Last week we attended HSMAI’s Revenue Optimisation Conference in Palma, Mallorca where our Customer Success Manager, Einav Guez led a roundtable discussion on Reducing Distribution Costs for Hotels. A lot of interesting opinions and ideas came out of the talk, so in case you couldn't make it, we thought it would be a good idea to summarize the key questions and points here and Einav’s response.
What are your thoughts on distribution costs for hotels?
In my opinion, hoteliers have a strong understanding that they must deploy a distribution strategy and proactively reduce their distribution costs to ensure more control of their distribution and inventory but don’t necessarily know how to achieve this.
Can OTAs such as Booking.com or Expedia help hotels reduce their distribution costs? If so, how?
This really depends on the hotel or chain. When a hotel is based in a market with low demand, and they focus solely on direct bookings it can be extremely expensive for them, so by using a large OTA, such as Expedia or Booking, they can improve their occupancy and revenues quite easily. However, if the property is based in a high-demand market and their brand is well known, a direct reservation may be less expensive for them than the OTAs due to the high commission rates.
What actions can hotels take to reduce their distribution costs? Are they the same for both independent hotels and chains?
I really think it’s about raising awareness of the distribution effectiveness and cost across the whole organization, as it is related to many departments/functionalities within the chain or hotel. Without raising the awareness across the stakeholders (that can be achieved for example by using tools like Fornova’s DMS) and taking active actions, the distribution costs will definitely grow YoY.
Do hotels actually monitor their distribution costs on a YoY basis?
I really think this comes down to having the right tools and data to support distribution decision making, and unfortunately, while most hotels want to monitor their distribution costs, often they just don't have the right resources available.
Any key takeaways from the rest of the event relating to distribution costs and strategy?
- It seems hoteliers are struggling to manage the balance between online and offline reservations, as well as optimizing the reservations coming from GDS and OTA’s
- It’s extremely hard to calculate the final cost per booking/per channel
It seemed that hotels are finding that there is no clear view of the distribution landscape, instead, often they are going in blind, based on online searches they are carrying out themselves. My advice to a lot of hoteliers I spoke with was, it is not necessarily about being good or bad when it comes to distribution, it is about creating the right mix per guest type and per source market.
We, in Fornova, encourage the hotels to build KPIs and targets that will lead to the right strategy for them to reduce their overall distribution costs. The right strategy should look at all the possible channels and be focused on managing them instead of being managed by them, this means understanding that sometimes direct is not always the best. Only by having this holistic view, hotels can control and reduce their distribution cost.