The hospitality industry grows more and more competitive each day with the emergence of new hotel brands and other industry players.
NB: This is an article from Shiji
The key to succeeding in hospitality has always heavily relied on distribution strategies and the various available distribution channels, both online and offline. With the increase of global tourism and tech savvy travelers, hotels have introduced more and more mobile innovations, but have yet to fully encapsulate the benefits that total distribution provides.
For the past 20 years, hoteliers thought of distribution almost solely as a means to push out hotel availability, rates, and inventory (ARI) – specifically in relation to the market share of bookings between brand.com and online travel agencies (OTAs). Unfortunately, this narrow focus on ARI has caused hotels to disregard emerging trends that make the booking experience more personalized, mobile, and interconnected – and allow them to win bookings back from their direct competitors and OTAs.
The industry has developed beyond simply distributing hotel availability, rates, and inventory and into amenities, add-one and ancillary products to create customized experiences for the modern and experienced traveler. Today, hotel brands should be focusing on the concept of “total distribution,” that is, broadening the discussion from room only distribution to an entire platform for travelers to customize their complete guest journey.
When OTAs first came onto the market, they quickly formed a symbiotic relationship with hotels, charging modest commissions in exchange for buying excess inventory, and providing free advertising in the form of the “Billboard Effect.” In this environment, it made sense to focus on Hotel Room Only Distribution to integrate and manage as many booking channels as possible, while booking the most inventory at the best possible rates. Essentially, they were selling at the right place, at the right price. Unfortunately, this world no longer exists within hospitality.
As OTAs rapidly increased their share of the digital booking market – up to 41% in 2020, including 52% of Millennials – they began to dramatically increase their commissions, from 15-30% or even higher. This placed hotels in a bind: they needed OTAs to move inventory, yet the high commission fees were cutting into their profits. OTAs were also monopolizing the guest relationship: when a guest booked through an OTA instead of brand.com, the OTA gained access to the guest’s data -and ultimately, their loyalty.
The result was a commodification of the hotel booking market, where hotels were forced to compete based on rate, and not based on brand distinction or value. Hotels needed a way to differentiate their brands from competitors to encourage direct bookings and build customer loyalty.
Fortunately for hotels, a major change in thinking occurred in how people planned out their vacations – and purchased products in general. The mobile revolution empowered customers to take an active role in creating their own guest experience when traveling. Consequently, travelers began to demand more convenience, customization, and control during every stage of the guest journey from researching to booking to their actual stay: 57% of customers were found to prefer mobile notifications about deals or offers on-property, and 42% of business travelers preferred mobile check-in – with 14% of them even booking their hotel in the airport departure lounge.
Hotels have started to embrace mobility on property to personalize and enhance the guest experience – and begin to win back direct bookings. With increasing frequency, hotels are now offering mobile check-in/check-out, mobile guest messaging, and mobile offers for room upgrades, extended checkout, or other amenities. They have also employed mobile ordering platforms for food and beverage, spa, and golf, as well as guest intelligence and online reputation management tools. Once on-premise, hotels were then able to consolidate guests’ stay information with data from this entire ecosystem of platforms, giving hoteliers real insight into their guests’ preferences and spending habits, which could then be used to improve the experiences of future stays and help ensure brand loyalty.
This in-turn allowed hotels to win direct bookings back from the OTAs by promoting highly personalized guest loyalty programs. Due to parity agreements between hotels and OTAs, guest loyalty programs might be the only legal mechanism for hotels to offer travelers preferential rates. They also happen to be the main driving force for the relative upsurge in direct bookings. According to PhocusWire, 79% of direct bookings are made by guests who belong to a loyalty program. Similarly, when Hilton Worledwide started to aggressively promote their loyalty program through their 2016 “Stop Clicking Around” campaign, they saw a steep increase in loyalty membership, from 51 million in 2015 to 78 million in 2017.
Unfortunately, this forward-thinking, mobile-first approach to the in-stay experience largely did not extend to the booking experience. Although consumers are increasingly using mobile devices to discover, plan and book their travels, brand.com sites are rarely completely optimized for mobile, and hotel OTA storefronts are often siloed in their ability to share data and visuals. The lack of mobile optimization is a huge missed opportunity for both hotel brands and OTAs as 60% of searches for destination information come from mobile devices, and location-based searches have increased 50% year-over-year.
As more people move to mobile options, the search experience inevitably changes. It becomes harder to compare multiple hotels and channels on mobile devices and harder to read significant amounts of content, making it more difficult to arrive at an informed booking decision. In fact, 69% of travelers worry that they’re not finding the best price when they’re about to make a final booking decision. And only 23% of leisure travelers are confident that they can find all of their relevant trip information on their smartphone, and 88% of them will eventually switch to another website or app if the current site isn’t satisfying their needs.
Consequently, 94% of leisure travelers switch between devices as they plan to book a trip, with 46% of travelers deciding where to travel on mobile, but physically booking the trip on a desktop. Not only does this give the traveler yet another opportunity to book on an OTA, but switching devices also makes it more difficult for hotels to track their marketing and distribution efforts across channels and ultimately, personalize their stay. This also leads to the potential loss of guest data, which hotels could have used to build more detailed traveler profiles to provide their guests with more customized stays.
Total Distribution: Hotel Rooms, Amenities, Add-ons, and Ancillary Products
When it comes to the importance of “Total Distribution,” it’s so much more than just distributing typical hotel content of rooms, rates and availability. There is now a movement to take the comprehensive personalization and customization seen during the in-stay portion of the guest journey and apply that to booking through OTAs. Much like how OTAs currently allow customers to purchase airplane tickets and rental cars with their hotel booking, soon travelers will also be able to purchase any number of add-on or ancillary items: from dinner reservations, to concert and theme park tickets, to booking spas or reserving rounds of golf. And of course, merchandising additional products could include potentially anything that is required to make for the ‘perfect guest journey.’
With a few exceptions, until recently, OTAs have put together a large-scale strategy to implement Total Distribution, but consequently, have not invested in much of the infrastructure needed to make a Total Distribution system a reality. This will ultimately change because of two reasons.
First, hotels have been clawing back business from OTAs by differentiating themselves through highly personalized guest loyalty programs, where travelers can plan their entire guest journey through one unified brand portal. Second, there is an enormous profit potential in providing the option of add-on or ancillary products. With OTA’s only making a slim 10% margin selling airplane bookings, there is a much healthier 30-40% margin for them in selling hotel rooms. On the other hand, selling ancillary products through a Total Distribution system, however, yields 50-70% profit margins, far outperforming airplane and hotel bookings.
While hotel availability, rates, and inventory remain vital to hotel distribution strategies, with the advancements in technology and the increased of experienced travelers, hotel brands must adapt to the current industry environment to succeed. Ultimately, Total Distribution will become the new paradigm for the hospitality industry as it provides benefits for both hotels and OTAs alike: hotels can differentiate themselves on OTA marketplaces by offering customizable and higher margin amenities, while OTAs can capitalize on some of the mobility-driven personalization that has been driving enhancements to the guest experience in the past half-decade.
In an industry where it is often repeated that the customer is king, total distribution will allow hospitality brands to enhance the full guest journey, while providing more unique and customized experiences for their first-time and repeat visitors, and in turn, capture brand loyalty to improve their bottom line.
Reprinted from the Hotel Business Review with permission from www.HotelExecutive.com