Tightening the screw - why hotel distribution is about direct sales

It seems hoteliers are getting savvier and are more ready than ever to go to war and take back what is their own: in the world of hotel distribution, direct sales rule!

Hoteliers are getting back in the trenches and fighting to regain a healthy balance in their business segmentation, not least because the contribution level of direct sales has an immediate impact into the profitability of a hotel.

In 2014, where consumers do their travel research (mostly online) will be the battleground for distribution.

Of course, we love the third party websites - they have the capacity to drive consumers from all ends of the world to hotels. But this year, hotel need to put themselves in midst of this battle for business.

So, with 2014 finally upon us, here are our hotel distribution and revenue management tips for boosting direct sales:

Protect your brand

It is essential to reduce dilution of branded search traffic to online travel agences. The leakage caused by advertising on your trademark (hotel name) by third party websites is turning out to be extremely costly for hotels.

Of course OTAs will not stop this practice. It is, some believe, their highest profit margin source of business. You can’t blame them for stepping in where hotels are not investing. They are in business to make money and profit.

Tips:

1. Trademark claims

File trademark protection claims on the search engines to protect your brand name from advertising. Yes, this still works in many countries (outside the US & UK). Once approved report individual ads on a weekly basis to keep your search results clean.

2. Advertise on your own brand

Run PPC campaigns on search engines advertising your own brand name. If you do this well your ads will be listed above OTA ads and you will steer consumers directly to your hotel website.

Hesitant about investing and incurring additional cost? We are currently getting to a 5% to 6% cost on these campaigns. A lot better I would say than the 15% - 25% commission travel agency websites charge, or the 25% - 35% reduction for Net rates through wholesalers. You can do the math from here ...

3. Manage the OTA relationship

Enter into a dialogue with your distributors to persuade them from advertising on your brand. Demonstrate to them that you value your partnership, but it needs to be a fair, win-win situation.

Metasearch domination

The web has moved way beyond search engines like Google being the main platform driving consumers to either hotel or travel agency websites. A new layer has gradually moved into and established itself and a key force in the vertical business column of our sector.

Indeed, the distribution landscape as we know it has changed drastically over the last year. The third party OTA websites have to increasingly deal with an intermediary themselves.

The metasearch phenomenon has truly (and finally) taken off. The platforms in this new level in the distribution chain are nothing less than price comparison websites, benchmarking which channel has the best price for a hotel for your travel dates.

The likes of Kayak, HotelsCombined, Wego, Kelkoo, Hipmunk, Momondo, and many more...

We also see other key players in travel, TripAdvisor, Trivago and Google Hotel Finder for instance, moving into this area as it is abundantly clear that the value of offering the best rate to the consumer is unbeatable.

Conversion levels are high as the traffic is high as lookers have been pre-qualified down the level of product preference and price sensitivity (budget) and the steps to turn them into bookers is significantly reduced.

Currently the OTAs dominate the metasearch space.

And if you start taking a close look at what is happening here you will find that once again they have got creative to drive business their way. They smartly manipulate the rates to break rate parity offering rebates to their clients from the commissions you have contractually agreed with them.

So even if you upload a price of $150, don’t be surprised if it sells online for $147.

But not just the online travel agencies, who you have a direct contract with, are aggressively after the traffic of these powerful price-comparison mega websites - wholesalers are offloading their inventory through other affiliate travel websites.

These contracted FIT rates at 30% to 40% of your BAR price, are often marked up at a minimum.

Many of them working with intelligent algorithms adjusting the price automatically and independently per channel (and even per date), based on what other channels are offering.

It is a constant battle for market share in which $1 of price difference can lead to tens of thousands of euros or dollars (and much more even) of revenues per year for a single hotel.

Tips:

1. Participate directly on price comparison websites feeding in the rates from your hotel website

The conversion will be high, and with CPC models it will be easy to track ROI. From our experience the average return is about 13 times the investment. Again much better than the commissions charged by distributors.

2. Counter rate manipulation and adjustments by OTA

Monitor the key meta-search websites constantly. If you are being undercut, simply raise the rate for them. The Rate Parity strategy for your hotel has taken a complete new dimension and requires an ever more thorough approach.

3. Research and scrutiny

You will need to monitor the metasearch sites for low rates cause by wholesalers offloading your inventory intended for packages to B2C travel websites, selling them on a room only basis.

If you find a lower rate, make a reservation to find out who is sourcing it. Give the distributor 24 hours to resolve the matter. Make clear if they don’t you raise their rates (or close their availability if you can’t).

It is a constant battle, but well worth it as the impact of diluting the sales of your premium rates with one of your lowest priced market tiers is just too costly.

