Hoteliers confident distribution pendulum swinging back
Hoteliers confident distribution pendulum swinging back
22 AUGUST 2019 8:16 AM

Hoteliers are seeing their efforts rewarded in the battle to secure revenue through direct channels, but challenges still litter the horizon.

NASHVILLE, Tennessee—Hoteliers are increasingly confident that the battle to bring more bookings revenue into direct channels is beginning to pay dividends.

Reasons include increased industry consolidation and resultant negotiation and technology muscle, an increasingly fragmented industry landscape and moves by online travel agencies to become more collaborative as tech giants such as Google, Facebook and Amazon enter the hotel distribution space.

Speaking during the final keynote panel at the Hotel Data Conference on “Are hotels finally winning the distribution battle?” Michelle Fiorletti, director of revenue management at LodgeWorks, said she believed the tide is turning but the battle is far from being won.

Panelists questioned the word “battle” in the panel’s title, suggesting that OTAs have to be considered valuable partners.

“Recently we did a test with our independent brand and backed off for a few months on travel agency business, to see how it would affect us, and we saw we still need online travel agency business. As times change, and agreements change, we are making strides, though,” Fiorletti said.

That brand, Archer Hotels, has six assets opened and one in the pipeline, with LodgeWorks also owning hotels from other flags.

An on-the-spot survey conducted by attendees accessing the HDC app had only 26% thinking the distribution pendulum had swung the direction of hoteliers.

“OTAs are an integral part of the mix, and it remains that we have to have an understanding of our businesses and levers. On the brand side, there have been great strides in the OTA relationship, with brands coming out well if not ahead,” said Kerry Mack, VP of revenue and distribution at Highgate Hotels.

Alex Dragan, director of global analytics at Four Seasons Hotels and Resorts, said it’s important to understand the entire ecosystem of sales, marketing and distribution.

“The idea is to provide the best profitability for our management companies and owners. It is important is to see how sales change over time, and it is up to us to optimize this,” he said.

Philippe Garnier, VP of third-party distribution at InterContinental Hotels Group, said his company prefers “to distribute through the correct channels, depending on what that would be at any point,” noting that OTAs currently only cover the leisure segment.

Mack said smart moves would be to analyze higher peaks and compression times, handpick the business that comes in, track on a monthly basis where commission derives from and provide great deals to those booking direct and to negotiated business.

“Be aware of what is coming in before you think of future strategy,” she said.

Talking to the OTAs
Panelists said the hotel industry has been negotiating hard with OTAs, but as with all negotiations, it is best started with a good hand of cards.

“The big firms have announced margin changes (with the OTAs), but P&L is still impacted in the same way in terms of commissions,” Fiorletti said, who added that in her recent negotiations with Expedia, Archer most likely did not get the same deal as Marriott International did.

“All the partners in my company are vice presidents, so there was a lot of emotion (during negotiations),” she said.

Hotel companies’ strategy should be to be truthful, put on the table exactly what the expectations are and to have heartfelt conversations, she said.

Garnier quickly stated the answer is to join a brand.

“The conversation has to evolve around the added value and where you compete,” he said.

Four Seasons’ Dragan returned to the need to see the whole picture clearly.

“Understand your demand, and understand not all hotels are created the same. You have to analyze whether you want to sell in the same way a room and a suite. Understand the totality of the (OTA) contract and your business, and do a lot of homework,” hes said.

Costly journey
Panelists said having good insight into the full ownership of the guest journey continues to be important.

Dragan said the industry does not really know what happens before guests come direct to hotel firms’ websites.

“And what will happen if Amazon, Facebook and Google decide to enter the picture? We have invested in new (customer management system) and personalization software, so we hope that helps us in the 40% chance of a recession next year,” he said, referring to a keynote presentation earlier in the conference by Adam Sacks, president of Tourism Economics.

Dragan said his company’s direct website traffic moves faster than that of the OTAs.

“We have no loyalty scheme, and we are also tapping into those OTA-loyal customers, of which we know there are a lot of them. For instance, in China is it impossible to live without the OTAs,” he said.

Garnier said “direct is linked to loyalty,” and added he believes there are huge opportunities in terms of group, corporate and room-block business.

Highgate’s Mack said it remains vital to track the cost of customer acquisition and make educated decisions.

“Never just run with it. Five years ago, it was about revenue and conversion, rather than getting into the nitty gritty. Now we have got very analytical on every line item,” she said.

For her hotels in New York, the decision has sometimes been made to cease ecommerce marketing, which resulted in no dip in direct bookings, she added.

OTA shifts
Hotelier should consider that the OTA world also sees the need to continually adjust, panelists said.

“A lot of OTA traffic is direct now, too, bypassing Google,” Dragan said.

The wholesaler landscape is changing, especially in Europe; and, especially in luxury, there remain customers who like to speak directly with people, he said.

The OTA landscape generally remains a duopoly, Garnier said, so new players are welcome.

“The barriers to entry are significant, so we are very patient and merciful (with new entrants) and pick up the phone, but I cannot see (the duopoly ending) soon. New ideas do come up frequently, so we have a magnanimous ear, but until they are able to drive traffic, there is not much we can do,” he said.

Fiorletti said she receives a call at least once a week from a new distribution startup.

Dragan questioned the mentality of these new players.

“Do they just want to grow large enough to be bought by Expedia, or are they trying to really change the landscape?” he asked.

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