Travel suppliers are getting better at understanding the economics of their indirect distribution initiatives. They are also closely looking at guests or passengers behaviour online and testing different scenarios to improve website conversions. Today profitability is not the only factor to consider. Being in control of customer acquisition and distribution costs matter too, writes Ritesh Gupta

Distribution in the travel industry is a fairly settled discipline and travel suppliers are expected to have a fair grasp of the costs associated. If there isn’t sound understanding of how to work the channel cost and profitability, it obviously impacts the planning and the intention of being in control over distribution. Other than control, one needs to simplify rate distribution management, and work out the best channel mix to optimise yields.

Hotel or car rental companies can’t overlook the significance of third party channels. No one can afford to forfeit revenue opportunities by ignoring indirect channels. Hotel companies, including those representing independent hotels, need to work out their presence on all the channels where consumers are shopping. At the same time, they should also turn less profitable channels off when demand is high.

Being in control

Today what stands out is the suppliers’ practice of managing their channels based on demand. Also, they are much clearer about which channels they would like to associate with and base this on the customers they intend to serve.

As far as the relationship with intermediaries is concerned, suppliers are clear about their position even though there is talk about OTAs moving into or evolving a wholesale business model unit, and also creating multiple ‘closed user groups’ (a consumer grouping that is given access to an offer that non-affiliated general consumers don’t have access to).

“The end producers (hotels owners, car rental owners, airlines) have now stabilised their distribution costs,” says Pascal Moyen, director digital and brand marketing international, Hertz. “The fight is now moving higher in the chain, within the different online intermediaries and Google, which is already capturing a huge part of the distribution value.”

According to Moyen, who will be speaking at the Travel Distribution Summit, Europe in London on May 23-24, suppliers are now quite stable and, if anything, negotiating the costs down with intermediaries. “The fight is on among intermediaries and between intermediaries and Google, if Google decides to start promoting directly flights, hotels and car rentals.”

Constant improvement

Digital marketing executives, that represent suppliers, are minutely scrutinising the overall cost per acquisition, and paying media for a direct contribution in transactions in order to have a better distribution cost control.

Online direct efforts are taking new direction. Over the past few months, the likes of Wyndham Hotel Groupand Park Plaza Hotels & Resorts have re-designed their brands and individual hotel websites to position them as more user-friendly, easy to navigate and visually appealing.

At Wyndham, the group has created new designsand focused on TripAdvisor reviews. It has also introduced WyndhamHotelGroup.com, a new website which allows guests to engage with the complete family of brands while driving incremental bookings for hotel owners. Meanwhile, Park Plaza Hotels & Resorts opted for consistency by choosing the same format for all the websites of its ten properties in the UK. One of the major considerations is to serve customers exactly what they want. The team at Park Plaza deliberately reworked the search functionality of its booking funnel to give consumers a chance to select what they want from a number of options in a drop down menu rather than loading a new page.

Intense competition

Travel suppliers acknowledge that if they aren’t vigilant about their distribution costs, then they are in danger of achieving lower revenues from online channels than offline channels. 

Moyon agrees. “The issue with a number of traditional suppliers is that digital marketing is not their core business, and the impression created (over the years) indicates that the return on investment via digital is better because it is possible to be very targeted,” he says. “As a matter of fact, the ROI on generic paid search is generally very low due to the intense competition on the all the verticals.”

For a company with a relatively strong brand, Moyen says the focus should be on:

·          Growing the B2B/corporate base;

·          Developing a solid relationship with customers through loyalty programmes;

·          Maintaining the brand awareness through traditional advertising;

·          Developing natural visibility through content.

Online resellers and paid search should be used tactically to harness complementary demand, and it should be closely managed with pricing and yield.

A lot needs to be taken into consideration while controlling the cost associated with online direct efforts. It is imperative to ensure that the volume of demand that you are predicting in this particular channel is strong, and the cost per acquisition is being handled efficiently to sustain an entity’s fix costs.

To hear more insights from Pascal Moyen, director digital and brand marketing international, Hertz, join us at the Travel Distribution Summit, Europe in London on May 23-24