Hoteliers grappling with the business impact of the COVID-19 pandemic are faced with a difficult distribution challenge.
NB: This is an article from Fornova
On the one hand, there is the short-term need for the revenue obtained by putting heads in beds; this is the lifeblood that keeps staffers employed and the lights on. But on the other hand, there are also long-term profits to consider, which often necessitate a more stringent distribution approach.
How should hotels approach distribution and channel mix as demand returns post COVID-19? By ensuring they’re open on every available channel that provides demand that is incremental to their own business, while preventing undercutting and leaked inventory.
What’s more likely? Hotels can’t afford to be greedy and will take any incoming demand to fill their rooms because they won’t have the manpower to analyze which channels are driving the most to their bottom line until they’ve developed a baseline of business.
The Brand Stance
Cooler distribution heads will prevail during the crisis, led by the efforts of the larger chains, which will reveal a divide between hotels that focus on channel mix, and those that do not. The major hotel brands will all likely devote staff to maintain distribution integrity, so there’s less leakage, less undercutting and the best prices on the brand.com sites. Direct bookings, in general, are also on the rise, further fueling this trend.
Because most hotels will require financing to survive and are facing difficult conversations with banks, we may see some owners enticed to join one of the big brands, as this may be only option for lending when occupancy is down.
But even for those hotels who choose to remain independent, there are still reasons to continue to safeguard distribution. Hoteliers can work to preserve distribution integrity and show lenders higher profits, not just revenues.
The pandemic is also impacting the distribution technology landscape. Hoteliers are going to be looking for more automation and more lightweight tools to help, that are also more budget efficient. In the short term, it’s going to be a challenging road for big-ticket tools such as full-feature revenue management systems. The ability to provide hotels with these resources will be another feather in the caps of the major brands during the crisis.
Moving Forward
As the hotel industry faces an uphill climb of unknown length and severity, there’s no simple answer to approaching your channel mix. You’ll likely have short term, medium term and long-term approaches, and the length of each of those will be determined by your specific market conditions.
As demand returns, it may make sense for you to market more through the OTAs. Here are some suggestions on how to maximize that relationship:
- Make use of OTA tools that allow you to market to specific markets or specific verticals that are relevant to your hotel.
- Monitor your competitive landscape in each of the OTAs, because they will all be different.
- Monitor your channel mix, to drive as much direct business as you can, but also using the OTAs to drive incremental demand that fills specific need periods.
- Invest in more niche marketing, especially in terms of geography. Be sure to understand your source markets and confirm you’re running the smartest promotions targeting them. These may be small-scope promotions, assuming that travel will resume locally and from specific sources.
Tapping Market Intelligence
Data will also be a vital weapon in the arsenal of hoteliers as the industry recovers. In the new distribution world, it will be crucial to effectively measure a hotel’s booking pace and performance against the market. Primarily, this is a two-step process:
1. Understand your competition, which has changed. Before analyzing your pace and internal data, which are also important, hoteliers must first understand who the competition is, which probably has dramatically changed post-COVID.
Here’s an example: Today, more than ever, your competition are vacation rentals. They’re going to recover before hotels. Ask yourself: Do you want to take your family to a large hotel with hundreds of people, where some of them might have COVID-19, or do you want to just rent a house in the middle of nowhere?
2. Make sure your pricing is the most competitive in your market. The most important use of data in the current marketplace is to make sure your hotel has the most competitive pricing compared to its market. There’s less demand, and the demand that does exist is dramatically more price conscious because these guests have less disposable income in the current environment.
With limited ways to measure unconstrained demand, hoteliers rely mostly on bookings data. So as bookings pick up, hoteliers should analyze the effectiveness of direct bookings and not pull inventory off all the other shelves. Understand your market and where your competitors’ demand is coming from as well.
Ideally, by working effectively with OTAs post COVID-19, hoteliers will capture their share of demand while cautiously ensuring not to repeat past distribution mistakes.
