How independents find dynamic distribution mix
16 JANUARY 2015 9:37 AM
Effective distribution is critical to a hotel's bottom-line performance. But for many independent properties, it's also a big challenge.
REPORT FROM THE U.S.—As competition in a robust hotel market increases, effective distribution strategies for independent properties are more important than ever. But optimal distribution is often difficult to achieve because independent hoteliers often lack the resources of their chain counterparts.
"The optimal distribution mix is elusive," said Donna Quadri-Felitti, academic chair and clinical associate professor at the Tisch Center for Hospitality, Tourism, and Sports Management at New York University. "And it changes. It's dynamic. So you have to be willing to be dynamic in determining what the right mix is. But what's really important is to understand that no matter what distribution strategy you deploy, you have to be vigilant in measuring your production by channel. And your metrics must include cost of acquisition by channel."
The most important performance measurements include volume of reservations, average daily rate and length of stay, Quadri-Felitti said.
"You have to think about which of those kinds of things you want from a particular channel. You have to always ask yourself what is the unique deliverable from a particular channel. For example, you need to understand whether a particular channel produces a higher average rate or a longer stay, or whether it produces bookings during slow periods. You have to be specific in your analysis of each channel," she said.
Charming Inns, a family-owned company that operates four small historic properties in Charleston, South Carolina, has invested continually in its website over the past several years to ensure it meets standards and best practices, said Michelle Woodhull, VP of revenue management and marketing.
And the results have been dramatic.
Approximately 85% to 90% of the company's bookings are direct.* And Woodhull is now less dependent than ever before on online travel agencies.
"In addition to redoing our website, we also hired a digital marketing group," she said. "We do a lot of search engine optimization and Google pay-per-click marketing and link-building with them. We also now do a lot of social media marketing based on a solid content strategy because we have a historic destination to sell."
Nevertheless, Woodhull noted, effectively managing distribution for a small hotel company is often a time-consuming challenge.
"I do everything manually, meaning that I manage each distribution channel independently," she said. "So during the first quarter of 2015, we're installing a channel manager technology platform that will make things a lot easier."
Channel management platforms, which have been around for a long time, function as an extension of a hotel's property management system.
"But you also need specialized skills to get the most from the output of those systems because it still needs to be analyzed properly to give you real business intelligence," Quadri-Felitti said.
Later this year, Charming Inns will add a revenue management system to its technology platform.
"That will mean using a technology that is capable of making smarter decisions that I can make—and also making them more quickly," Woodhull said. "And that will also mean that all of our analytical data is integrated into a single reporting system."
In their quest for better market clout, some independent hoteliers make the mistake of relying too heavily on the biggest OTAs, such as Expedia and Booking.com.
That is bad strategy, said Jeff David, managing director of the new 330-room The Knickerbocker Hotel, a Leading Hotel of the World, which will open on Times Square in New York City in February.
"The more you depend on a particular OTA, the less negotiating power you have," David said.
"So you need to also find the less expensive, smaller OTAs and create a mix of 10 to 15 of them that give you a decent number of rooms a year (at lower cost). The analogy I make is that you have to treat your OTA mix like diversifying your stock portfolio."
In David's experience over the past two decades, the single most important factor in a successful distribution strategy is regular and effective communication between the hotels' GM, director of sales and marketing and revenue manager.
"Effective distribution requires a lot of communication today," David said. "And the more frequently that communication takes place—even daily—the better. The more thoroughly your team understands your business, and that means distribution and rates, the better you will perform as a hotel."
Correction (20 January 2015): An earlier version of this story stated that 85% to 90% of the hotel's bookings came from its website.