We had envisioned in the article Breakfast is a Great Moment #3 Pricing Strategies. Here, I propose you to consider the different Hotel Distribution Strategies. I share with you my vision of distribution methods and channels adapted to your establishment.
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Hotel classification has a rather fragmented system in Europe. The ranking differs in Spain, Germany, the United Kingdom and Italy.
When I was in operations and I was reading up on commercial distribution, two postures left me a little doubtful:
The magic formula adapted to all establishments. E.g.: By taking care of their visibility on all social networks, hotelkeepers will improve their direct sales.
The relativistic advice from which the hotelkeeper emerges without knowing which direction to take. E.g.: All hotels must sell on OTAs to ensure profitability, but dependence is strongly discouraged.
I will try not to fall into either the first or the second pitfall and the task is difficult, since each hotel is an entity in its own right and at the same time, the subject of e-distribution is global to the sector.
The article is not intended to revolutionize e-distribution. Booking.com is a market capitalization around 81 billion dollars, the leader in e-distribution of accommodation and for the past two years, a tour operator of tourist activities.
Expedia, it is a market capitalization around 17 billion dollars. Airbnb, not listed on the stock exchange, is worth an estimated 30 billion dollars.
As a hotel operator, I was in a frantic race for « Sold Out Rooms », trying to find all the existing sales channels that could be connected to my channel manager.
I suggest we make a short stop in the frantic race for « Sold Rooms »:
First by briefly evoking the contemporary history of hotel distribution.
By explaining the main lines of the sector’s distribution strategy.
By proposing ideas correlated to experiences in hotel distribution in general, and strategies in particular.
Short History of Hotel Distribution
The disruption of the internet wave
For two decades, the giant immaterial distributors have been attacking all of our tourist service structures in waves: air, automobile, hotel, restaurant and tourism intermediaries.
The wave of dematerialized marketing is not exclusive to the tourism sector. It is a major trend in the tertiary sector as a whole (real estate, insurance, banks, local shops).
If OTAs (Online Travel Agencies) dominate the hotel industry, it is risky to decree the « fault » of hotel owners, and if there is a « fault », it is immensely shared between businesses of all kinds and a large majority of countries and continents. It is a new reality, virtual in form, tangible in its impact on our revenues and gross operating income, once commissions have been deducted.
The constant of greedy intermediaries
Another element of the contemporary history of our hotels: the wave has always existed. It changes color.
In the 60s and 70s, charters were introduced and the hotel business was marketed by GDS with the support of travel agents (in the 40s and 50s, they held the exclusive rights to our distribution!). At the time, the GDS – travel agencies tandem reaped the modest margins of 20% to 30% of the posted price (a far cry from the agencies’ modest commission of 10%).
The net pricing is the ancestor of the commissioned pricing. The hotel sold 100 francs for its room to its intermediaries. The intermediaries applied the margin they wanted and agreed among themselves: 100 Francs X 1.20 = 120 Francs, the travel agency’s selling rate. In our current and widespread system of commissions, the establishment decides to sell 100 € his room, or 120 €, and it knows that it will deduct the corresponding commission, without referring his intermediaries.
Paid vacations are voted, leisure prices fall and the offer grows drastically. In the 70s and 90s, in addition to the well-established and well-rounded travel agents, the wholesalers allied with the tour operators arrived. Dedicated to the target of the leisure clientele, the less gourmets took a margin of 20%, while the most greedy could go as high as 40%.
Being an affiliate of an integrated chain was rarely discussed for a large carrier in the process of successful distribution. The market was becoming industrialized at the level of its distributors, intermediaries and end customers. Hotels had to meet the standards expected and visible by these global distributors to ensure their fill.
At the end of 2001, the traumatic event of the World Trade Center attack occurred. Our indispensable American clientele began to desert the French market. Our French destination, upscale and luxury included, has eaten its black bread. Expedia arrived on our market the same year.
Americans came back to us with a generous commission price, with Expedia as a booking ally, leading the travel agencies, followed closely by American Express and Carlson Wagonlit Travel. The best travel agency in 2004, pure player, however, was grinding its teeth by commissioning at 25% and demanding a net and contractual pricing according to seasonality.
