Hotel Industry Blog

Towards A Smarter Distribution Strategy

By Des O'Mahony | On Fri, June 10, 2016

Has profit growth in the accommodation sector kept track with ADR or revenue growth? Doesn’t look like it. Undoubtedly costs are rising and eating into profit, but some of these costs may be more under your control as a hotelier than you might think. Finding the time to actually think critically about this is the key, because there are no quick and easy (sustainable) solutions to improving profit and it takes time to analyse your position and consider alternatives to your current mode of operation.

Focusing on improving your distribution costs in particular, or making those costs produce better (or work harder) for you, is something you cannot afford not to do. Many of your distributors may be far better at getting a cut of the upturn than you are. A buoyant market is an opportunity to capitalise, and lowering distribution cost rather than jacking up rates is the sustainable way to do that.

Making A Start – 3 Steps

I have a simple (simplistic in fact) 3-step approach for any hotelier starting to really analyse their distribution and rate strategy, namely:

1. Recognise that anyone selling rooms in your hotel is your competitor

The idea here is to assume that your best position is to be selling every single room at an optimum rate yourself (directly on your website) and that any other approach is going to cost you profit, i.e. someone else is benefitting from the service you are providing. This of course assumes that you know what an optimum rate is (which you should be actively managing), but for now let’s focus on the distribution end.

2. Only release rooms to distributors (competitors) if you cannot find a way to sell those same rooms directly on your website at a lower cost of acquisition and

3. Prioritise distribution channels based on profit retention, not revenue.

We know we can’t sell everything only on our website. But giving anyone a share of your business should not be done lightly. The three steps above raise further issues that can help you shape your distribution strategy.

Who’s In Control?

Online Travel Agents (OTAs) do a very good job indeed in bringing you bookings and revenue. They do a very necessary job of allowing you to tap into markets you cannot otherwise reach. In fact they are so good at their online business that they are quite likely also to be taking a significant chunk of business that you could have taken for yourself at significantly lower cost.

Given their branding and advertising budgets, the question I am asked often is “How can I possibly compete with them?”. That’s the wrong question. That passive question needs to be replaced with the more assertive “Why do I let them compete with me?”. After all, you give them the rates and the rooms to do so.

Two critical areas where OTAs are growing rapidly and hotels seem to have turned a blind eye are on rate and on lead-in time.

Firstly, while the parity rules are finally changing across Europe, the real issue in rate is that hotels are funding the growth of private sale and loyalty clubs on OTAs by effectively giving them sub-parity rates so the OTAs can lock in more customers. If you are discounting so-called “private” rates on OTAs on the basis that it brings you extra business, have you analysed if it is indeed extra business or just replacement of full price business? If you are doing so, why are you not offering similar rates on your own website, using newsletter signup or promo codes to make them more “private” if necessary? Hotels need to seriously look at the consequences of helping OTAs to build their own private rate programs at the expense of their own profit.

Secondly, the danger in a high occupancy market is that hotels are so content with the here and now that they fail to see pick-up on OTAs in the very long tail until it’s too late. OTAs, largely saturating the short lead-in time market, have started aggressively pushing the long tail market 6, 9 even 12 months out, where hotels without active rate management have probably just loaded low rates and unchecked availability and look no further. Worse, if hotels are using most of the market leading channel managers to control distribution, those tools are probably putting open inventory on OTAs in the long tail with no checks at all! Without adequate rate and distribution planning, hotels are losing significant yielding capability from which the OTAs can profit. Hotels should shut down long tail availability on distribution channels until they are ready to manage it properly. Bookassist’s Distribution Management System allows this channel-by-channel control necessary for an effective strategy.

To counter these issues and regain control, you need to be confident you can build your direct business.

Is my direct-online strategy good enough to reduce distribution dependence?

Reducing dependence means improving independence. Enhancing your direct-to-web strategy so that you can stand on your own is a must. And it must be a real strategy, backed with facts and planned with deliverables, not just a secondary notion.

A direct-to-web strategy needs real coherence across website, branding, customer communication, digital marketing, rate strategy and distribution strategy. It needs priority and investment. Unfortunately, few hotels fully recognise this and the consequence is that the result of the effort is often poor.

A poorly managed direct strategy will always cost you more than you need to be spending, with poor results. Easy to see why some hotels just give up and give in to the demands of the OTAs. On the other hand a well executed and thought out direct strategy will pay dividends and not just in the short term. Direct strategy benefits are sustainable enabling you to reinvest in your direct brand rather than supporting someone else’s

Far too many times I’ve heard hotels remark that driving direct business is “too expensive” and maybe OTAs are worth it after all. Yet direct business is actually growing in the industry so somebody is doing it right and customers are clearly prepared to go direct!

Like nurturing a tree, it takes patience and investment, care and protection, to bring it to fruition. But the harvest is dependent on the work put in. If direct business to your website looks like it is costing too much in return-on-investment terms, then the solution is not to reduce spending, but to analyse why it is not as effective as it should be and take corrective action so you can reach industry standards. Companies like Bookassist play a critical role in the industry, empowering hotels to compete with the heavy weights and gain sustainable advantage. Taking the easy route and relying on everyone else to sell your rooms is not where you want to be going. The only way is down in that situation.

