The age of Distribution Channel Marketing
Whether we like it or not, selling a hotel room today requires taking note of the OTAs and meta-search players. Although many hoteliers would prefer to reach their guests without intermediaries, the reality is that, last year, about 72% of U.S. online hotel shoppers used an OTA website to shop for their leisure trip. And smartphone shoppers are three times more likely to shop for hotels via OTAs than via hotel websites1.
So instead of dodging these players in what can become a zero-sum game, we advocate leveraging OTAs, meta search sites, and every logical intermediary to enhance the gains of hoteliers. Applying Distribution Channel Marketing (DCM) would be one way of achieving that leverage. DCM is about deploying marketing tactics related to improving a hotel's ranking on indirect channels. In this approach, hoteliers use the intermediaries' structure to leverage their digital presence. In other words, intermediaries are not an obstacle between the hotelier and her guest, but an additional point of sales. Rather than facing the OTAs as enemies, we suggest a more collaborative approach of the relationship between hoteliers, OTAs and meta search sites.
This shift in the mind-set about distribution applies to any hotelier. Independent players lack the scale and network in their distribution competences and intermediaries can compensate for that shortage. Large corporations would leverage their distribution capability through such tactics.
The rules for the DCM age
The core of our proposition about DCM is that OTAs are an important part of the distribution landscape and they offer marketing opportunities. With that in mind, there are key aspects about OTAs that hoteliers can leverage. From these aspects we derive four rules for the DCM age:
Rule # 1: Use OTA's search site to show case the hotel
Hotel shoppers may not always book on OTAs, but they like the wide range of hotels available on them. In this case, OTAs and meta-search sites provide the hotel shoppers the opportunity to research and compare hotels on one website. As a result, on this one point of sale, traffic is often higher than on the website of large corporations. For hoteliers this means ONE point of sale to showcase their differences and standout against competition. For independent and small players, this means access to scale distribution. Providing eye-catching photos and inspiring descriptions is one way to effectively show case a hotel on OTA's search sites. Other components include managing the reviews on the OTA's website, and the relationship with the OTAs in general.
Rule # 2: Focus on higher rankings on OTA's search site
Simply being listed on OTAs will not cut it anymore. BlueMagnetinteractive reports that 95% of Expedia bookings occur on the first page, and 47% of those are in the top six spots2. And a 10% increase of a Tripadvisor ranking increases the overall bookings by 4.6% in Europe and 5.7% in Asia-Pacific hotels3. In the age of DCM, hoteliers will focus on the determinants of ranking on the OTAs' search site to generate visits and leverage their sales.
Rule # 3: Optimize room allocation to indirect channels
In the age of DCM, hoteliers always allocate rooms to OTAs. They select the indirect channels that best align with their target market. They work with different, yet selected, OTAs to improve the visibility of their hotel(s). They optimize the number of rooms available on each selected OTA, based on their probability to rank on the first pages; the alignment with their target market; the room rates they can display; and the rivalry level between OTAs and meta-search sites.
Rule # 4: Maintain control with filter functions
In addition to ensuring hotel descriptions are accurate on indirect channels, hoteliers can use different search filters to leverage these distribution channels. According to a personal communication with a major OTA, around 50% of its users apply filter functions on that site. These travellers want to simplify their selection process by identifying the most important services and facilities for them. Aligning the hotel's proposition (i.e. amenities, services, facilities, and aspects of the hotel's offer) with the filter functions is an appropriate allocation of time and effort. Through these filter functions, hoteliers can differentiate and gain back their control over their inventories.
In sum, we suggest putting aside direct rivalry and embracing the change that these OTAs bring to the industry to finally leverage the possibilities that they offer. These players have modified the rules of the game. As the digital revolution unfolds, more will continue to disrupt the distribution game. So instead of seeing these players as enemies, let's seize the opportunities that they bring to the distribution landscape.
- Phocuswright (2015). Supplier or OTA? How U.S. online travellers decide where to shop and book. Download available at http://www.phocuswright.com/Free-Travel-Research/How-US-Online-Travelers-Decide-Where-To-Shop-And-Book#.VioJs37hAdU
- Bluemagnetinteractive (2012). Drive Brand-Level Hotel Bookings With Expedia TravelAds. Download available from http://www.bluemagnetinteractive.com/blog/2012/02/06/drive-brand-level-hotel-bookings-with-expedia-travelads/
- Kevin May (2015). Data shows connection between reviews, ratings and rankings on TripAdvisor. http://www.tnooz.com/article/data-shows-connection-between-reviews-ratings-and-rankings-on-tripadvisor/
Ecole Hoteliere de Lausanne