On the heels of the pandemic, the global hotel industry has experienced remarkable growth.
NB: This is an article from D-Edge
In 2022, online revenue increased by 49% in Europe and by 7% in Asia over 2019 levels, and the numbers continue to trend upward in 2023, according to our 2023 Hotel Online Distribution Trends Report.
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However, the pace of growth is expected to slow down this year, and OTA bookings have been increasing at a faster pace than direct bookings, cutting into hotel profitability. And with the majority of online bookings coming from just two sources, Booking.com and website direct, hotels are missing out on revenue opportunities on direct channels, regional and niche OTAs, wholesalers, and the GDS.
Under any market conditions, increasing market share and profitability requires a diverse distribution strategy powered by efficient, agile technology. In today’s complex distribution landscape, more hotel companies are transitioning to a CRS-centric strategy to leverage the advantages of integration, consolidation, and automation.
The PMS: Great for Hotel Operations, Not Designed for Distribution
One of the most important decisions in revenue management strategy is determining which software will be the hotel’s lead, or master, distribution system, acting as the central repository and source of truth for room rates and inventory. Traditionally, the PMS has filled this role, but in recent years its limitations have become increasingly apparent.
When the PMS was conceived in the 1980s, there was no internet. Distribution was a relatively simple process, and the PMS sufficed. Since then, online and offline distribution channels have proliferated, and the PMS has been unable to keep pace.
Don’t get us wrong, we love our PMS partners, but the PMS was built to manage operations, not distribution. As a distribution platform, it can be slow and inefficient, constrained by limited features and connectivity issues. This is especially true for operators of multi-property hotel groups that use legacy PMS platforms, although there has been some progress with newer, cloud-based platforms.
Meanwhile, the CRS (central reservations system) was purpose-built for managing distribution, providing hotels with greater flexibility, reach, connectivity, and control over reservations and revenue across the distribution network.
Perhaps it’s no surprise, then, that 89 percent of large hotel chains have shifted to a CRS-centric strategy, according to h2c’s 2022 Global Hospitality Distribution Study. Meanwhile, however, 33 percent of medium-sized hotel chains and 58 percent of small hotel chains still use the PMS as the lead distribution system. While the study focused on hotel groups, we can assume that the number is even higher for independent hotels.
The CRS: The Heart of Hotel Distribution
Often perceived as standalone software, the CRS is in fact a connected network of distribution applications that includes the following components:
- Central inventory management – for managing rates, inventory, and content
- Internet booking engine (IBE) – for direct bookings via the hotel website
- Channel manager (CM) – for bookings via OTAs and wholesalers
- Global distribution system (GDS) – for bookings via travel agencies, TMC (Travel Management Companies, or Corporations Travel Managers.
- Central reservation office (CRO) – for bookings via the hotel call centre or reception desk
- Payment gateway – for processing online payments and checking the validity of payment methods
- Business intelligence (BI) – for aggregating raw information from multiple sources and tracking, analysing, and interpreting important data
The CRS is also connected to the PMS to synchronise bookings and inventory. Depending on the hotel’s setup, these components may be provided by one vendor as part of an integrated platform or by several vendors and connected by application programming interface (API). Additional third-party solutions, such as a revenue management system (RMS) and customer relationship management (CRM) software, may also be connected by API.