Time for relationship change?

What’s clear is that OTAs run a two-tier service level, where the big brand accommodation providers have less stringent contract terms and more favourable rates, while the independent hotels must fend for themselves in a one-size-fits-all world. Clearly hotels need OTAs, but hotels should ideally be able to change or select alternate service levels that suit both sides. It is perfectly reasonable to pay an OTA an increased commission if they have truly brought business you could not get elsewhere. But it should likewise be reasonable to be charged a far lower commission if they have used your preferential rates in special offers to deliver bookings.

Bidding by OTAs on hotel brand names is a key problem that the big brands have managed to severely limit. Why don’t independent properties have the option to limit bidding on their brand name? Seriously, independent hotels need to square up a bit more. At the very least hotels need to review their contracts with OTAs and attempt to regain control of the inventory that they know full well they could sell themselves. Likewise, OTAs need to review the relationship they have with hotels - isn’t it time they recognise that not all hotels have the same needs and so differentiate their service offerings to them just as they do for the big hotel brands? Independent hotels are easy pickings and unless hotels take an assertive position with regard to their inventory just as the big brands did, OTAs will just keep on getting stronger to the ultimate demise of profit and sustainability.

Bottom Line

The fact is that hotels are now much more tech-savvy than before, and can reach customers far more effectively online than was the case some years ago. The tools and technology available to hotels today can help level the playing field, if they are seized upon and used properly. But a passive approach to distribution will lose out to the professional and very active OTAs every time. You can’t blame OTAs for optimising their business, but you certainly make it easier for them to do so if you do not optimise yours.

Starting with the approach of “Anyone selling rooms in your hotel is your competitor” might be overly simplistic, but scrutinising your business from that protective position will certainly do you no harm at all.

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Dr Des O’Mahony is CEO and Founder at Bookassist (http://www.bookassist.com), the multi-award-winning technology and digital strategy partner for hotels worldwide, and is a HSMAI “Top 20 Extraordinary Minds” recipient.


You Need Smarter Rate/Profit Management

By Des O'Mahony | On Tue, April 19, 2016

In revenue management we have seen significant changes in approach in the last decade, from a relatively rigid set of yield management rules to a much more dynamic approach to rate and distribution in the longer tail. In parallel we have seen the development of systems and technology that can help with the management of rate strategy.

It’s rapid-upskill time for hoteliers. But unfortunately, many hotels have not really made the key transition from a shorter-term tactical approach to this longer-term more strategic view of their rates that is necessary today. In our experience in Bookassist, hotels are still not focusing on the essence of the problem – how to sell the right-priced product to the right person on the right channel at exactly the right time. If they are doing so, then they are typically focused on one or at most two months ahead. Discuss what’s happening to rate or yielding with many hotels for 6 months’ time and it is often a relative unknown. Just keep the rate high and worry about it later is often the tactical approach.

OTAs And The Long Tail

What is clear is that online travel agents (OTA) are now shifting their battle for business to the long tail, and therein lies very real danger for unprepared hotels. With the short booking window already dominated online by the OTAs, there is little room for their growth on a per hotel basis unless OTAs push their effective booking window out even further. But when they do, there are rich pickings for OTAs because many hotels are relatively blind to the long tail of their own business.

With hotels largely concerned with the red herrings of “rate parity” and “last available room” in the short term, their long term bookings are increasingly being swallowed up before they even see it happening.

OTAs are now actively encouraging hotels to give them more availability for the future months. At the Irish Hotels’ Federation AGM in February of this year, I shared the stage for a discussion panel with a Booking.com representative whose parting advice for hotels was to load more and more availability for 6 to 12 months out so that Booking.com could “help hotels to sell more”. (My advice was exactly the opposite – don’t load onto OTAs that far out unless you have to!). While hotels will of course get more bookings because of this strategy, the hotels’ opportunity to maximise profit and reduce dependence on OTA will be rapidly eroded just as it was in the short tail.

As we all know, there is nothing glorious about discovering you are fully booked for 6 months out. That’s just a wasted opportunity to yield appropriately and generate higher profit per room. But this is precisely what OTAs are now manoeuvring to achieve to their advantage. Don’t say you haven’t been warned.

Drivers For Revenue Planning

Hotels have to move from tactical short term views to an overall strategic approach. The real strategic view is to look at rate in the context of cost of acquisition so that you are really in a position to develop more of a long-term profit strategy than just a rate strategy for your hotel. In the ideal case, an optimum rate should be determined for every channel for every day of the year.

The ability to maximise rate and simultaneously yield appropriately to distribution channels is the new challenge. This can be quite a difficult to get right, but it pays very real dividends.

