Online distributions: Critical issues and opportunities for Hoteliers.
By Mahendra S. Rathore
Saturday, 27th May 2006
It is a well-known fact that Internet advertising is the most cost –effective and the most accessible form of advertising in today's complex and competitive environment. And a vital tool to promote products and services that hotels offer.

In such an era of stiff competition and ever-increasing heavy tracking on the web engines, the hotel property owners need new tools & renewed strategies to position their properties for low cost, high returns online distribution and marketing strategies.

Recent studies show that online travelers are increasingly using suppliers for their lodging needs. Internet generated business has grown from the number three source to number one. This makes a 65 % increase in Internet business to date in 2005 alone.  69 % of online travel bookings are now directly made on the companies web sites.

On the other hands third party distributors and travel agents are increasingly facing challenges in terms of shrinking returns on transaction commissions. Travel suppliers are gaining more control of their products. Achieving substantial revenue market share growth in the most trying times. Hoteliers need to leverage the Internet's growing success in the travel sector by forging distribution relationship with all major third party Internet travel providers, boosting RevPAR for theirs hotels. They also need to identify the consumer behaviors, new trends, and role of third party distributors and invent strategic and tactical for distribution systems and redefine relationship with online intermediaries. Owners and operator should also consider new e-commerce alternatives of integrating Internet strategy with the brand awareness and driving more traffic to their websites.

Building external distribution channels that could be leveraged to increase online revenues and lower distribution costs.

Marriott International receives over 2 billions booking through their online booking channel i.e. Marriott. Com. similarly Hilton group after promising the lowest price guaranteed for operating, managed and franchise hotels minimum guaranteed rates on their web site has increased their online booking share almost by 85 % of all the booking made online for their brands of hotels.

These trends definitely suggest that hotelier are in drivers seat and are in absolute control of their room's inventories and distribution channels. Hilton has focused on mobile, internet and web-enabled services, call center reinvented and are focusing more on web content and preference online and off line choices. The group has rapidly drove high booking through the web site distribution channels.

Gradual demise of traditional distribution model:

The continuing trends of online booking through the hotels websites does pose problems for the retailers and wholesalers who will continue to receive less margins and commissions.  Their trends would have adverse impact on the travel agents commission also. Thus far travel agents have been receiving 10 % commission but the commissions would also be significantly less in future. Although travel agents would continue to book groups & transient but their share will decline and so will their commissions. It is predicted that by year 2010 travel agents commissions would shrink to be only 5 % instead of 10%

Merchant Models:

Merchant whole sellers discounts correlation is two to three times higher on the BAR. This would also shrink the whole sellers discount compared to the current levels. However, the whole sellers/merchants would have to devise new ways & means of keeping their business. They would thus be focusing more on making their discounts on packages consisting of hotel rooms, airlines tickets and rental cars. In the coming years there will be more focus on dynamic packaging that would benefit not only the merchants but also the suppliers.

The merchants /whole sellers have also closely focused the web content and connectivity and flexibility of the customers to browse through the site, research and book. Sites such as Hotwire, trip.com, travelocity and expedia now offer better connectivity, credit card payments and sites are shopper friendly, easy to navigate, book the reservations and offer niche services in packages. More companies are focusing on experience, family vacations, business incentives, comfort and convenience in purchasing travel needs online. Intercontinental hotels have focused on Internet as mainstream online agency; offer both offline and online presence and customer relationship. Their success has been mainly driven by the content, merchandising, and their Customer Relationship management initiatives and suppliers relationship.

Proliferation of online booking media:

Internet revolution is continuing to grow. Hotels and air is best packaging that help drive revenues to the hotels and offer customers different choices, adaptable and offer business experience.

Currently 1/3 of business comes from the group bookings. Meeting facilities, catering facilities and Meeting planners. Packaging offers unique opportunity for the merchant / wholesalers to enhance their revenue and market share in distribution channels. These whole sellers bundle the offer and sell leisure packages to the niche segments of business such as mid-week transient business packaging.

However, there is a need for establishing rate parity between channels and rate integrity to win the confidence and trust of the packages buyers. There is also an important issue of how to merchandise different kinds of values for different products? In most cases, whole sellers sell packages two to three years in advance and get to whole sellers online. These traditional packaging does not find favor with the modern lodging suppliers and airlines since they work on dynamic pricing model to drive revenues and profitability of their products. There is urgent need for the whole sellers and retailers to embrace dynamic packaging model instead of old traditional packaging.

Further the dynamic packaging should offer multitude of choices to potential buyers in terms of distinguishing products, offer customization, stay, activities, and all other aspects of business.

Independent hotels: Package for success by an attractive websites:

Property owners should invest in search engines optimization over the long haul, this will cut the Internet booking costs and stay competitive in the Internet advertising landscape.

Third party distributors such as expedia, travelocity, hotwire, price line and intermediaries command the distribution channels in the current market scenario. However, independent properties should focus on distributing as much as possible by getting their hotel web sites out there on the web. Such hotels lack the instant recognition of a chain affiliation and the hip ness of cutting –edge hoteliers. Despite those obstacles, they can still promote their key selling features, unique attributes, generate awareness and buzz about their hotels on the web. Having a website would help establish, communicate and reinforce the public image about the property, help drive incremental traffic and business to the property.

The goal of Hotel website to differentiate the property from the competitors and package the products and a compelling vicarious experience to make the potential customers envision and want that experience during their internet booking decision making process. The hotels should fulfill the consumers craving for complete experience, one which meet their criteria and delivers what they perceive to be their best value. This would help them increase hotels occupancy and revenues. The hotels should address the needs of distinct market segments including business and leisure travelers, meeting professionals, and travel agents. Independent properties should focus on features and benefits to get market share on distribution sites. Individual property Website build publicity, create awareness, drive customer calls and website hits to book the rooms throughout the year.