4. Differentiation

Another approach we have found working well is to only offer bed and breakfast rates to wholesalers.

It makes it harder for your lowest room only price to be undercut on meta-search websites. And after all it makes total sense that inventory destined for leisure package sales includes breakfast.

Reputation is a key to success

It speaks for itself that your online reputation will have a huge impact on how much interest your hotel will generate. It requires a lot of attention, and focus on constant improvement of weaknesses.

It is important to understand that you should look beyond TripAdvisor. Other platforms like Google+, Yelp, Zoover, etc are also essential to your online image and presence.

Tips:

1. Oversight

Monitor review websites, preferably with a tool, to streamline up the process and make it measurable.

2. Hands-on

Manage your profile by responding to guest feedback (positive & negative). But also make sure your listing is complete and up to date, with amazing pictures plus attractive and differentiating information about your hotel.

3. Swiftness

Take quick action to improve shortcomings. Make sure this is a constant process on which all departments are following through.

4. Volume

Make sure you get more reviews than the competition. Ask your guests to share their experiences on the various platforms. Just make sure that if someone did not have a perfect stay, to filter them out.

5. Spend some money

As mentioned in the metasearch section above, participate in price advertising to drive direct sales and reduce leakage to the third party websites.

Multi-device strategy

Consumers now do their research for travel and (increasingly) book products over multiple devices. Hotels have to adapt their strategies to take this into account.

For example, as consumer on the train to and from work may be on their mobile phone looking for travel ideas. In the evening, on the sofa or in bed, consumers might use a tablet, then the day (or days) after on a desktop the booking is made.

For the few remaining sceptics out there:

17% of Global web usage on mobile
54% of social media activity is carried out on on mobile device
Around 35% of hotel web traffic comes from devices
Almost 15% of hotel reservations are carried out on mobile or tablet devices (and it continues to grow rapidly)

Tips:

1. Don’t leave market share up for grabs to others

Make sure you have websites optimized for mobile and tablet devices. You should basically have three websites: desktop, tablet, mobile.

2. Reactive and responsive

All sites need to have a central responsive design, adapting seamlessly to various screen configurations maintaining an impeccable look and feel and navigation experience.

Keep in mind mobile and tablet devices come with many different screen resolutions an operating platforms (IOS for Iphone and Ipad, Android by Google, Windows by Microsoft etc), and your website must function well on all. Quite the challenge.

3. Let them book there

Also a hotel's internet booking engine needs to be mobile and tablet-friendly. Preferable, again, there would be three versions.

BRIC and beyond

BRIC has been the hot acronym to cover the emerging markets of Brazil, Russia, India and China for a number of years. New source markets which are now getting on the hot lists are Peru, Argentina, Colombia, Indonesia, Thailand, Malaysia and Vietnam.

Tips:

1. Localisation

Provide the website and booking engine in the languages for secondary and emerging feeder markets relevant for a destination.

2. Focus

Identify distribution channels that can help you capture travelers from these markets.

Flash sales are not dead. Seriously

I have heard many industry commentators proclaim that the flash sale is either on the demise or dead entirely. I would say on the contrary. Flash sales are here to stay.

Mind you, hotels have to be very cautious not to undermine their current hotel distribution strategies.

Tips:

1. Targeted

Use flash sales only in low demand periods to offset distressed inventory.

2. Bundle

Package the offer with added value and include restrictions and fences in order not to dilute your regular room only sales.

3. Scheduling

Make sure the lead time does not overlap with the normal booking window.

4. Size isn't everything

Work with smaller flash sale websites that are more flexible and do not dictate crazy conditions. We like to come out of a business negotiation with our clothes still on, instead of only in our underpants and socks.

5. DIY

Carry out direct flash sales to continue to build your own brand.

Target niche market segments

These are easily identifiable and targetable. Think about the specific individual reasons why people are coming to your destination and build a sales strategy only for them.

OTAs are large companies and generally cannot compete on such a micro-level. So it is an effective way to drive extra direct sales.

Tips:

1. Targeting

Identify niche target markets for your destinations and hotel by looking at travel motive or demographics. Here some examples; culinary and gastronomy, incentive, active break, museums, live music, travelling with their pet, senior citizens, families, etc.

2. AdWords

Identify related keywords they might search on for your destination. (use Google Adwords as a resource)

3. Bundles

Build a package for each individual niche target market and upload it in your website booking engine.

4. Optimisation

Build optimised landing pages to attract these niche market segments and convert more direct sales.

5. CRM

Segment your mailing list based on information preferences, so you can market each package to the right audience.

6. Nu-marketing

Retargeting through Google Adwords to these specific consumers after they have visited your landing page to increase conversion.