Don’t Lose Sight of the Optimal Distribution Strategy
Advertorial by Rod Jimenez, Chief Executive Officer at SHR, Sceptre Hospitality Resources LLC
Visioning a Post-COVID Era in Distribution & Digital — Special Series
It's easy to forget that hotels first started selling their rooms online just 20 years ago. Over the past two decades, hoteliers have learned a great deal about how to distribute their inventory in the most cost-effective manner. We learned the importance of last-room availability and rate parity, we learned how to negotiate for lower commission costs, and we learned how to drive traffic to our direct sites and capture that demand through best-in-class conversion techniques.
Then COVID hit, and it seems like we're starting over from scratch. Hotels are courting whatever demand they can find, however they can find it, and the temptation to lean on high-cost channels is there again. It's imperative we rely on the best practices we've developed over the past two decades and stay true to the distribution strategies we've spent countless hours building. Rely on your knowledge and experience, trust in your product, and find the optimal distribution mix for your individual hotel.
It Should Not Be Forgotten
Here's a checklist of things we've learned about distribution over the past 20 years. These best practices are still relevant today, and if we stick to these principles as demand slowly returns, we won't be left relying on high-margin channels to capture it.
1. Remember the valuable lesson that discounting doesn't spur demand.
Especially today, travelers are basing their decision whether or not to travel on a lot of important factors, the least of which is the price of a hotel room. They want to know they'll be safe on the road and they want to be ensured we as hoteliers are taking the best precautions to keep them healthy. Lowering your rate a few dollars less than the neighboring hotel is not going to drive enough demand to make a difference.
What it will do, of course, is spur a race to the bottom. Once you lower your rate a few bucks, your competitors will be forced to do the same, and all of a sudden the entire market is losing value.
OTAs have accelerated their discounting programs and are pushing deals, special offers or margin enhancements. Be cautious of these "opportunities," as they are experiencing the same demand drop-offs you are. Rate integrity is crucial today when the entire industry is at the mercy of a travel lockdown.
2. Remember how to best execute your direct-business strategy.
Driving direct business should always be the goal, but you can't stay static in your approach here. Adapt to where the demand is and build digital marketing strategies and packages to speak directly to the traveler.
Ensure your revenue system, CRS, booking engine and channel managers are all in sync and sharing rates and inventory in real time. Think beyond simple data transfers and consider artificial intelligence and automation. For example, a booking that comes through the CRS may trigger an action in your CRM.
The foundation of a good distribution strategy consists of a slick and user-friendly website, a low-click booking engine, and rate strategy in which the direct channel is equal or better than what is being distributed to OTAs. Use fenced rates that are based on loyalty status, length of stay or qualified discounts. Increase value-adds like dynamic upgrade rates, free parking and property credits to increase value without lowering rate.
Should you happen to get a guest through an OTA, remember your strategies for ensuring that guest returns directly the next time around. Let them know the benefits of booking direct and get them signed up for your loyalty program so you can continue to engage with them post-stay.
3. Remember to measure and track performance.
Great tracking and reporting are crucial to avoid an over-reliance on OTAs. Hoteliers need to have a firm grasp of how much business each channel is producing, down to the rate type on each channel by day. Understand the year-round impact of that business. Understand the cost of acquisition of each channel on which you distribute your rates and factor that into the bottom-line contribution each channel is bringing.
Armed with this knowledge, work hand-in-hand with your marketing team to scale back promotions and reduce opaque rates whenever possible. Don't hesitate to close out channels that aren't producing enough to justify the added costs.
What's New this Time Around
Even since the start of COVID, hoteliers have been introduced to new techniques that will help improve their distribution strategies.
For example, today there is a much greater amount of data to help you target travelers earlier in the booking window. We can start to measure traveler intent by analyzing traveler search behavior - on Google, on your direct website and on the various OTAs. This search data tells us when travelers are considering taking a trip, where they're headed and how long they plan on staying. We can even capture detailed flight information that shows precisely how many travelers are heading to your market in the future.
Cloud technology also allows hoteliers today to connect their CRM, RMS and CRS so they can build guest profiles and implement strategies to target their best guests directly. Once you've determined your hotel's value propositions and segmented your business to identify which types of travelers are booking the most, you can target new-but-similar travelers. With some crafty marketing techniques, you can even begin building packages and fenced offers with tailored rates specific to your most valuable guests.
Keep in mind that, at least for the foreseeable future, leisure guests are going to make up the bulk of your business. And those leisure guests are more often than not going to be driving to your hotel, meaning promotions targeting weekend getaways will often draw the most business.
Unfortunately, the last 20 years of industrywide RevPAR growth have been wiped out in a matter of months. But we can still focus on what's in our control. Work to ensure the countless hours you've spent developing an optimal distribution strategy are not trashed by a few short-term mistakes.
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SHR is a leading provider of meaningful technology that helps hotels execute their best revenue generation strategies. Headquartered in Houston, Texas, with offices in Europe and Asia-Pacific, SHR has a history of innovation starting with Windsurfer® CRS, SHR serves thousands of properties around the globe with an evolving suite of AI-driven solutions, ranging from high-level distribution to intricate guest management. In addition, the company offers Revenue Management for Hire to brands, chains, and management companies. SHR brings hoteliers nimble, real-world technology, intelligently supported by tested industry experts—keeping hotels competitive. For more information, please visit www.shr.global.
SHR is the trade name for Sceptre Hospitality Resources, LLC, a Delaware Limited Liability Company.