GDS can equal ROI with the right opportunities
01 DECEMBER 2015 9:13 AM
Sources say many hoteliers are overlooking opportunities by not marketing through GDSes and working with travel agents to secure highly lucrative bookings.
REPORT FROM THE U.S.—Global distribution systems and travel agent bookings remain an overlooked yet lucrative source of revenue for hoteliers, sources said.
The reason these channels are overlooked? It’s because many hoteliers are looking at them the wrong way, according to Mark Haley, partner at the Prism Partnership.
“So many properties fail to exploit it,” Haley said. “Instead of moaning and groaning about travel agent commissions, they should be looking at their net revenue.”
Haley said hoteliers can see a boost by marketing through GDSes if they’re dissecting the information in the right way.
“Part of the problem is the incentives,” Haley said. “Revenue managers are pushed to drive (revenue per available room). But if you push net RevPAR, that’s much closer to finding profitability.”
The difference, Haley said, is net RevPAR accounts for distribution costs, which tend to be lower through GDSes than online travel agencies.
John Hach, senior industry analyst for TravelClick, said GDS bookings mark an opportunity for hoteliers in part because of the travelers they’re able to capture.
“Approximately 50% of the business is corporate travelers that will stay at higher-star-value luxury hotels,” Hach said. “That’s premium ADR. Their rate selection is important, too. The corporate traveler will upgrade to a better room type. Agents are encouraged financially to upsell.”
David Jones Jr., GM for the Hilton Garden Inn – Overland Park near Kansas City, Kansas, said his property has seen dramatic growth through GDS bookings in a short time period.
“We decided to advertise on the GDSes pretty heavily for three months,” Jones said. “We saw a $10,000 to $15,000 increase a month for an investment of $600.”
Jones said the GDS marketing started in August and the original plan was to cut it off in October. He said the plan now is to continue through 2016. He said that quick boost made it a no-brainer to continue.
“It’s a great (return on investment),” Jones said. “We’re hoping to get some loyalty out of it and pull back at some point, but we’re kind of scared to now.”
Cindy Estis Green, CEO and co-founder of Kalibri Labs, is less enamored with the possibilities presented by marketing through GDSes and admitted skepticism about some people pushing them.
When discussing the banner ads offered on GDSes, Estis Green said it’s “very rare we see them being productive.”
She said that overall the growth of GDS bookings can be tied to the health of the industry, although she noted that GDS bookings “tend to be more common at the higher-rate level with more full-service properties.”
“It’s not really a growing type of business, in general,” Estis Green said. “It’s grown because rates have gone up and more corporate business came back. But it’s been pretty modest growth patterns.”
The travel agent’s role
Estis Green is more bullish on developing direct relationships with travel agents, and she said many hoteliers are dropping the ball when it comes to traditional travel agents.
“I definitely think hoteliers should be paying more attention,” she said. “They should know which travel agents are bringing in business when they need it and working with them.”
A recent survey of travel agents conducted by TravelClick showed agents are more likely book through GDSes. The survey showed 51% of agents around the globe have increased their use over the past two years.
At the same time, more than half will book away from GDSes if hoteliers aren’t offering their best rates there.
Hach said this growth in booking has flown in the face of conventional wisdom.
“It’s really caught a lot of people by surprise,” Hach said. “The long-held belief is GDSes are going to decline. People have predicted they’ll go extinct like dinosaurs.”
The survey also showed that the vast majority of travel agents—96%—consider it somewhat to very important that GDSes offer rate parity.