In revenue management, a smart, disciplined distribution strategy key to boosting a hotel's bottom line

The most cost-effective online booking channel for a hotel is its website. How can you maximize direct bookings? Photo credit: cybrain//Getty Images

In the hotel revenue-management playbook, maintaining a well-oiled, proactive distribution strategy is crucial. How you choose to distribute your offerings should be carefully and regularly assessed, with the goal of maximizing your profit potential always in mind. Evaluating channel acquisition costs, looking beyond OTAs for better revenue opportunities and finding ways to drive more direct bookings are all good practices for monitoring and improving the health of your distribution strategy. First and foremost, however, a functional distribution strategy starts with the quality of the people implementing it and the tools they use to drive it forward.

Aligning the Right Staff with the Right Systems

The role of distribution in the hotel industry is one historically intertwined with the strategic function of revenue management. While a distribution strategy is nothing new for hoteliers, there has been a significant evolution in how it drives hotel profitability due to emerging industry data sources, channels and a variety of new technology.

Such is the complexity of prices, restrictions, add-ons, channel usage, technology and distribution costs that many hotels have considered this function large enough to split off on its own, increasing job roles that develop, execute and measure their comprehensive and intelligent distribution strategies.

The complexity of distribution channels, and the impact an effective distribution program can have on a property's ability to grow revenue, make it critical for you to understand how the quality of this role increases your overall profitability.

Without the right staff and systems in place, your hotel will struggle to realize its full revenue potential. Not properly managing or accounting for distribution costs directly affects the net revenue results you can expect from your distribution strategy.

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Using OTAs to Your Advantage

Today’s costs for acquiring guests are significant. OTAs charge between a 15- and 25-percent commission for every booking they secure, with hotels also paying hefty transaction fees to their selling systems if the reservation is received through them. These third-party costs influence the amount of revenue hotels can secure from each guest, ultimately impacting a property’s bottom line.

For many hoteliers, OTAs are an accepted part of the distribution toolkit due to their marketing power and high customer traffic. However, they should not make up the majority of sales or distribution. Before engaging with an OTA, you must fully understand the value and costs associated with the third-party distribution platform. Any relationship weighted in favor of an OTA to the detriment of your ability to obtain satisfactory revenue outcomes should be reviewed. For example, in the past, many OTAs required a last-room-available guarantee for their channels, which resulted in hotels losing ultimate control on yielding of inventory.

Hoteliers currently using OTAs to secure bookings should also consider ways to use those platforms to better support future business. To increase both new and return business, intelligent hoteliers are letting OTAs handle the initial capturing of guests, and then implementing strategies and incentives that ensure those guests book future reservations directly with their hotel, eliminating ongoing third-party booking expenses.

Following the Direct Path to Profit

The most cost-effective online booking channel for a hotel remains its own website. How can you maximize direct bookings through your website? The first step is increasing web traffic from potential guests and attracting more “lookers.” To do this, you need to understand more about those lookers. What dates are they searching for? Where do they search? What is driving them to a particular market? Collecting this market intelligence provides data that can be used to develop targeted marketing campaigns that attract the right type of lookers—the ones most likely to become bookers.

You can also increase direct bookings by retargeting past visitors and directing them to your website. When researching a location, potential guests may visit a variety of travel websites and OTAs before deciding where to stay. Hotels need to keep their property on the top of the consumer’s mind and influence guests to book on the hotel’s website. Technology that offers tailored ads customized around visitor behavior or website activity can help achieve an estimated 10-percent return rate on website visits, increasing direct booking opportunities.

Hotel owners are all too aware that in today’s competitive environment, every dollar counts when it comes to increasing the value of a hotel asset. Any competitive edge that translates into a stronger bottom line should be sought out, and every piece of hotel business should be evaluated to determine its true worth. With rising costs associated with acquiring new guests through third-party platforms, hotels need to consider their most effective booking channels and maximize direct business.

Mike Chuma is VP of product strategy and marketing for IDeaS Revenue Solutions, a provider of revenue management software solutions and advisory services. Before starting with IDeaS, he was senior director, global product management and strategy for Digital River, Inc.