The recent Distribution Channel Analysis report, produced by the American Hotel & Lodging Association, STR and the HSMAI Foundation, highlighted the importance of established distribution channels and indicated some of the concerns about their pending evolution. As the report indicated, in aggregate less than 7% of total demand is coming through online-travel agents. Yet this segment gets considerable attention, especially as the OTAs serve as the focal point for many consumers who are conducting their online-travel research.
More recently, there have been several new developments in the distribution landscape that pose opportunities and challenges to consumers and suppliers. As suppliers decide where to focus their limited resources, the creation of new channels, the evolution of older variants and the growing prominence of social-media content will continue to pose challenges to them. By focusing on new methods of selling and engaging consumers or creating demand for hotels, several of these new channels are creating interesting segmentation opportunities. These evolving channels can be categorized into three major types: new search models, mobile/last-minute models and new discount channels, dissecting the broader impact of social media when it comes to online bookings.
New search models
Changes to search engines as well as a couple newer OTA/meta-search models can be categorized into newer search models. Some of the players in this category include roomkey.com, globalhotelexchange.com, room77.com, hipmunk.com, simplehoney.com and Google Hotel Finder.
Google’s Hotel Finder has moved beyond beta and is now an integrated part of hotel-related search. The placement of Hotel Finder (as a sponsored listing) just below the first set of pay-per-click ads—as illustrated below—indicates Google’s desire to showcase these results at the expense of organic search results. While much of the hotel-specific results within Hotel Finder represent opportunities for supplier showcasing, in the end reservation facilitation comes via pay-per-click opportunities, with OTAs often being highlighted over supplier direct. The major impact of Hotel Finder placement and click flow is it will serve to increase suppliers’ search-related budget (both search-engine marketing related pay-per-clicks, as well as search-engine optimization as it related to organic search).
Roomkey.com was launched with considerable buzz and continues to add more brands to its stable of suppliers. Roomkey.com, which is similar to the TravelWeb portal of the past, represents the attempt of the brands to launch their own version of an OTA. While suppliers remain optimistic about Roomkey.com, it has yet to really catch the eye of consumers and still needs considerable improvements before it starts to offer a viable alternative in the eyes of the consumer.
Other players in the meta-search arena have had some interesting developments, with hipmunk.com receiving attention for its more graphical, map focused listing of hotels and graphical listing of flights. Room77.com is the first major OTA to showcase qualified rates as part of its display. Given these qualified rates, room77.com will appear to have rates lower than other OTAs, as it points out very clearly in its display. Room77.com has the potential to create service disruptions for suppliers because guests unfamiliar with qualified rates assume they are booking rooms at better rates even though (strictly speaking) they don’t qualify for these rates.
Globalhotelexchange.com, much like roomkey.com, offers an inexpensive channel to suppliers as fees are as low as $2.99 per booking and are paid by the consumer. GHX, similar to Google and Bing, indicates historic prices to provide some level of comfort with current prices. Additionally, GHX offers consumers a pay-when-you-stay model versus a pay-in-advance merchant OTA model. It’s hard to imagine GHX getting the scale to compete against established OTAs at $2.99 per booking. So while there are some new players in the OTA space, it is unclear if any will have major impacts upon the established players.
Travel-related mobile developments have received considerable attention over the last few years, but it is only recently that there has been significant evolution in targeted mobile bookings. While Priceline has been a leading innovator in mobile booking-related applications with its Negotiator app, there are new developments as both existing OTAs and new entrants focus on the in-market and last-minute nature of mobile demand. Illustrated here are some recent developments through the eyes of a few key players: blinkbooking.com, booking.com, hotels.com and hoteltonight.com. All of these day-of mobile-targeted channels focus on some form of limited inventory availability (only a small set of suppliers) with rooms only available for the stay date. As a result, these channels really focus on last-minute travelers who suddenly find themselves in need of a hotel room. This limited availability typically comes with 30% off retail listing.
Hotel Tonight and Blink are targeted day-of channels. The others are side offerings of established OTAs. The Hotels.com app from Expedia is very streamlined. However, Priceline embeds its Tonight Only product within its current Negotiator app. Blink and Hotel Tonight’s stand-alone offerings potentially offer sufficient opacity (owing to limited access to a limited set of suppliers) to offset dilution whereas Expedia, Hotels.com and Priceline’s offerings, given the ability to do a retail search, may impact day-of retail bookings.
Discount targeted channels
A variety of interesting newer selling models including tingo.com, backid.com, guestmob.com and hallst.com, can be categorized in a consumer discount group. Each of these new models focuses on the deal seeker by offering a new twist to the hotel shopping/reservation experience. Tingo.com, launched by TripAdvisor, provides access to hotels through Expedia’s Affiliate program. Tingo.com automatically cancels and rebooks fully refundable reservations if prices drop at the supplier of choice between the time of the initial reservation and check-in (or within the cancellation period). BackBid.com allows confirmed travelers to upload their confirmations and allow suppliers to submit offers to the consumers in an effort to get them to switch to other hotels at lower prices via these private offers. Guestmob.com shows a sample of suppliers (between four and six) in a market sub-area at discounts on the order of 20%. Consumers find out the Thursday before their check-in at which of these potential hotels they will be staying. Finally, U.K.-focused hallst.com (a play on Wall Street) is quite possibly the most novel of these offerings. It creates a peer-to-peer market for consumers to sell the reservations they have acquired through hallst.com’s posted price OTA model, as well as its non-refundable bidding model.