Choosing Alliance partners: Marketing approaches

In choosing the distribution sites they should do some research. The distributions sites should be selected carefully for their intrinsic value proposition to the online buyers. In this regards, non-branded hoteliers would be well advised to enhance their hotels sites by way of rich content communicate in way that appeal to potential guests.

What a guest could expect in your hotel property? What is the unique value proposition of your hotel and its features and benefits? What distinguished you from the pack? Determine your target market and customize your offerings to fulfill those segments needs by position your property and its services. In this context, design the best web contents, offer strong value proposition to the potential clients and put forward an irrevocable promise. Market unique packages to a niche audience consistently, and you will gain an edge. Originality is the key to achieving results. The content of your web site is very important, and supplement the content with best three-dimensional pictures, virtual tour of the hotel and its different types of suites/ rooms. Putting valuable tips for the prospective travelers would be another value addition for the customers. Hotels could also use their client's testimonials, VIP comments about the hotels and its employee's distinguished services as part of the web content to create interest in the prospects minds about the property and thus, influence them to book the rooms with the hotel.

Independent Metro Hotels: Online is not enough!

Similarly for metro hotels in highly competitive locations, the property owners would have to take recourse to different modus-operandie to get their market share. These hotels could distinguish themselves by way of having best description of the hotel, virtual reality experiences. Customers look for web blogs and Internet comments (tripadvisor .com & expedia.com etc) about the guest comments for their stay at the hotel.  Hence, these customers look for "blogs" by different guest who share their experiences as also positive recommendation by customers. And the best way to positively influence the buyer's decisions to book rooms at such hotels is to provide them with business services available, location advantages, prominent events hosted at the hotel, and its proximity of the shopping areas, business districts and key tourist spots of the metro city.

By putting contemporary design themes. Photos and marketing theme based messages, home page with audiovisuals interest and encouraging travelers to make direct online reservations. The hotels attractive, colorful web site should aim to enhance awareness of this unique attraction with customers testimonials, recommendations/referrals, availability with Best Available Rates on the website would significantly impact the "look to book" conversion rates. The property owners can provide broad exposure to the property by having a few links on their sites as well as having the property's links on the city's visitor's bureau, Chamber of commerce site, and AAA, DOT and Newspapers sites.

Destination hotels/resorts- needs targeted Web based approach:

Most of the large hotel chains have been very successful in promoting their leisure destination hotels by having resort /hotel specific sites for tourist besides the presence on their company websites. Starwood hotels, Marriott and Hilton has have successfully promoted their leisure properties by having individual property websites and have positioned those properties as niche destination hotels & resorts. Leisure destinations and dream hotels should have individual websites for the hotel/resort along with the presence on the corporate brand website.

These unique properties should have beautiful luxury photography bringing to life the micro detail that differentiate the property pictures on the location, culture and lifestyles of people, virtual tour of the property as well as the portray the natural environments, descriptions of destination history, its natural and geographical attractions, vibrant communities in neighborhood, beaches, and impact testimonials.

Having such dedicated website for property is the best way to publicize the property, position the property, drive traffic and book additional business. Such dedicated property specific web sites would have handoff between corporate website. Also seamless transition between the two websites. Such locations franchise property owners should use right booking engines, enriched experience, E-commerce booking online. And should try to take most out of representative companies websites. Instead of spending their own money on their own property websites. This would afford them cost effective exposure and you can measure Internet marketing success through these search engines.

Search engines would help merchandise the property, differentiate the product in the market; Individuals property site should focus on the value of the product, experience should be price focused. What's unique about your hotel/resort? Meta search engines to get research in the market, targets to price conscious customers better than third party distributors. There is need for balancing the needs of the customers as well as the ROI for the investors. Distribution strategies should be measure by the cost of distribution, should cost less and bring and enforce positive value to the owners over a period of time.

Need for a better Address:

Use of Meta search site help the property gain reaching the potential market and target the property to the price conscious customers. These are better options that third party distributors. These search sites balance the needs of the customers while meeting the owner's need for ROI on their investments. Third party agencies distribution would still continue to grow notwithstanding the properties own websites due to packaging of air, hotel and car rental. In this context, the individual property owners would be well advised to keep in mind the different products, varied channels values and delivering pricing consistency across external and internal distribution channels to maximize inventory and profits. Hotel owners should strategize on capturing the additional market share of business in different market segments such as; Business travel, leisure travel, incentive travels and SMERF, Business transient, FIT Corporate, AAA. Devising & implementing yield management strategies for different market segments could best achieve this goal. Their web sites must offer price, pre payment and fees that are competitive and in tune with the market demands.

Hotel business is as dynamic as airlines and hotels have to find a niche to be visible, attractive and reasonable choice of the potential customers who are increasingly looking for price and value proposition. Pricing will become more dynamic in due to time to come.  Individual hotels owners could also think in terms of opaque models that give the customers a choice to give their quotes and choose the hotels or airlines.

But this model is no ideally sited for building brand loyalty. However, opaque model is good for hoteliers to sell their distressed inventory at lower ADR but help increase your RevPAR. It is good inventory management option to sell distressed inventory or sell last time rooms. There are different retail models to choose and individual property owners would participate in single bundled or last minute model to leverage their business.

In today's market the customers drive price and owners should leverage the Internet beyond just the booking tool. Internet does make an impact on services, products and serve the guests effectively and efficiently.

Mahendra S Rathore, MBA, CHA, CHE, MCHCIMA, CTA
President, Ultima hospitality Management, LLC
PH : (704)248-6280
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