landscape can change in a matter of months. A new channel threatens to siphon all the marketshare from other channels and you absolutely have to get your hotel listed STAT. Unfortunately, that isn’t always true and I’ll explain why in a bit.
First, let’s do a quick review of the key players and how they impact your hotel:
GDS – Ah yes, the GDS. The giver of life and travel data to OTAs and travel agents. By far your most expensive reservation but some OTAs offer direct connectivity to bypass the GDS fees (or they just pass that fee directly to you.)
OTAs – OTAs are a sore subject for a lot of hotels because it feels like they retain all of the control. And for the most part, they absolutely do. Mandatory inventory allocation, rate parity, guest anonymity, retail versus merchant agreements. If you are lucky enough to negotiate lower fees, they still take between 10-15{97f5de9008dbce478b9914384118bb17bc275beb18053f10d4c63e347dc71139}. You pay a premium for the “visibility” yet in some markets I believe that term is being used loosely.
Metasearches – Metasearch emerged from the need to better refine search for travelers. Super great in theory; like Google search for hotel data. When metasearch first became popular everyone flocked to it like it was a revenue holy grail. While engines like Trivago, Kayak, and TripAdvisor do provide a great search experience, most hotels still have to pay for primo visibility in addition to a booking fee (because they are now all owned by OTAs….)
Your hotel’s website – Direct reservations are wonderful for two reasons: 1) it’s typically the most affordable reservation for your hotel and your guest and 2) it gives you access to all sorts of data insights you won’t get from other channels.
It’s All About the Channel Mix
None of these booking channels are a singular magic bullet to revenue. A hotel’s online distribution is a strategic mix of channels and is unique to every property. This is where skill comes into play and it all boils down to calculating your CAC, or Customer Acquisition Cost, per channel. CAC can be found by dividing your total marketing expenses by customers acquired in a given time-frame (note that you wouldn’t want to track short-term testing as that would skew your metrics.) Perhaps that newly-introduced channel would be great for your hotel. With these insights you can test and refine your mix to deliver truly profitable reservations.
In our next blog we will discuss current marketing tactics that can maximize direct bookings.