The story paved the way for Booking.com: a flexible, agile and commission-based model, not net pricing. More sales are maid, proportional commission is paid. The cherry on top: a 10% commission. Booking.com was selling our last rooms, as a loyal and faithful friend, every night including weekends. How to throw the stone to our elders? We understand them, we certainly would have done the same, every step of the way. We would have believed in a better world.
The wave of OTAs has swept through our offices and our homes, as has the use of the Internet. The keys to their success, easy to describe in retrospect, difficult to predict in the 2000s.
The « Catalog » effect: OTAs have carried out the referencing work (segmentation, neighborhood, destination) instead of our Tourist Offices, which have not been digitally transformed. Without irony, I doubt they still are today.
Massive technological investments (Ad words, sales tunnel): Hotelkeepers have valiantly and brilliantly invested in Ad words as a bypass strategy. The strike force and massive bids from pure players make ad words unaffordable for independents, barely profitable for networks (Booking is one of Google’s biggest clients). On this point, my opinion is to allocate this time and money budget to less risky practices. I prefer to build a real hotel CRM (explanations to come).
The promise of a better booking (better price, immediate availability): It wouldn’t have really changed the deal, but encouraging our customers for years to book with distributors, or offering a higher live rate, or displaying a booking form instead of a real-time engine hasn’t diminished OTA’s promises.
Booking.com then created its direct chat with our guests during their stay in our hotels in 2016. At the same time, Booking.com created its “bleisure platform” (a combination of Business and Leisure) with our corporate customers.
We are now in the apprehension of what they will still be able to invent! The fear is confirmed with the arrival of Booking Basic. Booking is now being used in some countries by our predators of yesterday: wholesalers.
Dependence on a powerful service provider has begun. At night we see our BRP dancing, which it could have been, should have been. We wonder about the nice things we could have done by saving the « Commissions » line. Works, staff trainings, a modern website. So many things.
Traumatized, betrayed, we behave with defiance when Airbnb, with whom we are starting a shy but happy honeymoon, tells us that it is thinking of changing its model and perhaps increasing its commission to be paid by the hotelkeepers (Stockholm Syndrome.)
While waiting for our next Messiah, CTrip, Airbnb, our website, there is no need to dither : Booking.com and its business model have become in a decade and a half our new Giant. As far back as we can remember, we’ve always had Giants. And if we continue to think about it, the one thing these giants have in common is … us.
To define the problem of hotel distribution, I take into account on one hand the technological disruption and on the other, the structural propensity of our sector to be subject to Giants. My proposal is that this new technological disruption is part of a series of constants specific to our sector. Since disruption, even if unintentional, is a constant, why go upstream like a rebellious salmon? Or on the contrary: why maintain the belief of better days?
To face reality, to find within ourselves what generates and holds on to those symptoms that affect our economy and our forecasts.
Hotel Distribution Strategies
There are, in the case of our hotel sector, three main types of distribution:
Exclusive distribution is the one that makes you dream the most. One and only one distributor manages my entire distribution. This distribution strategy is popular in the luxury and high-end sectors. It is an image insurance. Costes hotels achieve this. A racy DNA, a luxury offer declined in brand, a very strong and omnipresent soul. The only compromise, which is not one, is to have finally decided … to put a booking engine on their official website.
Selective distribution carefully selects its points of sale. The respect of the brand image by hand-picked distributors is its niche. The strategy is widespread in the top of the range. In selective distribution, it is clearly found at La Réserve in Paris, which markets directly and on the luxury OTA Tablet.com.
Intensive distribution multiplies the distribution channels likely to sell at one time or another. The objective is to multiply the presence on OTAs, opinion networks and social networks. The strategy is encouraged by the common-sense yet unproven theory of the billboard effect. The principle? The more you are e-distributed by mainstream or specialized brokers, the better you sell live because all alone, you are invisible. This strategy is adapted to products that generate profits by volume: budget, economic or even mid-range establishments.
It should be noted that the intensive strategy is currently experiencing a paradox. The vast majority of upscale 4* and 5* hotels are engaged in an intensive distribution strategy. OTAs have become indispensable to the entire hotel class, including the selective and exclusive by nature.
There is also multi-channel distribution, i.e. the simultaneous use of several types of distribution for the marketing of products. I intensively sell my rooms via OTA, while my starred restaurant is exclusively bookable directly. Multi-channel allows me to maximize sales according to product and customer typologies. In our sector, strategy can blur the identity of the accommodation unit – F&B.
