Balancing direct and indirect business
 
Balancing direct and indirect business
12 MARCH 2014 9:09 AM

Invest in your direct presence—particularly mobile—and pay distribution partners to help find and acquire only those guests you can’t reach yourself.


How’s business these days? For many hoteliers, things are starting to get pretty good. Hoteliers I talk with are enjoying higher rates and occupancies, along with an overall improved business climate and increased optimism about the coming year. 
 
As tends to happen during good times, many of these hoteliers are taking this opportunity to evaluate their relationship with distribution partners and to explore ways to drive more business through direct channels. 
 
I applaud this focus. With increasing competition for high-performing search terms from online travel agencies and metasearch, hoteliers are seeing their costs to acquire guests continue to rise. The current business environment provides a perfect opportunity to evaluate each of your distribution options for its fit into your overall approach. 
 
Take a new look at each of your channel partners with a clear eye and ask these questions: 
 
  • Can this OTA reach a guest you can’t? While the answer to this question is often yes, don’t assume OTAs always reach new business. Look for channels that deliver first-time bookers and look for opportunities to convert these to loyal guests. 
  • Are the guests they reach the guests you want? One GM I know once told me about his “cooler index.” He could accurately predict which booking channel his guests used by the number of beer coolers they dragged through the lobby at check-in; the more coolers, the lower rated the business—and the greater the effort needed to convert them into longer-term, higher-value customers.  
  • How much are you willing to pay to reach those guests? In other words, can the OTA reach those guests at a reasonable cost? Analyze your business to ensure an appropriate return on your cost of acquisition, whether paid as commission or as net rate margin.   
 
Of course, OTAs represent only part of your overall distribution strategy. A balanced approach to distribution puts significant focus on direct business, too. Research shows that guests spend significant time before booking, looking to answer two questions:
 
  1. Why should I choose your hotel for my next stay?
  2. Why should I book that stay through this channel?
 
Savvy hoteliers ensure guests can answer the first question across all channels—Web, mobile, voice, metasearch and OTA—while focusing their efforts and investments in answering the second question only on those channels delivering high-value guests. 
 
Look to improve your guests’ shopping and booking experience on your own website, and in particular, pay attention to mobile. Many forward-looking hoteliers enjoy significant benefits from mobile, with Starwood Hotels & Resorts Worldwide, for example, noting it’s seeing mobile booking growth five times greater than Internet booking in the Web’s early days.
 
The distribution landscape continues to evolve but also continues to represent a crucial element of a successful hospitality business. When managed well, OTAs, Web, voice, mobile and metasearch work together to deliver increased roomnights and improved revenues. 
 
Take advantage of the improving economy to think about the role you want OTAs to play in helping you find and acquire the right guests for your property. Pay only for those guests you can’t reach yourself, then work to migrate those guests to higher-value channels. Invest in your direct presence, particularly for the increasing number of guests choosing mobile. 
 
Taking a balanced approach to your hotel’s overall distribution enables you to achieve the results you want from the channels you choose. It also provides you a great answer for when you’re next asked, “How’s business these days?”
 
Tim Peter helps companies put the web to work to grow their business. Since 1995, he has developed innovative e-commerce and digital marketing programs across multiple industries. An expert in e-commerce and digital marketing strategy, Tim focuses on the growth of the social, local, mobile web and its impact on both consumer behavior and business results. 
 
Prior to founding Tim Peter & Associates, LLC, a full-service e-commerce and internet marketing consulting firm in 2011, he worked with the world’s largest hotel franchisor and the world’s premier independent luxury hotel representation firm to help hotels and resorts achieve more than $2 billion in online revenue. He can be reached at http://www.timpeter.com/hotelmarketing/
 
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