Has profit growth in the accommodation sector kept track with ADR or revenue growth? Doesn’t look like it.
Undoubtedly costs are rising and eating into profit, but some of these costs may be more under your control as a hotelier than you might think.
Finding the time to actually think critically about this is the key, because there are no quick and easy (sustainable) solutions to improving profit and it takes time to analyse your position and consider alternatives to your current mode of operation.
Focusing on improving your distribution costs in particular, or making those costs produce better (or work harder) for you, is something you cannot afford not to do.
Many of your distributors may be far better at getting a cut of the upturn than you are. A buoyant market is an opportunity to capitalise, and lowering distribution cost rather than jacking up rates is the sustainable way to do that.
Making A Start – 3 Steps
I have a simple (simplistic in fact) 3-step approach for any hotelier starting to really analyse their distribution and rate strategy, namely:
#1: Recognise that anyone selling rooms in your hotel is your competitor
The idea here is to assume that your best position is to be selling every single room at an optimum rate yourself (directly on your website) and that any other approach is going to cost you profit, i.e. someone else is benefitting from the service you are providing. This of course assumes that you know what an optimum rate is (which you should be actively managing), but for now let’s focus on the distribution end
#2: Only release rooms to distributors (competitors) if you cannot find a way to sell those same rooms directly on your website at a lower cost of acquisition and
#3: Prioritise distribution channels based on profit retention, not revenue.
We know we can’t sell everything only on our website. But giving anyone a share of your business should not be done lightly. The three steps above raise further issues that can help you shape your distribution strategy.
Who’s In Control?
Online Travel Agents (OTAs) do a very good job indeed in bringing you bookings and revenue. They do a very necessary job of allowing you to tap into markets you cannot otherwise reach. In fact they are so good at their online business that they are quite likely also to be taking a significant chunk of business that you could have taken for yourself at significantly lower cost.