Direct versus indirect: understanding booking windows can help you to yield better

Hotels have to improvise their channel mix with evolving market conditions. In this multichannel environment, an understanding of booking windows and knowing when and where to target your customer is absolutely crucial.

Understanding the booking window today is significant considering that the number of channels have exploded and all have vastly different characteristics. Indeed, wholesale, corporate, direct, online travel agents and MICE (meetings, incentives, conferences, and exhibitions) all act differently and if you want to optimise your revenue. It is essential to be aware of lead times, volumes, average revenue and total revenue generated from all of these.

EyeforTravel’s Ritesh Gupta talks to Chetan Patel, VP, Strategic Marketing & E-Commerce, Onyx Hospitality Group about the evolution of booking windows, and how to work out packages or offers that take all these factors into account.

EFT: Over the last few years, how have booking windows evolved?

CP: Before a significant proportion of our business started coming from the Internet, most business was driven mainly by wholesale (including groups, FIT and series) and corporates. Depending on the source markets the lead times were quite predictable. In the initial years of Internet growth, it was considered as a last-minute channel and most hotels used it to offload leftover inventory. This continued for a while until the power of direct and power of yielding were realised.

Now the scenario is that the wholesale channel has retreated but is still largely predictable with the lead-time of several weeks to months but online channels are significantly varied. The online lead times are last minute to several weeks with more and more piling on closer to the check in dates.

EFT: How has this impacted your distribution strategy?

CP: The challenges have been substantial. Although, some channels like direct and OTA could bring in more revenue, the hotels generally do not feel confident waiting for this business. They want to be comfortable with the base business, meaning sometimes the rooms are taken up by the lower yielding channels at the expense of higher yielding ones. The mismatch continues to this day but the situation is getting better with hotels having more confidence on the better yielding channels.

EFT: Okay, so how can one decide on packages or offers for 30 to 50-plus days out?

CP: Packages and offers are derived from a combination of channels and markets. Higher lead-time bookings tend to come from long-haul markets with flights involved. They also tend to have a higher average length of stay, meaning if your offers are designed to appeal to this segment and are sufficiently differentiated, you will gain business.

Another example is aggressive early bird offers. If you give higher discounts or better value added for those booking 45 days out, it also works. This needs to be properly balanced though. Those booking with higher lead times are less rate sensitive but more value conscious. An added benefit is that such guests also tend to spend more on other services at the property.

EFT: What metrics do you use to evaluate booking windows associated with various channels?

CP: In my view there are three metrics to keep an eye on here:

·          Lead times,

·          Source markets, and

·          Average value per booking

Looking at these, you can clearly see the difference in booking patterns of guests booking through Agoda and Asiarooms versus those booking through brand sites like Booking and Expedia.

The same approach should work for offline channels that are still important for most hotels.

EFT: Can you talk a more bit about the online direct channel in relation to the metrics you have mentioned above?

CP: Because we choose to compete with OTAs on all fronts, our brand channel is a bit of everything. Having said that, we do have a higher proportion of business from more mature markets like Australia, the US, UK and Singapore. Numbers are high from India and the Middle East too, but as a proportion of overall business coming from these markets, OTAs dominate.

About a third of business comes in with lead times of 30 days plus which is unlike most OTAs, but an even higher proportion comes with less than a week’s notice. The proportion of business from OTAs with a lead time of less than a week is still higher though. Some OTAs dominant in Europe and the US are a bit different with higher lead times.

As far as average value per bookings go nothing beats the brand site. Some OTAs like Booking do drive higher value bookings from some markets but when you take out the margin or commission paid out, direct is still at the top of the list (even accounting for online marketing and other expenses).

EFT: So the direct channel yields the highest? 

CP: Yes, direct is again high on the list here as we have opportunity to target diverse markets with varying lead times. We can customise our offers, packages and add-ons and they can drive additional revenue. As most other channels will take room and possibly breakfast, the direct channel has a potential to sell much more. What is also interesting is that most OTAs are able to sell the lead in room categories while brand sites account for bulk of higher category rooms booked at our hotels.

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