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Find out which are the distribution channels for your hotel

Find out which are the distribution channels for your hotel

Distribution channels are those independent companies that function as intermediaries between a hotel and its customers. That is, they are involved in the process by which the services or products of a business are made available to consumers. In other words, distribution channels help a hotel to secure room bookings. In this article, IHCS tells […]

Distribution channels are those independent companies that function as intermediaries between a hotel and its customers. That is, they are involved in the process by which the services or products of a business are made available to consumers. In other words, distribution channels help a hotel to secure room bookings. In this article, IHCS tells you all about them.

 

Importance of hotel distribution channels

In the hotel sector, distribution systems aim to bring the consumer to the product or service, i.e. to the hotel, restaurant, spa, etc. The importance of commercial intermediaries is reflected in the fact that they offer benefits for an independent hotel.

The importance of commercial intermediaries is reflected in the fact that they offer benefits for an independent hotel. One of them is that a hotel does not have to worry about displaying its services in each city, as this is something that a distribution channel does. This means that hotels that contract distribution channels or intermediaries have greater expansion in national and international markets, thus greater reach.

For a hotel distribution channel to bring guests (consumers) to the hotel (product or service) it must perform several functions:

  • Collect and distribute information. The distribution channel must collect and distribute data and information about the market and the hotel’s environment.
  • Promotion. Distribution channels also carry out the dissemination of campaigns that draw attention to the hotel’s services and products.
  • Contacting the potential client.
  • Adapt the hotel’s services to the needs and preferences of the client.
  • Carrying out the negotiation process, where prices for services are agreed upon.
  • Distributing the service or product to the client. In the case of hotels, the consumer is brought to the product.
  • Assume financial risks in the case of not selling all the services or products that are part of the contract.

 

Main distribution channels

Direct channels

A hotel’s direct distribution channels are mainly its website, where customers can make reservations without intermediaries, but also e-mail and telephone reservations.

The advantages that hotel owners obtain through these channels are basically two. The first is that you do not pay commissions, so bookings are more profitable. And the second is that the owner has a direct relationship with the customer. But to obtain these benefits the hotel must invest in a good booking engine within the website and marketing strategies to attract customers.

 

The role of OTAs

OTAs are online travel agencies that started out as websites for booking hotel rooms. Over time, apart from being a commercial intermediary for hotels, they spread to airports to offer trips, car rental companies, taxi lines, tourist attractions, restaurants, among others.

When a hotel hires an OTA as an intermediary, it must take into account that it must pay a commission for each booking. These commissions can be between 12 and 30 % of the room rate. Among the most important and well positioned OTAs in the market are Booking.com and Expedia. The percentages can be a bit high, so it is also important to work on the booking engine of the hotel’s website.

There are several benefits that an OTA can offer, one of them is the fact that our hotel will have visibility in front of millions of travellers, as they are positioned at an international level. Another reason why a hotel should think about an OTA is because approximately 41% of travellers use online travel agencies such as Booking.com.

For independent or smaller hotels, there are smaller OTAs that specialise in market segments. These also target more local segments and may have low commissions. Examples of these are Airbnb, Trip.com, Despegar, among others.

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Metasearch engines

A metasearch engine is a computer system that collects and stores all the information that is on the web. The most famous search engine of all is Google. In the case of the hotel industry it is called Google Hotels. For hotels, in addition to Google, there are others such as Tripadvisor, Kayak or Trivago.

The function of each of these metasearch engines is to show prices and room availability of a hotel from different booking sources. It also allows customers to make a comparison between the OTAs’ rates and those on the hotel’s website.

The trading relationship between the hotel and the metasearch engine can take the following form. A search engine such as Google publishes advertisements about the hotel and for each click a user makes on the advertisement, the hotel pays a value. In this sense, a metasearch engine differs from an OTA in that it does not charge booking fees and can also direct potential customers to the hotel’s website.

 

Tourist wholesalers

Independent hotels may also use those companies that are responsible for designing tourism packages targeted at a leisure-related market segment, and one of the main elements of these packages is accommodation. Among these companies are tour wholesalers and bed banks. Examples are TUI and Hotelbeds.

These wholesalers generally book a number of rooms in a hotel in exchange for a discount. Then retailers such as OTAs or tour operators sell the package tours to receive a commission from the wholesaler. The hotel then, instead of paying a commission per booking, offers wholesale rates that include discounts.

Other channels

The above channels are the most used and the most important, however, there are others that independent hotels can contract. In this case, global distribution systems (GDS), tour operators, Hotel Ads, social networks, among others, stand out.

 

How to manage your distribution channel mix

As we have seen in the previous sections, in order to market our hotel establishment correctly, we must have a mix of channels. It is not enough to have only our website. But in order to have a mix of channels, good management must be carried out. Here are some tips for such management:

  • Optimise advertisements in each distribution channel. In this case, every independent hotel owner must publish content that provides all the information that customers need. So it is necessary to be reviewing the ads and updating them if necessary.
  • Maintain the same prices on all channels. It is a mistake to have different prices on each channel, that can be seen badly by customers. Also, you need to make sure that the rates will be sufficient to cover the commissions. Another thing to keep in mind is that prices on the hotel’s website should be lower than on paid channels, as this promotes direct booking.
  • Track acquisition costs. In other words, the performance of each distribution channel, including the direct channel (hotel website), should be verified. The costs per commission, per click, per marketing, per booking engine, among others, should be calculated. The idea is to see which is the most profitable and invest more resources in it. To measure profitability, metrics such as NetRevPAR (net revenue per available room) should be applied.
  • Use revenue management technologies. Managing several distribution channels requires time and effort, so it is advisable to use hotel management software. Some of the most commonly used are: the rate comparator, which allows real-time viewing of rates; the channel manager, which allows updating rates and availability on multiple channels at the same time, enabling competitive rates to be maintained in the market; and price intelligence technologies, which send alerts on rate changes and local market conditions.

Remember that a specialised hotel consultancy like IHCS can help you manage your hotel distribution channel mix in the most effective way possible, so don’t hesitate to contact us!

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