Optimizing Profit & Reducing Distribution Costs
November 21, 2019 Administrator Distribution Channel 79
Is your hotel burning money? An IDeaS revenue technologist shares some channel strategy tactics.
There is still a lot of talk in the hospitality industry regarding the rising costs of distribution. While encouraging guests to book direct can help hotels bypass some commissions and fees (even direct channels are typically not a free lunch), there are still many hotels that rely on the distribution and marketing reach of online travel agencies (OTAs).
As hotels start to change their contracts with third-party channels, they gain flexibility in managing rate and availability parity. It now becomes critical to weigh the value of a channel—not only today but in the long term—versus the costs of acquiring reservations through that channel and how much of that demand is needed.
So, why hasn’t the industry progressed much on how to understand channels better? In this Q&A with IDeaS senior product manager and industry vet Stephen Hambleton we review the critical points and offer some tips on how to get your distribution data in better shape.
What’s the latest buzz around channel optimization?
Stephen Hambleton: There is a vast amount of data available to hoteliers from their reservations and distribution systems. For many years, the industry has been focused on revenue optimization. Over time, the reservation acquisition costs have increased as hotels have seen demand shift to higher cost channels with more pressure on bottom-line performance.
Understanding your costs by channel—and evaluating which channels give you the most bang for the buck—can be an overwhelming task, unless your team has a common definition on the coding structure and a means to calculate cost of acquisition. There’s now a focus on collecting data to understand the impact of acquisition costs on profitability to support adjusting contracts with OTAs. This builds a basis for more profitable decisions in the short-term and more long-term channel-value-centric decisions when contracting with distribution channel partners.