IN-DEPTH: Paul King, Director of Revenue Optimization EMEA for Sabre Hospitality Solutions on how the industry is currently going about optimising the hotel direct to consumer channel

Published: 05 May 2011

IN-DEPTH: Paul King, Director of Revenue Optimization EMEA for Sabre Hospitality Solutions on how the industry is currently going about optimising the hotel direct to consumer channel

By Ritesh Gupta

The significance of quantifying the Hotel-OTA hidden costs for hotels keeps on surfacing from time to time. Earlier this year, an analysis stressed that many hoteliers are becoming addicted to OTAs. More recently, another analysis highlighted that listings on third-party sites increase bookings on a hotel’s own website (for each reservation at the OTA, 3 to 9 reservations at the brand’s website are directly influenced by listing at the OTA). The magnitude of the billboard effect indicates the effectiveness of OTAs in marketing to consumers and educating them on product assortment and characteristics. Additionally, the billboard effect leads to an effective decrease in the cost of OTA transactions..

So what should one make of the whole reliance on OTAs?

Paul King, director of Revenue Optimization EMEA for Sabre Hospitality Solutions, says: “I agree that if hotels truly allowed these commissions to hit the P&L then they might stop and think about the value of certain OTAs to their business and revenue. Some hotels have become very reliant on OTA’s – offering rooms on these sites is easy and doing so offers hotels some built in marketing and easier sales opportunities.”

“However, where hotels lose out with OTAs is not only in the sometimes tremendous commissions they pay, but they’re also losing the opportunity to segment and better target their customers, as well as fully merchandise their properties from all angles,” Kind told EyeforTravel’s Ritesh Gupta in an interview. “Hoteliers need to think outside the box to be able to create a mix that works for their business. OTA’s should be a part of the overall strategy, but never dictate what business the hotel takes in order to meet its targets.”

In this context, one needs to ensure that the Internet strategy is in order. Hotel websites need to be up-to-date, easy to navigate, search engine optimised and possess a user-friendly booking engine.

Equally important is to gauge what should today’s hotel website look like especially considering that today’s consumer is tweeting, posting, texting, emailing, communicating with friends via Facebook and Twitter, and commenting, often in real-time. In order to know more, Gupta spoke to King in detail. Excerpts:

What according to you are the latest trends when it comes to optimising the hotel direct to consumer channel? How do you think the industry is currently going about optimising the same?

Paul King:

The key to optimising this channel is providing good, clear content and call to action at every step of the way. Hoteliers should anticipate smart consumers who do their research before booking, so maintaining rate parity is essential. Monitor review sites such as TripAdvisor, and engage the consumers who write on it – chances are most customers/agents on the phone or visiting your website will have been there first. Further, ensuring that your website delivers simple and concise information with clear navigation through the booking process will help consumers choose your own channel as the location where they will book.

In a direct to property or call centre scenario, ensure the team are well trained in product knowledge and negotiation skills – the consumer is prepared to pay, but in today’s landscape they are just more careful about where they spend, and want maximum value for money.

As far as the industry is concerned, savvy independent hotels or small groups are often fast to adapt and keep on top of changes in direct to property optimisation, as are those who work with representation companies who drive best practice. The larger chains, bogged down by a corporate office, are slower to take on change and still have some distance to go to really get the benefit of this channel. It’s not just about brand, it’s also about content and image, which tends to be very limited and standardised.

With GDS and voice channels in perpetual decline, hoteliers do not have many options when considering non-OTA distribution channels. The only viable option to drastically reduce reliance on the OTA channel is for the industry to embrace the direct online channel. How do you assess the situation today when it comes to GDS and voice channels?

Paul King:

OTAs will always have a part to play in business; however, they should be in line with the hotel’s business plan as the other channels should as well. In terms of GDS and Voice, I do not believe that these are in decline as such, especially not to the extent that they should no longer be very seriously considered. Although online now often represents a growing percentage of the marketing mix, there is still a great deal of potential for hotels to grow the GDS and voice channels. At minimum, hoteliers should still be focusing attention on optimising both of these channels and ensuring that potential bookings are maximised.