In working out a plan, the primary factors that should strongly influence your rate strategy on any given date are

  • Occupancy
  • Length of stay
  • Lead time
  • Day of the week
  • Season
  • Sales channel

Most of us would be familiar with the above, but in typical RM approaches the Sales channel would not have been considered a primary influencer. But it’s important to realise that revenue management is not just about getting the highest price on the day. The price elasticity curve is more complex than that these days since the customer has access to multiple sales channels for the same product (or more accurately, the hotel through its distribution policy has given the customer access to multiple sales channels for the same product).

In the drive towards maximising profit, which is the ultimate aim, there is often much more to be gained by reducing your effective cost of sale than by raising your rate. Redirecting your business away from costly online travel agencies and towards direct sale on your website can net you more profit even when accompanied by a rate reduction. Which is why, at Bookassist, we consider the sales channel as a primary factor in rate strategy. Concurrently, the direct sale gives you the best customer data of course, which you can leverage for pre-stay monetisation and post-stay marketing.

What’s interesting about these primary factors is that it is quite practical to automate a rate strategy around these parameters as most can be measured or assessed in software on a continual basis. Making decisions based on facts and figures is the aim here, as intuition is not always reliable in the long tail. We’ve seen a number of tools in the market in recent years which aim to help the hotel get a handle on this data that already sits in their PMS and is updated daily.

Secondary factors that moderate a rate strategy include (among others)

  • Events
  • Hotel historical performance
  • Cancelations
  • Competitive set
  • Pickup pace
  • Weather
  • Political issues
  • Segment specifics

In the case of these factors, they are much more hotel-specific and location-specific, and are not always entirely practical to automate. Their relative influence also can change very rapidly. Clear data on these should be used to influence the overall strategy that is determined by the primary factors in the first place, and the local knowledge of staff is a big advantage here. Think of these as manual tweaks to the overall plan which present more opportunities to maximise profit.

Putting A Plan In Place

Here are some steps you can take to ensure you are moving to strategic management of your profit.

  • Accept that rate and profit planning should be a scientific data-led discipline and is not best served by intuition.
  • Ensure you have the right person to lead rate strategy, trained in the discipline, up to date with the fast-moving distribution space, focused on improving direct business and capable of communicating the strategy to your organisation.
  • Adopt technology interfaced to your PMS to help you plan rate adjustments systematically based on the Primary factors, but retain manual override so that local knowledge can use Secondary factors to optimise your outcome on key dates. Systems that spit out rates without telling you the why and how are ultimately not going to help you understand and develop your strategy.
  • The focus should more strictly be on profit planning rather than rate planning alone, so rate per distribution channel must be considered.
  • Work to identify total cost of acquisition on a channel basis. Without real cost of acquisition knowledge, you cannot determine if a rate you set per channel is ultimately profit-optimised or not.
  • Remember that redirecting when possible your business away from costly online travel agencies and towards direct sale on your website can net you more profit even when accompanied by a rate reduction. Proper profit planning should push for redistribution towards direct where possible.
  • Aim to know what your ideal rate should be for every day of the coming year on each distribution channel, and why. Build a combination of short and long term strategies into your plan and review on an ongoing basis to ensure you always have a well-planned year-long window ahead of you.

Most of all, ensure you communicate the entire rate strategy to everyone in the organisation so that the reasons behind channel choice and rate are well known and are supported. If your plan requires changes in distribution strategy, such as shifting more towards direct, it is critical that everyone in the organisation is aligned with that aim and knows that the strategy will ultimately benefit the entire organisation through higher profit and more working capital.

This is particularly important if other individuals in your organisation are responsible for distribution channels that your new strategy intends to reduce – rather than seeing such moves as a threat to “their area”, clear communication of the overall strategy picture should help justify the changes and get people on board with the change. Indeed, incentivising those managing other distribution areas so that they can work with you to find ways to reduce their business and switch it to direct should be a stated (and incentivised) aim of your organisation.

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Dr Des O’Mahony is CEO and Founder at Bookassist (http://www.bookassist.com), the multi-award-winning technology and digital strategy partner for hotels worldwide, and is a HSMAI “Top 20 Extraordinary Minds” recipient.


Hotels Must Act To Avoid Profit Erosion

By Des O'Mahony | On Mon, February 22, 2016

Ireland’s Hotels Are Doing Well, But Rate Recovery Isn’t Everything

The recovery in Irish tourism continues into 2016 on the back of record numbers of visitors in 2015. Most sectors are reporting a strong opening to the year.

At Bookassist, our hotel data for the first 6 weeks of 2016 shows online booking numbers up almost 14% year on year, with associated revenue up by more than double that figure. This indicates a welcome rise in direct online business coupled with a continued rise in average daily rate (ADR). Additionally, occupancy has reached strong levels in Ireland, with in excess of 82% being recorded in many Dublin hotels and healthy RevPAR.

Rate has largely recovered to 2006 levels, and caution is being urged to not let rate get out of control. But the reality is that hotel costs have risen significantly in the interim, so hotels are not nearly reaching 2006 margin levels despite the rate recovery. All the more reason that hotels need to be extremely careful to focus on where their room profit is really going and how they can take their fair share of it and put it to good use.

You Need That Profit

At the risk of stating the obvious, the hotel sector needs its profit. Working capital is the only way to prepare the sector for the future.

