NASHVILLE, Tennessee — The hotel distribution landscape has undergone multiple changes in recent years, with booking channels shifting in popularity as consumer behavior changes and technology improves.
During the "Building a Profitable Distribution Strategy" session at the recent 2024 Hotel Data Conference, hotel industry experts shared their perspectives on the latest developments and how hoteliers can adapt their way of thinking about the hotel booking process.
Through the pandemic, there was an extraordinary booking shift among independent and boutique hotels to the voice channel, said Jack Newkirk, enterprise client account executive at Revinate. It was the only way guests could get answers about mask policies, room cleaning practices and other questions.
That has normalized now, and it hasn’t had the impact hoteliers hoped it would as guests are shifting back more to online travel agencies, he said.
The focus now isn’t necessarily the distribution channel so much as the total cost of acquisition balanced against the total lifetime value of a guest, Newkirk said.
“Finding a healthy mix between those two really gives almost like a runway for the hotel managers to understand which channel to lean into, which one has the lowest cost of acquisition and highest lifetime value,” he said. “Whatever that channel is, that’s what they’re looking for.”
The hotel industry is dominated by brands, but one of the benefits is the customer relationship management they offer, said Cory Chambers, vice president and chief revenue officer at Hospitality Ventures Management Group. The relationship is so well-managed that 60% of a hotel’s business comes in through brand contribution. For independents, a lot of it is online travel agencies or other indirect channels, and the challenge is these types of hotels don’t have a relationship with a guest until they show up at the front desk.
“Then its incumbent upon you at that point of sale to capture the guest on comeback or get their information and try to market to them directly,” he said.
Over the past four years, there’s been a return to a more stabilized channel mix, Chambers said. Online travel agencies are back to 12% to 12.5% for branded hotels, higher for independent, and global distribution system is back to about where it was before the pandemic. There’s strong retail business through the OTAs and brand.com, and there’s a nice mix in the premium segments regardless of channel.
“The OTAs are delivering very similar [average daily rate] as all our direct channels, so then it becomes all about the cost of acquisition,” he said.
Guest Capture
Remington Hospitality Senior Vice President of Revenue Strategy Gilbert Arredondo said he looks at distribution as where guests find hotels, not necessarily how they book.
“The booking is a mechanism to get them to your hotel, so I think distribution — the landscape has changed in terms of how are people finding you,” he said.
Thirty years ago, people would use a travel agency, brochures and the Yellow Pages, he said. GDS was strong, and then along came the online travel agencies. Hoteliers should ask themselves how guests find their properties if they don’t already know about the hotel. They may go through brand.com channels, but that doesn’t necessarily work for guests who aren’t brand-centric.
Many guests are looking for experiences, and they learn about them through social media platforms, such as TikTok, he said.
“The question is, how do you funnel them through the proper distribution channel?” he said. “Is that the way you want them to book?”
Marketing and distribution has changed its focus to the lifetime value, and to get that, hoteliers have to capture guests early in the booking process, Arredondo said. Oftentimes when people think about traveling, they don’t think of a specific location, instead deciding they want to go somewhere tropical or with a beach, and then go from there.
Most paid hotel marketing is when a person has almost made a booking decision, not for the earlier stages of their decision-making process, he said. The landscape has to change by looking at ways to capture the guest — branded or not — earlier.
“That's the million-dollar question: How do you get in front of them?” he said. “That really goes to what type of marketing you're doing through social media, through visual display, through campaigns, through targeting and so forth.”
Hoteliers are so focused on the conversion of the guest, but once the guest is on the hotel’s website, they’ve already made their booking decision, Arredondo said.
“That's not moving the needle, that's just capturing the demand that's coming to you,” he said. “The real question you have to ask for your hotel is, how do we move the needle? How do we really convert the customer that stayed at a hotel across the street to stay at our hotel when they're starting to plan?“
Take My Money
Newkirk spoke about a former boss he had who was dealing with an “unruly executive chef” working at a hotel.
“’It is our job to make it easy for people to give us their money. Will you fall in line please, in that making it easy for people to give you their money?’” he said, recalling his boss’ conversation with the chef.
That starts with understanding the guest, he said. The voice channel is the direct channel that is the least expensive to maintain, but it’s also the most difficult because it involves people interacting with other people. It can be a chore to manage a call center, but it’s profitable and makes the guests feel taken care of.
These guests are more likely to become a repeat guest, falling into that lifetime value category, Newkirk said.
“How do you make somebody feel special by a digital channel?” he asked. “That’s a real question.”
Arredondo said he’ll ask friends to book one of his hotels through the properties' websites and ask for their feedback on the booking process. He’s heard about being unable to find the desired room and having to navigate multiple pages to just book a room.
The brands have done a good job making it easier through booking on their loyalty apps, he said. For independents, hoteliers are so worried about capturing guest data that it can lead to guests to abandon the reservation in the shopping cart and decide to stay somewhere else.
People have gotten used to being able to buy things easier, he said, citing Apple Pay and the Buy Now button on Amazon.
“How many people buy stuff on Amazon at 11 p.m. just because it’s easy to?” he asked the room.
There are two ways to increase direct bookings, Arredondo said. Hoteliers can increase traffic, which is difficult. The other is to increase conversion, and increasing conversion from 2% to 2.2% or 2.3% through small tweaks and investment can generate big revenue.