One of the most globally talked about topics is the changing hotel distribution landscape and the impact on hotels. This article looks at current trends in distribution, considering the past 20 years developments. The article focuses specifically on the following key areas: customer expectations, high street to online, threat or opportunity?
Customer expectation: direct
Since the dawn of the industry, direct bookings have been the preferred distribution channel. The two main reasons being cost and the direct relationship with the guest. There are no intermediaries, no associated costs, no competition for ownership of the guest relationship and the opportunity to create a direct relationship with the guest encouraging repeat business.
The direct booking channel has always existed, is the most profitable and is potentially the easiest to deliver and fulfil. But how many hoteliers are maximizing the opportunities of this channel?
The late ’90s saw the emergence of the direct hotel booking engine, allowing potential customers to “surf the net” to find the best deal, direct with the property. Customers started hitting dozens of hotel, airline and car hire websites directly attempting to find the best deal and “self-package” their travel experience. It was laborious, but they had choice and control over their decision of where to stay and how much to spend, and they appeared to love it!
Retail travel agents have existed for well over 20 years, well before the wide spread corporate adoption of the internet. Twenty years ago, the distribution landscape was dominated by a small number of global distribution systems (GDS), including Sabre, Amadeus, World Span and Utell. Most GDSs originated from car hire or airline companies proprietary booking systems being extended to allow travel agents to book hotels, car hire and air.
In addition to traditional travel agencies, there were a myriad of intermediaries including wholesalers, airline travel booking agents, bank and credit card membership travel agents, tour operators and affiliate marketing agencies, which all provided booking services for customer niches, and all charging commissions with some as high as 25 per cent and often more than one intermediary in a single booking. Many of these still exist and provide valuable sources of business to specific property types, such as resorts catering to charter, inbound or all-inclusive markets.
There was a brief period between the era of high-street travel agents, GDS and the online travel agents. This was a period of direct online bookings to hotels with low or no commissions.
Travel agents have not disappeared, there have been and continue to be valuable segments that prefer the personal contact of a retail travel agent. It also appears that with the rise of experiential travel through younger generations, that they prefer the personal contact and recommendation of a travel agent. They enjoy the relationship with a professional who can provide first-hand experience on particularly aspects of travel. This is apparent in complicated itineraries and the sensational or memorable aspects of the travel itinerary.
Online travel agents
The surfacing of the online travel agent (OTA) brought all this research together into a single site, providing the same choice, the same value but without the laborious, time consuming search.
There is often negative discussion about OTAs being an “issue” from an annoyance, to being illegal. At eHotelier we believe OTAs are not only here to stay, but will remain an integral part of the future distribution as they appeal to the needs of the customer.
Customers have always desired convenience, comparison and ultimately value for money. These expectations have supported intermediaries in all forms in the past, and no doubt will continue in the future whether retail, or online.
Just as there are varieties of travel agents there are different OTAs and the benefits these bring to accommodation providers. The key is identifying which intermediaries will deliver the commercial strategy with respect to target markets, geographic source and cost of distribution.
“Hotel marketers are facing a new challenge: how to recover guests that start considering Airbnb-type accommodation options. While most hotels are focusing on the OTA vs. direct booking battle, few are taking action on getting a reservation at all versus losing a guest to Airbnb.” – Alonso Franco, CEO of Arrivedo
The key is not whether OTA’s should exist or not, but turning the lens back to the hotelier and asking how to best leverage the intermediaries to maximize the commercial benefit to the business.
Book anything and everything
The two main current trends in distribution are:
- The increasing breadth of distribution services available.
- The management of the distribution channels.
The three core booking components of online travel distribution have been air, hotel and car hire. The current trend is to enable the booking of other hotel services online, restaurants, spa, golf, ski, water and other activities, function space and now, believe it or not, the deck chair…
“The outdated model of showing up to the pool and hoping to find pool chairs is a model that no longer suits guest’s expectations. We created an automated, simple, convenient app that will eliminate the stress of having to wake up early on your vacation, and will allow guests to reserve their pool chairs in advance. We believe this new platform will reinvent the pool experience and give our resort partners the means to improve the guest experience while generating new found revenue.” – Bliss Baker, CEO and co-founder of SaveMyChairs
There are a raft of new technology vendors emerging in the market place providing customers the ability to book services online, either integrated into the existing booking process, or providing the hotelier the ability to offer direct booking of these services on their own site.
“iVvy are enabling organisations to extend their reach to a global audience of event planners and organisers. Our goal is to bring together the MICE industry in one seamless environment.” – Lauren Hall, CEO and founder of iVvy
It is questionable as to whether this trend is created by customer demand, hotelier requirement or because the technology can be created. Based on history, the question appears not to be whether to implement these services, but when and through which vendor and how to leverage commercial benefit from these services. The trend through our discussions with vendors at HITEC appears to suggest that the commercial benefits will be derived from maximizing revenue through inventory and rate control, and through promotion of these services, particularly between booking and arrival. There are several new technologies facilitating this upsell, through complex processes based on the propensity of the guest to purchase, leveraging the customer relationship management system; i.e. targeting an individual guest, with a specific offer, at a specific price, based on their market characteristics and behaviors.