As a whole, the sector needs to deliver more capacity into the country, in Dublin in particular, to cope with and capitalise on the growing opportunity. To not accelerate development of new properties is to risk supply-demand problems that will ultimately make the market uncompetitive in the coming years and potentially reverse the recent recovery or drive more and more incoming guests from the hotel sector and into the sharing community exemplified by Airbnb.

However, property developers see much more profit per square foot from developing office space than low-margin accommodation right now. Unless the margin on hotel rooms can increase, this is likely to remain the case and constrain capacity. We all know this - but driving up rate is not the only solution to delivering that better margin.

On an individual hotel basis, stock needs to be continually improved. Maintaining rate requires renovation, modernisation of properties. Even more critically, maintaining your business for the long haul means continually improving service levels and holding reputation, a key driver of modern online business. This means real and ongoing investment in property quality, staff training and management. All of which are increasingly costly outlays today – but driving up rate is not the only solution to generating the required cash.

Your Fair Share

A buoyant market with higher occupancy should be generating greater margin. Yet what Bookassist has seen in other recovering markets in Europe in which we operate is that hotels themselves have been the slower ones to capitalise on the renewed buoyancy, with a disproportionate share being ceded too quickly to online travel agents (OTA).

The result of this is that while occupancy levels and ADR have risen, the associated profit generated is increasingly moving out of the hotels and into the pockets of distributors. In Ireland this is already happening and is in danger of accelerating as capacity is squeezed in 2016 and onwards.

This is particularly apparent in the “red herring” debate around rate parity, ostensibly one where OTAs do not want hotels to be selling lower on their own websites. In reality however, the OTAs are the ones merrily breaking parity by requiring discounted rates in their “private clubs”, clubs which are anything but, since anyone can sign up. These discounted rates are the fastest growing area of business for many OTAs, not surprisingly. Viewing OTA costs in commission rather than hard euro terms can often disguise what is really happening to your profit figure - remember that discounting €10 on a €100 room rate in order to make a private club sale means -€10 straight to your bottom line but a reduction of just €2 or less in the commission paid to the OTA on the €90 sale (assuming commission rates of 20% or less). That’s €10-€2=€8 more in cost of sale to you on a €100 room.

Put simply, getting your distribution strategy wrong can still fill your hotel at a reasonable room rate, but it will bleed your profit line in cost of sale terms. The same occupancy and rate skewed towards direct online business to your website will result in a significantly lower cost of sale and therefore real and substantial profit gains – profits needed to build your business for the future, profits generated without driving your rate to unsustainable levels.

Creating versus Servicing Demand

OTAs do an excellent job and are a critical part of your distribution mix. But as a hotel, you must realise that OTAs should be a secondary part of your strategy, not a primary one. OTAs are excellent at helping you to reach that customer that you could never reach on your own, and can justify high fees to do so. But OTAs should not be used to service existing demand, at least not at the rates they currently charge. In situations where occupancy is breaching 80% levels, it is an absolute no-brainer to be channelling that demand towards your lower cost direct-to-web channel online and adjusting distribution strategy generally to redistribute towards lower cost channels.

In the booming market that Irish hotels are experiencing, hotels would do well to note that OTAs do not create demand. The tourism influx is happening anyway, driven by the excellent strategies of Tourism Ireland, the value for money available in the tourism sector nationally and many other positive contributors to Ireland’s image abroad.

Hotels need to be tapping into that influx directly with proper online marketing strategies, quality websites, high conversion booking capability and strategic customer relationship management. These people are coming regardless, why aren’t you reaching out to them directly?

Long Term Strategy

Hotels need to act now to appreciate the danger of what this movement of profit out of the sector means for them long-term. Continuing to focus your hotel KPIs on occupancy and rate only and being oblivious to real cost of sale and profit blinds hotels to the reality of what is happening in a fast-moving marketplace and will result in hotels sleepwalking their way into a permanent low-margin business through OTA reliance.

It is a fact that some hotels are currently losing money on the channels they use, possibly without even knowing it. F&B may not be able to make up the difference, particularly in city hotels where guests want to be out and about and may spend little or nothing more in the property itself.

As we have long advocated at Bookassist, cost of sale needs to be looked at forensically by hotel FCs to see where real margin potential lies and where the bleed is really occurring. Investment in the direct channel is a clear win, but takes effort to kick-start.

Hotels of course “appreciate the ease” of doing business via OTAs and often view the effort in growing direct business as onerous. But OTA costs per booking do not fall with volume, while a successful direct strategy will result in an ongoing reduction in acquisition cost per direct booking and a consequent profit growth per room.

Remember, if Irish hotels get it right and improve their retention of profit, they can develop the sector for a sustainable future where rate can be justified and held. But if they allow the profit to bleed out disproportionately to distributors, then the inevitable rising rates to counter lower margins over the longer term will hit the sector hard while the distributors can just move on to other cities and countries.

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Dr Des O’Mahony is CEO and Founder at Bookassist (http://www.bookassist.com), the multi-award-winning technology and digital strategy partner for hotels worldwide, and is a HSMAI “Top 20 Extraordinary Minds” recipient.


