Travel Analytics Blog
Hotel Room Distribution: Have You Got The Full Picture?
Posted by Matthew Goulden on Wednesday, May 4, 2016
Already an intricate web of online and offline sales channels, the hotel room distribution landscape has only become more complex as the fragile boundaries between many of these channels have started to blur. Until quite recently, concepts such as “business” and “leisure” could still be counted upon to bring some order – and differentiated pricing, availability and product strategies – to this chaos. Even this last crutch for the desperate channel and distribution manager is starting to collapse under continued onslaught of the online world, however.
Meta-search engines such as Kayak and Trivago now provide levels of price transparency that would have been unimaginable a few years ago, clearly raising the question of whether any meaningful regional price differentiation is still possible. Mobile sales and same-day reservations platforms such as Hotel Tonight, while offering new opportunities for distressed inventory and converting the offline “walk in” scenario to a more (centrally) controlled online transaction, have significantly raised the bar in terms of what it takes to run an effective “dynamic pricing and inventory strategy”.
At the same time, the “leisurefication” of corporate is slowly eroding the walled garden of GDS and corporate travel, with corporate travelers increasingly seeking the same choice, brands and tools that they encounter in their private hotel shopping experience. Not surprisingly, Global Distribution Systems (GDS) have been actively integrating the traditional “B2B leisure” and distressed hotel inventory from bedbank and wholesalers such as Transhotel and GTA (e.g. Travelport Rooms & More, Amadeus Multisource) and serving it to a premium corporate travel audience that could not have been further from the originally intended target audience.
While performance might still be “good enough” for many a traditional hotel chain working with log files and booking report, for anyone seeking a better method it is becoming quite impossible to successfully navigate this landscape without detailed, actionable real-time shopping (i.e. search) information.
It is essential to get under the skin of the changing dynamics of your “traditional” channels and differentiate partners within the same channel; obtaining a much more detailed and updated understanding of what each channel can deliver to your hotel and which individual players within these channels deliver the absolute best return. This dynamic landscape is starting to accentuate the leaders from the laggards and it has never been truer that not all channels, or partners in the same channel, are equal.
What is striking is how bad many hotel chains are at calculating the true longer-term cost/benefit of the channels they use, incorporating:
- Efficient use of their system, beyond simply look to book (e.g. Euros per search etc.)
- The trade-off between volume, margin and specific segment/niche of demand etc.
To ensure every room is sold for the best possible price using the best sales channel requires a detailed overview of the performance of all channels against key indicators. Such insight across the diverse channels is the best way to achieve three important Hotelier objectives:
1. Combat the rising costs associated with distribution
2. Guide sales and marketing efforts to drive occupancy
3. Help improve profitability
All this requires a detailed and bird’s eye view of channel performance across different players and different channels that focused on detailed search and shopping behavior, rather than the traditional lenses of commission levels, bookings and market silos (e.g. “GDS”, “wholesaler”, “OTA”). In other words, it requires a robust search-based business intelligence capability.
In a world where the channel type or booking patterns fails to identify the shopper, driving conversions increasingly depends on being able to leverage detailed search intelligence to create more relevant offers. More than that, while transparency is driving price commoditisation and any possibilities of “static” price differentiation, the same technology is opening the doors for highly effective contextual price differentiation and revenue management (i.e. based on window of opportunity, rather than static market segmentations). The catch? It requires you to have access, and be able to respond effectively to, detailed real time search information.
An effective distribution strategy that is integrated with revenue management can help forge beneficial links between crucial hotel operating departments and positively influence the pricing strategy. Instead of relying on more static rates uploaded daily or less, more dynamic pricing and room allocations can be applied in response to channel performance insight from search and booking traffic. Today’s leading wholesalers expect real-time access to inventories, usually via XML application interfaces. This gives hotel companies that are fully connected to these third party channels the ability manage yield rates. This evolution towards real-time environment in distribution also enables them to offer late availability not only from their own reservation systems but also to their wholesale partners.
So having set out the arguments of why search and booking intelligence can offer a clearer perspective of hotel room distribution costs, how can this be achieved? Well most hotel groups are already sitting on much of the XML data that can help build the picture, but till now have failed to give it the attention it deserves or appreciated the value it holds. XML is the language widely used within the travel industry to exchange data such as room availability and rates. The ability to tap into and analyse the wealth of information that is embedded in this flow of transactions up and down the network and to be able to do this in real time opens up possibilities and benchmarking opportunities between the different channels. Essentially, by monitoring and analyzing the rich content embedded in all these messages hotel distribution managers can manage their channel SLAs, while marketing managers can monitor their programs, with clear insights into:
- Consumer demand by capturing exactly what is searched
- Consumer satisfaction (in terms of the options and prices offered)
- Whether there are gaps between what is being searched for and what is available
- Consumer experience in terms of speed of response
- How many lookers are turned into bookers and at what ratio
- Any transmission errors and how they are rectified
- Any degradation or outage in web services that impacts user experience
- The commercial performance of each channel
Getting the right distribution mix and then monitoring the performance of third party channels is crucial to getting the best returns on a hotel’s inventory. Harnessing this intelligence from search and booking data is today’s competitive weapon to not only understand channels better, but ultimately also the buying habits and preferences of the consumers.