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Hotel Distribution: There’s No Such Thing As a Free Lunch

How long has it been since you had lunch with your OTA market manager?

I used to really enjoy those lunches when I worked briefly as a market manager for Expedia. I got to know some really great revenue managers throughout the Midwest -- Chicago, Detroit, Indianapolis -- and I can honestly say I helped drive a lot of demand to hotels which, at that time in 2005, were rebounding from some hard profitability hits.

I enjoyed analyzing the data and building reports for hotels, and then developing promotions that would convert well, particularly during need periods. Yes, we even optimized the sort order to shift share toward better partners.

I was good at driving demand to hotels. I could assure my clients higher ADRs, because the higher the rate the more commission Expedia made as well.

Now, more than a decade later, Expedia is still really good at driving demand to hotels, as are, Kayak, Trivago and all the other big names. As I wrote in Hotel Management recently, they’re better than the hotels themselves at digital marketing, and the balance of travelers opting for a third-party distributor over a direct booking with a hotel supplier is tilted in favor of the OTAs. The numbers don’t lie.

Why? For many reasons. It’s hard for hotels to compete with OTAs in several areas, particularly on scale, marketing budget and even technology innovation. 

For example, Priceline's ad spend in 2018 will be more than several of the top hotel brands combined. Which unfortunately means that if you're affiliated with a brand, that brand can get outmatched in the contest to drive direct, less costly bookings.

I’m not telling you anything you don’t already know: OTAs heavily reinvest the commissions you're paying them into beating you at your own game.

Advantage: Hotels

Fortunately, while you’ll never compete with the OTAs on ad spend or marketing, there are areas where hotels still have the leg up.

OTAs might own the transaction business today, but you own the hospitality business. Once a guest clicks “book,” he or she becomes yours — yours to welcome and wow and leave with a beyond-satisfactory experience.

All of those touchpoints hotels have with the guest after the booking bring new ways to get to know your guests better, all the while collecting data points and building actionable profiles.

While cross-brand distribution might give OTAs a better picture of general consumer travel and booking trends, you’ve got data that tells you what the guests want, and when and how they want it.

Without access to data from your CRM or PMS, OTAs are behind the 8-ball. Specifically, when it comes to pricing, rate recommendations based on Expedia or Priceline rate shops of publicly available rates are insufficient. We already know competitor rates should only be a small part of your pricing strategy — one “demand signal” among many others.

Without the proper guest data from transaction all the way through final folio spend, how will OTAs be able to match your personalized and fenced offer strategies?

It’s no coincidence that OTAs are making a strong push to get closer to your data. They’ll promote your members-only rates, so long as the guest books through them and joins their loyalty program as well. Their newest strategy is providing hotels with simple booking and pricing technology, often at low costs or even free. Remember: You get what you pay for.

Fight back with innovation

Look, we agree with Expedia and Priceline: Clearly, the hotel ecommerce space is in dire need of disruption. Hotels are often relying on closed legacy technology that prevents the collection, storage and sharing of critical guest and transaction data.

But does that mean that outsourcing more of your operations to online distribution companies is the right move? Or should hotels look to protect their proprietary data and instead challenge their internal and partner development teams to kick-start innovation?

The movement is already underway. Cloud functionality and data analysis are revolutionizing the way hotels can connect with their guests ... and it’s all happening very quickly. Hotels are rapidly advancing down the path to a seamless, personalized experience that starts with customized pricing, merchandising and content served up to them at the moment they’re searching and booking on a hotel website.

Of course, hotels have to follow through with a customized on-property experience and post-stay messaging to wow guests even further. When done right, that all together has the potential to dramatically increase guest satisfaction and revenue.

The key to all of this is connectivity, and fortunately most hotel tech vendors are finally embracing cloud technology and open API platforms, meaning data is unified across multiple systems.

Hoteliers own their data in the PMS and CRM that tracks customer spending and preferences — and it’s a big advantage they have over giant companies like the OTAs. The ability to access that information in real time is what enables them to create tailored rates or merchandising, ultimately maximizing their booking conversion.

Big data-powered predictive analytics are able to capture demand signals both internally from airline and car rental verticals, and externally from social, news, event, weather, traffic or retargeting campaigns.

So the next time your market manager pings you for a meetup, do your due diligence. Ask why you should partner with an OTA over a traditional hotel tech provider. Negotiate fair commissions and the ability to sell all your own rooms on high-demand days. Ensure you’ve got access to the appropriate guest and transaction data.

And always remember: There’s no such thing as a free lunch.


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