Ideally, hotels should be proactive in growing GDS and voice business. I would recommend to any hotelier that hasn’t done so already, to immediately review these channels with some basic questions. Is your staff engaging travel agents and actively building relationships with key contacts to increase business bookings? How are you handling agent requests for industry rates or barter agreements? When was the last time your staff did a full content audit of your presence on each GDS? Does your hotel or chain look at business travel strategically and incorporate GDS marketing into your annual business plan?

As for direct – how many hotels still offer a better rate online than over the phone? I have sat in many hotel lobbies listening, and many times have heard “that’s a special online rate so you need to book online” followed by hanging up the call. To me that’s an example of an area where the voice channel is unnecessarily declining right in front of our nose. How many hotels actually train their front line staff in how to handle and effectively convert a call? Think of it this way: Hotels tend to pay their Sales team a high salary. Is a reservations agent or a front desk clerk not considered a sales person also? If you pay them to be a processor, then they will do exactly that.

In October last year, HeBS pointed out that during the height of the recession, a number of very important developments occurred that profoundly changed hotel marketing, customer engagement and inventory distribution in hospitality. The Internet established itself as the main travel planning and booking channel. In the US, 45% of all hotel reservations were to be booked online in 2010 – compare this to less than 15% via the GDS. Considering this, how do you think one should prepare direct-to-property channel strategy?

Paul King:

During the recession, I personally found that direct to hotel increased because the consumer was seeking clarification on the product before they would commit to buy. This prompted us as a hotel to work on our content on all channels. The only decline we saw via the GDS was from Negotiated rates as corporate companies cut back on travel – transient travel still maintained and increased – so we still continued to build relationships with agents.

We always recommend that hoteliers concentrate on their website at the core of their online marketing and distribution strategy.. The design, functionality, and content on the hotel site is absolutely essential in influencing a consumers’ decision on whether to book there. I also think that hoteliers underestimate the power of a good booking engine on the hotel website. These days, every website has a booking engine of some sort or another. However, consumers are now extremely web savvy and their expectations for website technology are high. A booking engine that is designed to convert shoppers into hotel guests easily can make or break this channel. Of course, the first time a consumer becomes a guest at a hotel, the hotelier has additional opportunities to engage and establish a loyalty relationship that will further ensure future direct to property bookings. The hotel marketing strategy should incorporate these engagement opportunities pre-, during, post-stay.

Whether it’s directly at the hotel or via another channel, hoteliers should always at least ensure that their rates, inventory and content are consistent.

It is being pointed out that the last two years were not banner years for the travel industry causing hotels to rely more heavily on third parties. Share of sales on hotel websites fell dramatically as they continued to divert more inventory – and sales – to OTAs. Considering that OTAs and hotel websites attract different types of customers, how should one go about pricing, maximising online presence and inventory control?

Paul King:

Before I became a revenue optimisation consultant, I was a hotelier myself. The recession gave me an opportunity to revisit my whole online strategy, removing any OTAs that did not work for me, or were too expensive. This allowed me to increase ADR, reduce costs and therefore bottom line profit, and reinvest into my own marketing.

If your hotel website is not attracting the right customer, then you need to examine how you are reaching the customer that you do want. Hoteliers should see their site as a place where they’re able to market and merchandise to the most important target groups; OTAs may fill in other gaps. Pricing should be in line with product and demand, and in parity across all channels. Hotels should plan ahead accurately and avoid the need for “distressed” pricing tactics (right rate at right time). Consumers will shop 10, 7 and 3 days out and then book across most channels – so they should always find the same price each time they look. This will install confidence in them that your pricing is fair (rate integrity). Inventory should be managed right up to the last minute – keeping your brand website open for as long as possible. If you close, you just lose a potential customer. Direct connections are the way forward with this, and if an OTA does not support it, then you need to consider whether or not that OTA is right for you.

You need to make inventory distribution easy for you and your team. Work hard to engage online reviews, and increase your ranking – this will help to drive the consumer to you.

Travel Distribution Summit Europe 2011

Sabre Hospitality Solutions will present a workshop on “How to Optimize the Hotel Direct To Consumer Channel” as part of EyeforTravel’s Travel Distribution Summit Europe 2011 in London (May 10-11).

For more information, click here

Or Contact:
Tim Gunstone
Managing Director, EyeforTravel
Phone: +44 (0) 207 375 7557 (London, UK)
Email: tim@eyefortravel.com