A successful distribution strategy is based on the work of a product and an identity. Defining the right distribution and promoting it as it really is is key to financial success.
Strategic Directions
In All Cases, Finding Convenience
Whatever the distribution strategy (Selective, Exclusive, Intensive), the priority is to extract convenience.
The Macron law allows for price disparity in favor of direct sales. It has the virtue of proving that, federated, hotelkeepers are moving the lines of e-distribution to the top of the state. Good thing to say it and to prove it to oneself.
In spite of this advance, the Giants have nonetheless circumvented the principle. To be favored by Booking.com, it is necessary to apply a religious parity of rates, availability, room category, sales conditions, extras (if they are duplicated on the platform). Beyond the case of Booking.com, the algorithms used by the distributors do not allow the practice of rate disparity. In their place, we would have done the same.
A few concrete and non-exhaustive tips:
a. Make the Top Line Sparkle
The competition is not vertical: our establishments against Booking.com, our establishments against OTA. Let’s remember their valuation in billions of dollars. Competition is horizontal: the hotel against competitors in its market. At the heart of your market, choose to be the best.
In equipment : Invest in Capex, especially if your structure is aging, a little tired or even needs to be refreshed. The image and the average price are the two stakes of the additional equipments according to your category such as a workspace, a high speed wifi, shelves, a honesty bar, an open and shared kitchen, a fitness room or a swimming pool, a spa.
In services: You reach the undeniable quality in breakfast, welcome products, customer care. Create additional services to generate a greater margin. In 3*, it can be a souvenir store of the destination. In 4*, it can be, for example, massages on demand in a room dedicated to this purpose in your establishment.
In reputation: You actively communicate about your upgrade via controlled channels (official website, social networks.) with as many photos and qualitative videos as possible.
b. Win the Talent War
The war for talent is now. Reinforce your staff if they are short, train them on the basis of rigorous procedures, retain them through bonuses on turnover. Value the salary of your competent and loyal management so that a competitor does not capitalize on its transfer of skills. Invest in team events in order to unite them and improve their day-to-day relationships.
Unite your teams around a common cause, which can be to enjoy the best e-reputation, to be leaders in average price and occupancy rate compared to competitors on the basis of a CompSet.
All of these elements allow everyone to become one. It is their decisive effort in upgrades and upsells that most surely impact the average net valued price and additional sales that make you, rightly, happy.
Finally, carefully maintain an exemplary employer brand. This is the next step in capturing the best profiles before your direct competitors. Some companies are already pushing excellence by delegating the management of their employer brand. External service providers are in charge of defining an employer brand adapted to candidates, auditing the candidates’ overall career path, improving the job offers distributed by the brand and managing the brand’s candidate pool.
Given the recent HR contours that are taking shape, imagine how high the cost of acquiring our future talent will be. Making them loyal will remain the best calculation.
c. Adopt Digital Relationships
For the re-appropriation of live broadcasting, the turning point is also now. Investing in a hotel CRM connected to your PMS, your Channel Manager, your booking engine is now within reach of independent establishments.
To capture the direct and identify our customers : The customer relationship is of course the direct relationship between the establishment and its customers during the stay. In concrete terms, these are three major dematerialized and digitized highlights, along with a few examples.
The pre-stay communication (pre-stay), with a proposal of the hotel’s additional services (hammam, restaurant) for the Le Loisirs ravi, or a pre-check-in form for the Corpo pressé.
In-stay communication, anticipating dissatisfied customers and possible detractors of our e-reputation, detecting corporate customers to sign, spotting your unsuspected FITs.
Post-stay communication is already mastered by most hoteliers.
To build customer loyalty and resell directly: On this CRM database, regularly updated by the hotel reception, you segment your customers and adjust your offer as well as possible.
You activate targeted e-mailing campaigns (targeted seasonal offer for your previously unsuspected FIT clientele, targeted upgrade offer to promote your Bleisure). By taking back control of your distribution, by segmenting your guests, you target better, communicate better and generate more direct bookings.
d. Sign the Corporate
If the corporate clientele represents €5 billion annually, there is necessarily a lion’s share to be cut.
There are three key areas to win the Corporate award:
The prerequisite is to have a proposal dedicated to Corporate. It differs according to the location, capacity and affiliation of the establishments. In the case of large hotels, fixed pricing and fixed contracts are unavoidable. For smaller establishments, and assuming that it is well managed, pricing flexibility is very important.