For Ireland, It’s Never Looked Better For Direct Booking

By Des O'Mahony | On Tue, January 05, 2016

Positive Outlook

As 2016 opens, it is true to say that there has never been a better time for Irish hotels in particular to leverage their direct-to-website booking channel. 2015 was a boom year in Irish tourism. Recent Tourism Barometer reports from Fáilte Ireland have shown that accommodation providers displayed their most positive sentiment since the pre-boom era, with 70% of providers overall indicating that business is up. This figure rises to 79% among hotels alone.

Most providers benefitted from an increase in tourism numbers and a particularly strong influx from GB and USA. Overall spend is also up, and exchange rates have certainly helped Ireland to be more attractive. Repeat business has shown improvement, the domestic market is yet again on the rise, overall occupancy has risen. The Average Daily Rate (ADR) in all segments has also risen fast, which is generally good news for the hotel industry (but a worry if allowed to progress unchecked).

Sustainability of this growth is another question. But so far things remain positive, with Tourism Ireland aiming for another record year for Irish tourism in 2016 with a target of 4% growth to 8.2 million visitors.

But even without further growth in visitors, a strong opportunity exists to see further and continued growth in profitability if the existing numbers alone can be focused more on direct booking at the hotel rather than through more expensive distribution channels. It’s really time for hotels to rethink what this means and seize the opportunity.

Your Opportunity

According to Phocuswright (see Figure 1), online bookings in Europe will grow from 36% of overall bookings in 2015 to 39% in 2017. That same report shows that online travel agencies (OTAs) are taking 71% of the online booking value in Europe, versus a more balanced 52% in the US. (Peter O’Connor, the lead author on that report, is among the lineup for the Bookassist Distribution & Revenue Management Seminar on January 19th in Dublin.)

Figure 1: Data and figure adapted from Phocuswright’s recent report on the Independent Lodging Market in Europe

The challenge therefore for European hotels is to simultaneously seize the online growth opportunity in the coming years while reducing their reliance on OTAs to help shift the balance more towards what is already achieved in the US. Tapping in to this could make a massive change to your business. The stars are aligning for this, with considerable legal pressure in the EU on OTAs through 2015 to desist with anti-competitive practices and provide a more level playing field for online competition. OTAs of course retain a critical and necessary role for distribution, but their use should increasingly be strategic and if possible secondary, not a primary focus. The high rates charged for OTA business are often justifiable for that first booking you could not otherwise attract, but there are many segments where their excessive use is simply not necessary.

Repeat business and domestic business in particular is something that no hotel should be ceding to OTAs. These are customers who undoubtedly already know your hotel name and are likely searching online for your hotel. Targeted advertising on your hotel name is needed to ensure they engage directly with you rather than OTAs when searching online, and every one of them should see better value on your website and a well-presented offering online to ensure they book direct. Repeat business should additionally be encouraged through the proper use of Customer Relationship Management systems for targeted and relevant email communication.

Avoid Silo Thinking

Part of the issue with effecting change for the better in a hotel’s distribution pattern is that elements of distribution may be handled by different people who do not fully coordinate or who are not incentivised to do so. The approach to each channel or segment may be looked at in isolation, as a “silo” distinct from others. FIT business, Corporate segments, OTAs and “the website” may all be viewed in isolation rather than as a strategic whole. Even if the people responsible are the same, the thought process itself may be siloed. Optimising each within its own confines is not the same as optimising your total business.

You need to look across the business as a whole to ensure that redistribution towards direct becomes the priority of all involved. One could argue for example that the remit of anyone looking after FIT business should be to ensure as little business as possible goes that way and that as much of it as possible is shifted towards direct online channel! Accordingly, you can easily see how incentives based on targets for each silo may actually be counterproductive and encourage a status quo in your distribution strategy that is difficult to shake. Where all your key business managers are working together however toward a common goal of more direct business and therefore higher profitability, a more dynamic approach to redistribution will occur naturally.

Invest Now To Reap Rewards

The intention to push more to direct business and higher profitability must be met with real actions or it will fail. In particular, it is critical to invest in digital marketing and in web presence to ensure that the traffic is captured and is then converted. It is unfortuante that many hotels are still not prepared to make this leap and put the money behind their aspirations. This shows a lack of foresight that will trap a hotel in the distribution patterns of old.

The beauty of building your online strategy and customer engagement is that it is a bootstrapped process that gets cheaper over time with success. Initially, it may cost to fund online campaigns, a professional and dynamic web presence, proper analysis of your customer base, segmented targeting etc. But as the direct booking numbers grow and savings are made on each booking versus other distribution channels, the cost per booking of the ongoing investment actually diminishes.

This is because many of the necessary outlays, like website costs and software such as CRM or revenue management tools, are largely fixed or annual costs and as direct bookings grow those costs are not increasing. Conversely, the cost per booking of FIT or OTA bookings continues to grow linearly with volume and will never give you a cumulative advantage.