“It’s never been more important for hotels to ensure they offer customers first rate, online direct booking channels and not just for sleeping rooms but also for restaurants and meetings. In the long term this will allow them to create a more balanced customer mix and ultimately a healthier and more profitable future.” – Matthew Stubbs, CEO and founder of Bookingtek
The second distribution trend we see from our discussions at HITEC is the development of complex business intelligence and channel management tools.
OTAs are generally willing to open their vast data resources and provide extremely valuable insights into the booking patterns and trends of the market, the region and the property. Access to this information is extremely valuable to understand how to cost effectively target the potential guests with the highest likelihood to book.
The opportunity for the hotelier is extensive. Combining the intelligence from the OTA on market patterns, together with in-house analysis from the CRM, the hotelier can fully understand the past and current market mix, as well as seeing the potential opportunities for growth or new markets.
“The overarching trends we are seeing in distribution are data-driven; the mobile guest, the enterprise service bus, plug and play integrations, and further consolidation of companies and their technologies.” – Dave Samia, CTO of SHR
Perhaps the opportunity an OTA provides the hotelier is not only the ability to understand areas of opportunity, but to enable testing and fulfilment of these opportunities cost effectively?
The cost of online acquisition appears to be one of the points of contention for hoteliers, understandably. Particularly when it appears through a Google search that an OTA is competing for the same customer as the hotel is directly. OTAs have sizable budgets to ensure their presence is forefront of a customer’s search – something hotels can’t compete with.
Once the customer is inside the OTA, there is an opportunity to become prominently displayed at an additional cost. Through understanding who to market to, and investing in effective digital marketing within the OTA may deliver cost effective leverage booking conversions.
Who owns the customer?
In our opinion, the customer has choice and therefore owns their own decision, so no one “owns” the customer.
A property owns their relationship with the customer, as an intermediary owns their relationship with the same customer.
Where the customer chooses to stay is based on their personal requirements and only influenced by their relationships. These relationships include the hotel, the intermediaries, the hotel brand, marketing affiliations, friends, family and other customer sentiments.
What can you do to strengthen your relationship with the customer?
The ideal time to do this is during the stay when they are resident in “your home” sleeping in “your bed” dining in “your restaurant” and relaxing in “your facilities”.
The first step is identifying your customer, on and offline and building your relationship with them at all contact points, both natural and created.
“The hotel sector is all about experience and the guest’s experience starts the moment they click on to your website. As digitalisation advances and day-to-day online interactions become increasingly personalised, accommodation providers need to step up their game to engage their guests and compete effectively online. It’s essential to give potential guests a strong first impression of your hotel and to do that, you need to understand and play to their emotions.” Chris Rose, Head of Marketing, Avvio
As discussed in the CRM article, the trend is now to capture all customer information in one central database from all systems and contact points. Together, digital and offline information such as that generated through personal contact points with staff, creates a greater understanding of guest requirements. Leveraging this information serves to strengthen the relationship through recognition at all customer touch points, including processes aimed at targeting repeat business.
“The hotels we see having the most success in driving direct bookings are making full use of guest data. They’re using links to tag campaigns to the website, the booking engine and the PMS. They employ retargeting search ads, reaching back out to visitors who didn’t book the first time. And they’re taking input from guests, asking questions on arrival like “What brings you to our hotel?”
“All these insights allow hoteliers to create personas that represent the audiences they want to engage. Once you understand why your guests chose your brand, you can create advertising campaigns and content targeted to those personas, and start to connect with those guests on a more personal level. It’s an ongoing process, but this data-driven approach builds a foundation for ongoing testing and refinement. And this provides what every hotelier must have to win guest loyalty: a true understanding of your guests’ needs and how to reach them, no matter what their reasons for traveling.” – Paul Cote, Sr. Director of Digital Experience, Sabre Hospitality Solutions.
This task may be a call 15-minute post check-in to advise of the specials in the restaurant, thereby providing an added touch point as well as an opportunity for the guest to communicate additional requirements. Pre-and post-stay communications are becoming increasingly common, providing special offers for upgrades or repeat incentives.
There are a growing number of solutions in the market-place providing CRM solutions, channel management guest communications and delivery systems, all assisting the hotelier to strengthen their relationship with the guest and maximizing the potential for repeat business.
The most influential of all factors continues to be the satisfaction of guest expectations through product and service. If the guest’s expectations are exceeded, they are more likely to return. Either way they can disseminate their sentiment widely online, thereby influencing potential guests’ decisions.
Thank you to the following companies who contributed to the creation of this TechTrend article:
Fuel Travel Marketing http://www.fueltravel.com/
OTA Insight http://otainsight.com
OTA Insight http://otainsight.com
Save My Chairs http://savemychairs.com
Travel Tripper http://traveltripper.com
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