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4 top tips for lowering your hotel distribution costs, commissions and overheads

  Posted in Online Distribution

Hotel distribution costs are on the rise, as the march towards travel industry consolidation continues. Indeed, four brands – Expedia, Priceline, Orbitz Worldwide and Travelocity – dominate 95% of theOTA market share in the US alone. Meanwhile,, Australia’s fastest-growing OTA, saw a 160% increase in mobile bookings in 2013 with revenues of $8 billion (nearly triple from the year before).

As Google continues to dominate search, there are concerns rankings will bias users in favour of prominent advertisers, further increasing the costs of customer acquisition. While online channels are driving higher booking volumes, steep commissions and pricing transparency are putting competitive downward pressure on rates. So, if you’re feeling the pinch, here are four tips for lowering your hotel distribution costs, commissions and overheads.

1. Don’t put all your eggs in one basket

Statistics from HSMAI show 76% of independent hotel room nights are reserved through OTAs, costing hotels billions in commissions every year. In order to increase direct bookings, hotels need to think about their overall web presence, not just OTAs. By having an Internet booking engine (IBE) on your branded website and investing in social and mobile technologies to drive sales, you can reduce the amount spent on third-party commissions. In particular, you should be looking to leverage the native capabilities of mobile and social platforms as a means of communicating with consumers, providing information and facilitating transactions – not just promoting last-minute deals.

In today’s competitive environment, it’s safe to assume that channels will get more expensive over time, so it’s critical to invest in the ones that offer you the most control in your marketing efforts and communication. The key is to maximise and optimise your search, social, mobile, ad retargeting, email, and voice channels to attract and retain guests.

2. Grow your customer database

Developing and maintaining your customer database is one of the most important things you can do to nurture your customer relationships and create relevant conversations with guests. For example, a hotel CRM (customer relationship management) system, in conjunction with your PMS or CRS, can help boost your bottom line by gathering guest data from social media profiles, sending targeted communications and promotions, creating offers based on a customer’s behaviour, as well as providing valuable metrics and insights – all of which can help you measure the overall effectiveness of your hotel’s marketing campaigns.

3. Benchmark how effective you are

Are you getting the best ROI? Benchmarking where you stand in the market can give you a better idea of how well you’re performing. For example:

  • How do your revenues and costs measure up to others?
  • What are you paying for your marketing channels?
  • Are your acquisition costs high or low?

In the quest to stay on top of what it’s costing you to acquire guests and to keep them, your data and analytics are powerful tools for generating insights into your digital ROI and helping you discover the best distribution channels for reaching your target market.

4. Seek your competitive advantage

With hotels sitting in an ever-changing and volatile distribution landscape, they must constantly seek to improve their position in their market. Using a variety of channels (social, mobile, website, email and search), hotels can reach out to customers with special promotions and discounts, value-add deals and other incentives such as free room upgrades to get customers to book directly and build loyalty. For example, Danubius Hotels offers guests a free £15 voucher for each night booked directly, along with a best price guarantee.

While OTAs have their rightful place in any hotel distribution strategy, the key is to find a balanced approach to direct and indirect business. In particular, hotels need to pay attention to where their guests are coming from and measure the effectiveness of each channel by setting specific performance objectives. By staying one step ahead of the game, you can effectively reach your guests and retain them.

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