Technology

Technology in the travel space continues to develop apace and brings real advantages to the modern hotel. Profitability is driven by a capability to deliver, and delivery is driven by being forewarned and forearmed. Never has their been more opportunity for hotels to analyse and understand their business in order to improve their strategies for growing profitability.

Analysis is difficult, and interpretation even harder. Technology can take the pain out of this and many tools can provide real actions that generate business improvement and more than justify their costs. Three technology areas that are blossoming are in revenue management, customer relationship management, and data analytics.

Revenue Management: Revenue management as a skill is of course invaluable in your hotel’s team and further insight can be gained through the use of many tools now on the market. Understanding the dynamics of price flexing and its drivers is not necessarily simple and good tools can take the donkeywork out of the process, helping you see your real competitive set more clearly and patterns in their behaviour that you might otherwise miss.

CRM: Real analysis of your customer data is also critical and something that OTAs do exceedingly well. There are many tools on the market that can now help hotels to really optimise what is already their greatest but perhaps most underexploited asset. Many hotels are not capturing sufficient data to make their customer lists truly useful, and structuring your approach through the use of a specific tool or service can help turn lost customers into won customers, and turn your existing data into repeat business and improved profit. The area is worth looking at.

Analytics: True analytics and the promise of “big data” for the masses is finally coming to hotels also, combining revenue and customer views and taking a macroscopic view of the market. What use to be within the reach of large hotels only is becoming more and more affordable at independent hotel level. Watch the space carefully for developments in 2016. (One such offering comes from SnapShot, and VP Strategy Brendan May joins the Bookassist Distribution & Revenue Management Seminar on January 19th in Dublin.)

Take These Five Steps

So make it a resolution at your hotel strategy meetings to focus on what can grow your profitability and not just take complacent views of growing your ADR and occupancy. With the current positive sentiment, hotels are throwing away considerable opportunity to drive margin and generate the cash needed to invest in their property and thus secure sustainable rate levels through improved offerings and higher ratings. Adopt these five simple steps to improving your hotel’s profitability:

1: Make sure your team is thinking more broadly about your distribution mix as a whole and is resisting the trap of “silo” thinking. Ask of every booking, how could I have made that occur directly?

2: Focus more on redistribution away from other other online channels and FIT and towards direct. What does it take to achieve that? Set yourself goals.

4: Put digital strategy front and centre of your hotel’s entire strategy. Other routes may fill the gaps but direct to web must be the primary aim.

3: Be ready to capitalise by investing now, and indeed continually, in your web presence. You need to spend more to make more so beware of a budgeted approach that may place artificial limits on your ability to realise profit when it is there for the taking.

5: Embrace technologies that can help you analyse your position and give you the correct key performance indicators (KPIs). Are the KPIs you’re using now really helping to monitor your drive towards profitability or are they just affirming the status quo?

Above all ensure that you, and not just your distributors, are tapping into your fair share of the profitability that your industry is already delivering.

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Dr Des O’Mahony is CEO and Founder at Bookassist (http://www.bookassist.com), the multi-award-winning technology and digital strategy partner for hotels worldwide, and is a HSMAI “Top 20 Extraordinary Minds” recipient.


Trivago pushing for more Direct to Independent Hotel business

By Des O'Mahony | On Wed, October 07, 2015

There’s a big shift happening in meta search that is creating a real alternative to OTA-dominated business for independent hotels.

Tripadvisor and Google are both moving into the “direct to hotel” space, with onsite bookings, which Bookassist sees as a potential opportunity for independent hotels to break the stranglehold that OTAs can often have on their online business. Major meta search player Trivago, which is owned by Expedia, is also making moves to tap into the direct space more and open up opportunities for independents (and of course for itself). To date, Trivago was much more focused on the brands and chains in the hospitality sector and is dominated by OTA offers for its hotels.

In a recent interview on Skift, Johannes Thomas, Trivago’s managing director in charge of hotels, says he wants to reduce the company’s reliance on advertising from OTAs and tap into the independent hotel market. Trivago knows that “the hotel is the most valuable source of information” on its own unique services and believes that hotel sites are “the most-trusted”. The company has begun to improve its tools to allow hotels to edit and update their online content on Trivago and is hiring a strong team in this area.

Trivago still believes that managing bookings on its own site, as Tripadvisor and Google are now doing, is a non-runner. According to Thomas, Trivago wants to become a de-facto independent source of information and believes that “In a moment, where you take an on-site booking, in that moment we believe you lose credibility and trust” of the online customer. This of course is a valid issue in particular for Tripadvisor, a potential conflict of interest if it is monetising hotel listings, and it also calls into question the independence of hotel search results on Google.

For the full interview, see skift: http://skift.com/2015/09/29/interview-trivago-building-big-team-in-shift-toward-direct-hotel-relationships/

Dr Des O’Mahony is CEO and Founder at Bookassist (http://www.bookassist.com), the multi-award-winning technology and digital strategy partner for hotels worldwide, and is a HSMAI “Top 20 Extraordinary Minds” recipient.


New “Direct” booking via Google and Tripadvisor - threat or opportunity for hotels?