Chase local businesses within a 10 to 15 kilometer radius, #phoning # elbow grease # the old-fashioned way. To save time and plan a constructive meeting, put down your three sales arguments (1. strategic location, 2. competitive advantage, 3. preferential contract conditions) then send them by e-mail to the corporate contact.
Integrate the networks according to the typology of your establishment: the Hoteliens to favour the Corporate of proximity), for a denser traffic: HCorpo, TeldarTravel…and for an even denser traffic: the mainstream HRS, Egencia, Airbnb for work…
A hotel does not breathe through cost savings. It is by making its top line glitter, i.e. its occupancy rate and average price, its demand and its offer. By promoting a quality product, you will no longer have to choose between one or the other. You will enjoy a better demand AND a better average price because you propose a better offer, whatever your market segment (budget, economic, mid-range…).
You will gain in breath, and you will be more in control of your destiny with a valorized gross operating income. This does not yet solve the subject of your web-autonomy but you realize the key step of increasing your GRP. Aware of your exemplary nature, the market has every chance of rising in quality, in turn. This is beneficial for you, as an actor of a neighborhood whose offer is improving and mobilizes a stronger demand.
Once the base is accomplished, here are some more specific directions.
2. Intensive Distribution
If you are part of an intensive strategy (low end, mid-range), and you make a low to relative margin per night, this is your niche. You multiply the e-distributors to reduce the power of only one: sell on Airbnb, CTrip, Expedia which ended up lowering its commission. You become a fan of metas and you sell to all the racks.
You limit the wholesalers, who rarely play by the rules of the game and broadcast your net fares (between -20% and -40% of your fares displayed in B to C). You may stipulate it in your contracts, but my personal experience is that they always find a loophole.
At the same time, you develop a clientele of regulars who are sensitive to price and benefits. You offer a fixed or variable rate (not too variable, a moderate price elasticity is to be taken into account), a privilege code and an advantage (breakfast included, early check in.).
When I took over the Hotel Manet** 50 rooms in 2014, before its switch to renovation, I couldn’t believe my eyes. 80% guaranteed by … regulars, 80% direct booking, 70 € for a single room, 80 € for a double room, 100 € for a triple room. A hotel really in its juice, but faithfully maintained, the owner of the fund made regular and permanent work.
Coming from the Channel Manager Availpro, I was statistically convinced that OTA was an essential distributor. When I came back to finalize some formalities, I interviewed the manager. He answered me: for 20 years, I have been holding the reception desk where I am frequently on the floors to make repairs. When they come to Le Manet, it’s also to find me.
3. In Selective and Exclusive Distribution
In addition to mainstream OTA, you are expanding your e-distribution dedicated to the luxury hotel industry (Tablet, Splendia, Jetsetter…). These OTAs are dedicated to your distribution. They do not reserve you? The subject is image, not necessarily efficiency. By weighing in on their side, you improve the chances that they will distribute you.
You are campaigning to benefit on mainstream OTAs from a positioning, an exclusive and dedicated promotion in line with your image. To the OTAs that put you forward in line with your positioning, your group grants specific and exclusive advantages over the mainstream.
For 5* establishments, the Virtuoso network holds no secrets for you.
At the same time, you develop a clientele of regulars who are sensitive to the Legend of your establishment and to recognition. Your marketing is that of influence.
The purpose of the top-of-the-range is its transformation into a story or even a myth. Nothing is too good for you, high-end.
You invest in a PR agency where you control the notoriety of bloggers and journalists, and you invest massively in your official website.
In addition to high quality videos and photos, 3D photos of rooms and living spaces, and films that showcase your identity, you work tirelessly and in an original way on your social networks, particularly Instagram, which has an unrivalled commitment rate. You script your typical customers (Persona, embodied by muses) so that they instantly identify with your ben establishment and succumb with immediate reservation.
As Beyoncé sang in one of her innumerable masterpieces, the best distribution solution remains the permanent and factual upgrade of offer. By upgrade, I don’t mean the frenetic rise in classification. A remarkable 3* is better than a questionable 4* that pulls the market down and blurs market visibility.
I mean, in our chosen category, to produce the best possible level of quality from every point of view, in order to retain the loyalty of our true target. I will consider this subject in detail in the next article: « Destination Quality Podium » .
frederique dispagne 