Hotels can make the biggest impact to their bottom line with an optimized direct channel. But a recent white paper by HEDNA found most independent properties are underinvesting and undervaluing this crucial part of their business.
In “Hotel Distribution Data Management And Analysis,” HEDNA discovered that just 48% of independents look closely at cost of distribution. Independents were also the least likely to use analytics to make decisions about distribution (67% relied on them), compared to chains (81%) and management companies (72%).
Overall, the paper revealed something crucial: a lot of hotels just aren’t focused on the cost of distribution, or growing their direct channel. In the following post, we’ll explain why that approach can prove costly. We’ll also provide actionable strategies to help you drive more traffic and increase booking revenue through your own channel.
The cost of your hotel’s distribution
Put simply, if you optimize your hotel’s distribution costs, you’ll bring in more profit. But hotels commonly focus only on revenue and number of bookings, and ignore other important metrics. As a result, the direct channel becomes far less effective. Potential profits are left on the table.
Most hoteliers understand that bringing in more direct bookings (compared to relying on high-commission OTA bookings) will ultimately help increase profits. But there appears to be a general disconnect in how to achieve this goal.
Direct marketing expenses: Set it and forget it?
One major problem is that hotels often set their annual direct marketing budgets once a year, with x amount going to a new website, x amount going to advertising per month, and so on and so forth. In a dynamic travel marketplace, this “set it and forget it” mentality can prove highly detrimental, leading hotels to be outflanked by their more agile-minded competitors.
This annual investment in the direct channel is usually marked as an “expense” in the P&L (Profit and Loss) statement, which unfortunately means it’s one of the first budgets to be cut when trying to reduce costs.
Likewise, once this budget has been set for the year, it becomes extremely hard to increase. For example, when hotels use up their designated Google AdWords budget for the month, many will cut the campaign short rather than invest more, despite how successful the campaign might be.
Hotels often don’t treat OTA commission costs with such scrutiny as their own marketing channel, despite the fact these costs can range up to 15-25% of the incoming revenue. Instead, OTA commissions are often treated as a “Cost of Goods Sold” on the P&L statement because the hotel gets the net room revenue after the OTA has deducted the commission fee.