By Des O'Mahony | On Tue, October 06, 2015

Tripadvisor has effectively positioned itself as a new breed of online travel agent by launching its Instant Booking service recently. The service allows hotels to directly display rates and availability on Tripadvisor via a feed from their booking engine system, such as Bookassist’s. Customers on Tripadvisor can then see both OTA rates and those direct-from-hotel rates to make their booking choice. The customer never leaves the Tripadvisor site when booking “direct” with the hotel. (That “captive” approach of trying to keep the customer on one site for all was originally driven by Tripadvisor’s mobile business, where jumping between sites on mobile was a far bigger barrier to conversion than it would be on desktop.)

Not to be outdone, Google has now also expanded its Book on Google feature (now in the USA) in a change of strategy from their previous Google Hotel Finder and Hotel Price Ads approach. Again, the service allows hotels to directly display rates and availability via a feed from their booking engine system. The customer can now book directly from search results without ever leaving the Google site.

Both services claim to be “direct” friendly, helping the hotel to reach their customer directly, and positioning themselves apart from the big-brand OTA players such as Expedia and Priceline. But their “hybrid” services nonetheless come with hefty commissions from 12% to 15% for delivering acquisitions via this route (cost per acquisition or CPA model). In parallel, both continue to offer cost per click (CPC) alternatives also.

With these two giants of the travel search and research arena offering hybrid booking services, what does this mean for the hospitality industry? As usual with disruptive play, there are both threats and opportunities for the independent hotelier.

The moves from Tripadvisor and Google are, in our view, a positive for hotels if they know how to leverage the potential advantage. It does take specific action on the part of hotels to engage with the new services appropriately however, and, with inaction, therein lies the threat.

Giving Hotels Leverage

In terms of hotel online business, we are in the midst of a monopoly or duopoly stranglehold in most parts of the world with Priceline/Booking.com and Expedia dominating OTA sales. Often, this has meant that hotels are reluctant to challenge that status quo and have no option but to go along with often onerous contract terms.

The introduction of new viable routes to capture online business, backed by serious players in the travel space who can potentially deliver volume, breaks that monopoly/duopoly and introduces real competition for the main OTAs. If managed correctly, hotels should no longer fear reducing their exposure on specific OTAs since there is real opportunity to leverage the broader metasearch space encompassing Trivago, Kayak and others, as well as Google’s and Tripadvisor’s hybrid booking options.

Of course, managing carefully means managing availability and rates distribution at channel level, and not making total inventory available everywhere. The management of these hybrid metas is no different to the careful management required of OTAs.

Remember that if hotels refuse to “play” with these hybrid channels, their inventory and rates will appear anyway via OTAs, and at higher acquisition cost. It’s far better to be there directly and be in control of your offering. Therefore, it’s a question of effective management of such opportunities by the hotel.

Overall, adding new strong players to distribution is a good thing for hotels. Choice breeds competition that may ultimately favour not just the consumer but the supplier. (We will see.)

The Data Play

In the case of both TripAdvisor and Google, the hotel’s booking engine is the technology feeding the rates and availability to the site, there is no new “extranet” for the hotel to manage. Also, completion of the booking takes place behind the scenes on the hotel’s booking engine platform. Unlike the OTAs who have rowed back even further on the information they supply to hotels regarding the inbound customer, TripAdvisor and Google are providing the customer’s real email, and the hotel sends the actual booking confirmation email. This allows hotels to manage, own and monetise pre-stay communication, as well as maintain ownership of the customer interaction post-stay.

This is particularly important when you consider that the large OTAs are increasingly generating their revenue from “private” club sales to their customer base via email offers or private log-in, offering deals that never appear on the public sites. Clearly, customer data is extremely valuable. (Whether hotels are equipped to capitalise on that effectively is another question however.)

The cost of acquisition for that first hybrid booking via Tripadvisor or Google may therefore appear high (though not as high as OTAs), but it is critical the hotel has a data-use strategy to ensure that opportunities are created for the customer to book direct next time.

Browsing and Research Phase

A fundamental difference also between Google and Tripadvisor on the one hand, and the OTAs on the other, is that the browsing and research phase of travel planning overwhelming takes place on the former. By building in booking opportunities to the research phase of travel planning, it may well short-circuit the decision and lead to booking acquisitions that would otherwise have ended up on an OTA at a later stage in the decision process.

Also, with Tripadvisor the hotel has much more control of the content describing its services via the comprehensive multi-lingual content it can manage as part of its Tripadvisor listing. Google likewise is championing the clear display of hotel amenities as a way for hotels to stand out. Both these areas help hotels to be less commoditised compared to the OTAs’ approach, and to shout a little more about what makes them unique. Such rich information often drives additional confirmatory traffic to hotel websites, where direct booking potential can also be capitalised upon.

Bottom Line

It remains to be seen how this play from Tripadvisor and Google will work out. The primary disruption is to the OTA model, but for the reasons above we do not believe that it diminishes the hotels’ opportunity to increasingly drive direct business on hotel websites. Both OTAs and direct-to-hotel booking rates continue to grow, mostly at the expense of offline and traditional travel modes, even if OTA business has the stronger growth rate.

