It’s not time to give into the OTAs; it’s time to create a clear distribution strategy and focus on channels that drive strong business results in efficient ways.
I had a discouraging discussion with an outstanding GM recently who complained that her property’s struggles with rapidly shifting guest preferences, an evolving distribution landscape and ever-rising distribution costs—particularly in the form of online travel agency margins and increased search spend—had made it almost impossible to compete. While running her hands through her hair (or possibly pulling it out by the roots),she pleaded, “Why do we even bother? How can we possibly be expected to keep up?”
While it’s hardly a welcoming thought, maybe it's worth asking this question: Is it time to give up? Should we just outsource all our marketing activities to OTAs? After all, they are fantastic at marketing and merchandising hotels online, arguably better than many hotels will ever be. Should we simply hand over responsibility for filling our rooms and place our focus elsewhere?
Um… no. In fact, hell no.
Now, let’s be fair: OTAs are undoubtedly very good at what they do. That's a fact. But that doesn't mean for a moment that you can’t drive profitable business on your own. What we need to do is stop behaving like OTAs are our only option. Direct channels, email and search and ratings and reviews, and a host of other time-tested tactics and strategies, play important roles in delivering strong business results. The key is focusing on those channels that do that most effectively.
First, though, hotels need to be clear about their distribution strategy. To paraphrase NYU professor Clay Shirky, distribution once was a career. Now it's a button. Online, the distinction between marketing and distribution is essentially nonexistent. Once you add a buy button to any marketing message – email, search, display, metasearch, et cetera – you're really just one click away from the sale. At that point, it's not a marketing channel; it's a distribution channel. There are certainly some in the industry who will try to confuse you with fancy marketing terms, but the simple fact remains that marketing and distribution are inextricably linked online. You can – and must – measure exactly which channels work best for your business.
The most effective way to ensure that you're thinking about distribution correctly—and getting the greatest benefit for your property—is to ask three simple questions about your marketing and distribution channels:
- Where do your guests find you?
- Where do guests choose to book you?
- How much profit do you make from each of those?
Notice I'm not talking about revenue from these channels. It’s time to look past revenue and instead focus on profit. Recent data shows that distribution costs have outpaced rate increases, putting heavy pressure on your properties’ profitability. If you focus solely on revenue, it’s easy to miss the underlying costs impacting your business – and give too much credit to channels that aren’t actually helping you grow.
You may find that for your property, OTAs play an incredibly valuable role in driving profitability, particularly during shoulder or slow seasons. That's OK. As I've said before, there's no need to make OTAs the bad guys here. However, what we don't want to do is become so dependent upon them, particularly during periods where we can drive more profitable revenue through other channels, that we neglect direct business completely. Understanding which channels work for your property represents the first step in creating a marketing and distribution strategy that actually increases your hotel's overall profitability.
After spending time digging into the data with my GM friend, we discovered several underutilized tactics driving fantastic returns that simply required greater attention. We also found a few areas that consumed a lot of her marketing team’s time for very little benefit. It’s much easier to keep up when you’re only focusing on the areas of greatest return.
Outsourcing your sales and marketing to an OTA is certainly one approach to fill your rooms. And OTAs still will play a role moving forward. But realistically, many other options exist that can help you grow. The key is focusing on profitable revenue. After looking at the data, I asked the GM, “Is it time to give up?” Her response: “Absolutely not. It's time to get to work.”
Tim Peter helps hotels and resorts put digital to work to grow their business. Since 1995, he has developed innovative e-commerce and digital marketing programs designed to increase sales and revenues. An expert in e-commerce, digital, and marketing strategy, Tim focuses on influencing customer behavior and delivering business results. Prior to founding hospitality digital marketing strategy consulting firm Tim Peter & Associates in 2011, Tim led the world’s largest hotel franchisor and the world’s premier independent luxury hotel representation firm in using digital to help hotels and resorts around the globe drive billions of dollars in revenue. He can be reached at timpeter.com/hotelmarketing or firstname.lastname@example.org.
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