Distribution dilemmas: turning challenges into opportunities
IN-DEPTH: As new business models and distribution opportunities emerge, hotel companies must find ways to effectively distribute their inventory. Having a distribution or e-commerce executive who can confidently and accurately calculating the true channel cost and profitability definitely helps. EyeforTravel’s Ritesh Gupta reports
In the current economic environment, travel suppliers have to watch their margin more than ever, making the online distribution management landscape very competitive. But with more players than ever for hotels to choose from, having all their eggs in one basket is no longer necessary. Hotels can effectively distribute their inventory to all corners of the globe at a relatively low cost.
Prepare internally first
With continuous fragmentation within the distribution domain the most important consideration is to ensure that an organisation is prepared and this means having clear goals.
Audrey Murante, senior director, eBusiness Development, Carlson Hotels, Americas, says the most critical aspect is to have a solid distribution and online strategy that everyone within the organisation understands and supports including hotel owners, general managers and so on.
“We have more leverage as an organisation if we are striving for the same goals and objectives globally,” says Murante.
Several new concepts have emerged in the last 12 months. Start-ups today are trying to bring more transparency into the planning and booking process, by promising to improve on the whole search and discovery process. The aim is to deliver better content or information, and let consumers get closer to knowing what they are booking. Others are purely relying on mobile growth and then there are those serving up the best deals by analysing the pricing behaviour of hotels.
For Murante, the most disruptive element is simply the pace of change. But instead of being swayed by this, she says the focus should be on customers and how the channels chosen best fit their needs. In fact customers are increasingly driving the face of hotel distribution based on their needs and changes in technology. “Look at our efforts to respond to consumer reviews via social media,” she says. “As in any organisation we need to listen to our customers more and provide the services they want; not what is easy for us to provide.”
Of course, you cannot be everything to every customer but Murante is clear of the need to support channels of distribution based on the customers they serve.
The biggest challenge is trying to find the right balance between managing and controlling content versus supporting one-off user specific content. Many new business models and new channels want more content than can be held centrally today.
“Many of the OTAs are launching content projects to gather and differentiate content specifically for their channel and customers,” admits Murante.
Hotel companies are also clear about optimising revenue generation through third-party distribution channels.
Like most brands, Carlson is looking to manage its channels based on demand. “We want the opportunity to expand control of our distribution and leverage our revenue management tools for all channels and especially for third party distribution channels,” says Murante, adding that she recognises the importance of third party channels. “We also want to turn less profitable channels off when demand is high.”
Counting on pricing
It is now much easier for a hotel to enter their distribution to the outside world at a single or limited entry point.
But hotel companies still do worry about rate fluctuation; they don’t want their customers to question the true value of a hotel room. A firm like Carlson aims to be clear on one thing: that by making a direct booking, the customer can count on getting the best price for the experience they value.
When it comes to displaying real-time inventory of hotels, Matthew Harris, executive general manager - EMEA & Americas, The Wotif Group, has this advice:
• Both sides - The customer relationship system/ wholesaler/ property management etc and the OTA - need to be very prepared and should test the API extensively for all eventualities of bookings, cancellations, amendments and so on.
• It is also vital that all different methods of rate loading are supported. In other words processing and serving up rates in the correct fashion, that have been entered as best available rate or are length of stay dependent, for example.
• It’s also essential to realise that real-time inventory is not just about rates and availability flowing through, but can also mean new room types and rate levels being loaded. So it is essential that these are seamlessly integrated and added if they are extra to existing inventory OR that old rate levels and room types are seamlessly removed if being replaced with new ones, otherwise you’ll be selling what you don’t have.
“Displaying real time inventory is great for the hotel, the OTA and of course the customer assuming all is flowing through correctly. If it’s not, then it can be a headache for all concerned,” says Harris.
The judgement of hotel executives has improved considerably. In the past, says Murante, “we did not do a great job of understanding the costs associated with technology or distribution”.
Today, however, she says “most of us are now accurately calculating the true channel cost and profitability”.
Maintaining direct connection and implementing new functionality requires resources, which of course impacts the cost per channel. Changes to direct channels are also calculated into overall cost. The result is better control for hotel companies and this is, after all, what most firms are after.