Indeed OTAs are increasingly interested in direct business, and have been signalling their concern about how direct may evolve to reduce their business growth - witness booking.com’s move into providing the booking suite for hotels, and their associated acquisitions in the hotel direct business space.

With book-direct models, Tripadvisor may well have the edge over Google here, as a dominant travel-focused brand with a “good” reputation among online customers who trust its reviews and among hotels who value the custom and exposure it brings. Google on the other hand has massive volume but still did not manage to deliver effectively with its Hotel Finder or Hotels Ads approach previously.

With Tripadvisor, bringing in a money element may well introduce a risk to its standing as an independent review provider. Can it truly be independent in how it ranks hotels if it has more to earn from some hotels than others? They have to manage that issue carefully. Likewise, Google has to thread carefully with its push towards booking since its primary bread and butter in travel is pay-per-click advertising fees from the OTAs as well as from hotels. Google also has continual issues with anti-trust investigations into how its monetisation of search may lead it to skewing the validity of search results.

For the independent hotel, the moves are broadening the landscape yet again and this means that more careful management is key. Hotels need to have a full digital marketing strategy across all potential customer touch points, and need to work more strategically with their customer data if they are to properly leverage these new avenues for business. The key, as always, is for hotels to be able to actively manage the opportunity, rather than allow themselves to be managed by it.

For that, they need the appropriate technology and the expertise.

—-

Dr Des O’Mahony is CEO and Founder at Bookassist (http://www.bookassist.com), the multi-award-winning technology and digital strategy partner for hotels worldwide, and is a HSMAI “Top 20 Extraordinary Minds” recipient.


Hotels must think more strategically and collectively about direct booking

By Des O'Mahony | On Mon, September 14, 2015

In all the noise and opinion about rate parity changes, the pros and cons, some simple realities about the dynamics of the industry are often overlooked. For example, online travel agents (OTAs) are crucial to hotels’ business because they provide the reach into the general market that a single hotel cannot possibly achieve. And there will always be a need for that regardless of how the prices compare from OTA to hotel website.

That’s because a primary disadvantage for independent hotels that OTAs can continually capitalise on is that hotels cannot (or do not) behave collectively. Hotels are so busy competing with each other that they hand a significant amount of business to third parties at a high cost to themselves, rather than figure out ways to hand it to each other and benefit from reciprocation! For OTAs, it’s like divide and conquer except that the hotels oblige by doing the dividing part themselves.

Hotels are so busy competing that they hand business to third parties rather than figure out ways to hand it to each other!

The brands and chains have worked hard in this area of course, and can move business between properties through association and brand building. Pushing their business towards direct is happening more and more, as seen by Marriott’s clever #itpaystobookdirect advertising campaign recently. But the brands and chains are still walled gardens, passing business among themselves but not outside the brand.

Is there another way?

Many (but not enough) hotels adopt the sensible policy of telling their guests at checkout to please book direct with them next time. It’s that few precious moments of personal facetime with your guest when you can give them a message that sticks, and if it’s not policy in your hotel it certainly should be. Even if the price is the same, a personal request is often a strong psychological inducement to action. Don’t underestimate it.

OTAs have been leveraging this for years of course - encouraging their users through shrewd email marketing to return to the OTA platform when booking again, and making more and more use of “private” clubs to encourage their users to stop looking elsewhere. This makes sound business sense if you’re an OTA, and they’ve done it very well indeed. But independent hotels have failed to figure out how to work collectively when it comes to customer acquisition, effectively handing the advantage to OTAs.

That’s because they concentrate on customer acquisition for their own hotel only, whereas OTAs don’t need to care about which hotel their customer books once they do book.

But here’s the thing:

Hotels need to think at a higher strategic level when it comes to booking direct. At Bookassist, we advocate that hotels should be encouraging their guests to book direct at ALL hotels, not just theirs. Getting the message to every single hotel guest that any hotel would welcome direct bookings when next they book gives hotels an opportunity in this one small way to work collectively for their greater benefit.

Maybe your guest doesn’t book with you next time, but the message to book direct gets around and all hotels eventually benefit. (Ramping this up to offer some form of collective benefits or awards could be a next step.)
Remember, the hotel industry is larger than any OTA if it can just work collectively for its own benefit. Getting a larger slice of the online pie and redressing the balance of business with OTAs and other distribution avenues is a reasonable thing to work for. There’s plenty of business to go around for all.

Suddenly, hotels are vouching for their industry, not just their hotel.

So, suppose tomorrow every hotel told every guest at checkout to book directly next time at their next hotel, no matter where they decide to stay. Suddenly, hotels are vouching for their industry, not just their hotel.

Just imagine what a game-changer that could be.

—-
Dr Des O’Mahony is CEO and Founder at Bookassist (http://www.bookassist.com), the multi-award-winning technology and digital strategy partner for hotels worldwide, and is a HSMAI “Top 20 Extraordinary Minds” recipient.


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