Tuesday, 22 March 2011

Have you developed your hotel's distribution strategy for 2011 and beyond?

In my article last month we provided an overview of the changes in the travel landscape and the recent conflict between airlines, OTAs (online travel agents) and GDS (global distribution system). This month we have investigated the subject further and included an overview of how the changes will affect your distribution strategy for 2011 and beyond. In this article I covered:

  • The effects of the changes in the travel landscape on hotel distribution

  • Distribution strategies that you need to consider in 2011

  • Developing a "Direct" distribution strategy

The effects of the changes in the travel landscape on hotel distribution

Distribution is one of the pivotal channels to any hotel, airline, car rental or any other travel or any hospitality businesses. GDS and OTAs are the two most important players in this landscape in addition to the direct-distribution channel -your website. When planning your distribution model or choosing your partners, it is especially important that you consider the short-to-mid and long term impact on your business. Your primary focus should be shifted to a direct-strategy by making the initial adjustments to your website, e-CRM, online booking engine, pricing structure etc.

Over the last couple of years; the changes in the technology and its effects on the consumer search behaviors have shifted the spotlight to a more direct-to-consumer approach. Hoteliers should concentrate and invest in their websites more as the greatest growth area and profit is in developing a strong direct strategy. They cannot rely on the OTAs and third parties to bring them bookings with continually increasing costs. Like airlines, hotels should be looking on the most cost-effective strategy to build sustainable revenue growth. We recommend that you read our article on the changes in the travel landscape for a broad overview to help you anticipate the impacts of these developments on your business. Hopefully you will also learn some lessons to help you plan your distribution strategy for the coming years.

Distribution strategies that you must consider in 2011

When Google purchased ITA, the flight information software company, some of the travel industry players opposed the action and tried to block the acquisition. Especially third party intermediaries amongst others are worried about the potential entrance of Google to the market. A website called Fair Search has been established by leading OTAs in direct opposition to Google's ITA purchase. According to the website, Google is becoming a dominant player and has started threatening the online competition, innovation and economic growth. In contrast Google claims that their intention is to increase the consumers' choice and provide the most accurate and up-to-date search results. We shall wait and see the further developments on this landscape. We know that Google has been experimenting with pricing variations by adding prices to Google maps and Google Places for hotels and soon we can expect that pricing to be displayed on the search result pages. It is likely Google will continue along this path for the airlines and other travel sectors. What this signals to is that Google is looking to play a more active role in the travel sector. Google attempts to play a more active role in the travel sector are discussed in an article on HotelNewsNow highlights this issue. We recommend you are read this article for more details on how Google may or may not affect your distribution strategy and whether or not are you ready to make bold changes and embrace the upcoming trends.

The impact is clear - whether you are a hotel, car rental, resort, restaurant or other travel or hospitality company you should now consider Google as a distribution channel to remain visible and competitive in this landscape.

Developing a Direct Distribution Strategy

The travel industry is evolving; today almost 80-90% of travel search starts online. To remain competitive and decrease dependency on other channels such as GDS, OTAs and other intermediaries a direct-strategy is pivotal. This does not mean that you need to put all your focus on your website on the contrary, you must also be cautious when selecting your partners and distribution channels to make sure they provide the greatest value and best fit for your business structure.

A direct strategy will not only increase profitability by decreasing cost and increasing revenue it will also give you the opportunity to up-sell, cross-sell and remain competitive.

As mentioned in last month's article; the travel landscape is evolving at a fast pace. All these changes hint to a necessary change in the distribution models. Direct Strategy is here to stay and to ensure you are producing sustainable growth. Your website is the most viable channel that will require investment.

Not sure where and how to start your planning. Contact us! Our experienced team will help with this and other subjects that will facilitate long term sustainable revenue growth for your business.

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