The single most important issue affecting the hotel industry today is cash flow.
NB: This is an article from Hotelogix
With COVID-19 still disrupting normal segments, it is more difficult than ever for hotel owners to ensure a continual flow of cash with which to not just turn a profit, but to pay employees and vendors, invest in renovations and upgrades, and more. The good news is that you can still boost cash flow. You just need an effective hotel distribution strategy. Not sure what that means or how to build one? We’ll walk you through what you need to know in this article.
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What Is an Effective Hotel Distribution Strategy?
A hotel distribution strategy is nothing more than the plan you follow to sell rooms. It says “we will market rooms through this platform” and “we’ll use this channel to reach travellers who appreciate what we offer”. Once upon a time, a hotel distribution strategy relied primarily on word of mouth and professional travel agencies. Today, it centers on the Internet and the wealth of channels it offers.
The Importance of Channels, Channel Management, and Visibility
A quick glance at the online environment will show you a wealth of different distribution channels. There are online travel agencies, global distribution systems, social networks, and so many more. Each channel offers the opportunity to build cash flow through distribution, but they are not all the same.
Some channels offer very low costs. Others might be free, other than the operating expenses you incur. Yet others can be very costly, or they may work on the pay-to-play model, which gives those hotel owners with the deepest pockets more opportunities to get in front of their target audience.
Obviously, you need to choose where to list, but that requires careful consideration of each platform. It’s not just the cost of use. You must also evaluate its audience, market, and leading distribution companies, like Booking.com, Expedia, and the rest.
The goal with every channel is simple: maximize your reach and visibility while minimizing the cost. With a channel manager, this becomes simpler.
Considerations When Evaluating Channels and Platforms
As mentioned, you will need to consider many factors with every channel. These include the following:
Cost of Acquisition
How much does it cost to acquire a guest through the platform? This is simple to do with the data available from your PMS. Simply divide the amount of money you spend on a platform by the number of guests you acquire.
That will give you the amount spent per acquisition. Note that your total cost per channel can include multiple metrics, including the cost of ads, maintenance, commissions, development of marketing creative, and your net revenue per available room (Net RevPar or NREVPAR).
Is your audience reachable through the platform? Who are they? Where do they spend time online? If the platform cannot connect with your ideal audience well, is there one that can do a better job?
Think of it this way: LinkedIn and Facebook are very similar, but they have dramatically different userbases. Attempting to use Facebook to reach a primarily business-oriented audience is unlikely to be successful. Conversely, non-business-related marketing does not do well on LinkedIn.
Assess each platform to determine its relevance to your target audience. Of course, that also means you need to have a very good idea of who your ideal guest might be in the first place.
The travel industry is highly seasonal. A seasonal hotel distribution strategy takes advantage of that nature and combines it with online reviews, and an in-depth analysis of your revenue streams. With the right strategy, you can maximize peak season bookings while simultaneously boosting bookings during the off-season.
You’ll spend money to reach your audience through many online channels, but direct bookings can save you time, money, and better resonance with your target audience. How can you generate direct bookings and not have to split the revenue with channel operators?
It really comes down to two things- social media, and your website. For instance, Facebook offers cost-effective advertising that allows you to reach all segments of your audience with the right message at the right time. And, while it does cost to market through the platform, there are ways to cut those costs and you’re never on the hook for a commission on a booking.
You also need to maximize the value and utility of your website. This is perhaps the single most affordable way to reach your audience and it costs you nothing that you’re not already paying (hosting fees, etc.).
Of course, this begs the question – how do you circumvent those costly channels and boost your direct bookings? You can achieve that in several different ways. One of those is to create loyalty or reward programs that encourage your guests to come directly to your website or interact with your hotel through social media, rather than using a site like Expedia or a digital travel agent website.
Another is to simplify the booking process. The fewer hurdles your would-be guests have to jump through to book through your website or mobile app, the more likely they are to do so.
Finally, you need to leverage the power of user-generated content. This includes reviews, but it goes so much deeper than that. Videos, social media check-ins, sharing locations and events with friends and family – all of these things get your hotel’s brand out there in front of others and can drive traffic to either your social media profiles or your hotel’s website.
Hotel Management Software
The incredibly vast web of information is impossible to sort, organize, and use on your own. Even if you have an entire team of back-office employees, it would still be out of reach. The answer? Hotel management software. With the right tools, you can leverage the data available within your hotel PMS and then use it to build an effective hotel distribution strategy.
Of course, there are plenty of hotel PMS systems on the market. They are not all created equal, and you will need to choose carefully. What should you look for?
- A cloud-based PMS
- The ability to create a hotel distribution strategy
- Connections to GDS networks
- Integration with OTAs
- The ability to increase direct bookings with an integrated booking engine for your website
- The ability to effectively manage inventory across your online distribution channels
Isn’t it time that your hotel had a distribution strategy that ensured growth and success?