Over the last few years, social media has emerged as a new “channel,” impacting guest satisfaction, OTA channel conversations, brand evaluations and revenue. Early in the Internet travel age, brands became concerned about user perception being on certain channels or having their hotel misrepresented from a rate or content standpoint. Now with the emerging social-media channels, user-generated content effects not just brand perception but also revenues. The link between an online review reputation and revenue is increasingly clear, with Expedia quantifying the impact on their site as “A 1 point increase in a review score equates to a 9% increase in average daily rate (ADR).”
A tipping point of this emerging channel evolution was a Market Metrix study in 2010 that showed for the first time that more bookings are driven by reputation than either by location or price. ‘Guest experience factors,’ which include past stays, reputation, recommendations and online reviews, are critical to selecting a hotel by the majority of hotel guests (51%) and are now more important to guests than either hotel location (48%) or price (42%).
OTAs, independent review sites and various social-media platforms have provided travelers with the value of tremendous customer insight, and hotels with the burden of monitoring, responding and analyzing the data that these channels are offering. While tripadvisor.com remains the leader in this area, other review sites including yelp.com and zagat.com (purchased by Google) offer aggregated customer feedback, while nearly every OTA offers its own user-generated content that ties to sort, conversion and bookings.
Just as hotels weigh decisions to participate in various distribution models for incremental revenue, they too need to view these social-media channels as pivotal aspects of their distribution and revenue strategy.
The best way to strategically assess new channels is to ask: Do these channels offer benefits to both suppliers and consumers? While suppliers often speak negatively about OTAs, the value proposition is clear on both sides as they provide a great shopping experience to consumers, and considerable reach and revenue to suppliers. The burden really lies at that comp-set level. Will a hotel lose market share if they don’t participate with a certain provider when their direct competitor is? Also, when analyzing your hotel and your competitive set through the social-media lens, recognize that there may be a direct impact to your top-line revenues if there is clear distinction between properties in the eyes of potential customers. So when considering a new channel, a good first step is to evaluate the opportunities from both parties and if the channel fails to deliver to both key parties, it may not be around for the long haul.
Chris Anderson is an associate professor at the Cornell School of Hotel Administration. Prior to his appointment in 2006, he was on faculty at the Ivey School of Business in London, Ontario Canada. His main research focus is on revenue management and service pricing. He actively works with industry, across numerous industry types, in the application and development of RM, having worked with a variety hotels, airlines, rental car and tour companies as well as numerous consumer packaged good and financial services firms. Anderson’s research has been funded by numerous governmental agencies and industrial partners and he serves on the editorial board of the Journal of Revenue and Pricing Management and is the regional editor for the International Journal of Revenue Management. At the Hotel School he teaches courses in revenue management and service operations management.
About the HSMAI Revenue Management Advisory Board
The Revenue Management Advisory Board leverages insights, emerging trends, and industry innovations to guide the development of products and programs that optimize revenue for hotels.
• Chris K. Anderson, Ph.D., Professor, Cornell University
• Bonnie Buckhiester, Principal, Buckhiester Management USA
• Shelia Cosgrove, Director, Revenue Management Ops & Planning, Intercontinental Hotels Group
• Kathleen Cullen, CRME, Corporate Director of Revenue Strategies, Heritage Hotels and Resorts
• Sloan Dean, CRME, Vice President of Sales & Marketing, Interstate Hotels & Resorts
• Kent Duncan, CRME, Vice President, Sales and Revenue Strategy, Marcus Hotels & Resorts
• Jon Eliot, CRME, CHA and co-chair of the HSMAI Revenue Management Advisory Board
• Tammy Farley, Principal, The Rainmaker Group
• Neal Fegan, Executive Director of Revenue Management, Fairmont Raffles Hotels International
• Rhett Hirko, CRME, Director of Revenue Analytics, Hyatt Hotels & Resorts International Operations
• Jay Hubbs, Director Hotel Supplier Relations, Expedia Partner Services Group / Hotwire
• Burl Hutchison, CRME, Director of Revenue Optimization, Sabre Hospitality Solutions
• Klaus Kohlmayr, Senior Director, Consulting, IDeaS Revenue Optimization
• John LeCoz, CRME, Regional Director of Revenue Management, Loews Hotels
• Mark Molinari, CRME, Corporate Vice President of Revenue Management and Distribution, Las Vegas Sands
• Orly Ripmaster, CRME, Senior Analyst, STR Analytics
• Scott Roby, CRME, Vice President, Revenue Management, Evolution Hospitality
• Chinmai Sharma, CRME, Vice President, Revenue Management, Wyndham Hotel Group
• Susan Spencer, Market Director - N. America, ChannelRUSH
• Trevor Stuart-Hill, CRME, President, Revenue Matters
• Paul Wood, CRME, CHBA, Vice President of Revenue Management, Greenwood Hospitality Group
Want to Learn More?
This topic will be addressed as part of the 10-part 2012 Revenue Management Webinar Series produced by the HSMAI University in partnership with HotelNewsNow and STR, and sponsored by IDeaS. Each month a webinar covers one aspect of cutting edge revenue management in today's economy in conjunction with articles written by members of the HSMAI Revenue Management Advisory Board. If you’re not able to attend a live program, archives are available. Also, some of these and other timely revenue management topics were the focus of the HSMAI Revenue Optimization Conference on June 25, 2012. Presentation recordings are now available in the ROC 365 Conference Archive.