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Direct Versus Indirect Distribution: Making the Most of a Love-Hate Relationship

Direct versus indirect distribution: making the most of a love-hate relationship

BY EYE FOR TRAVEL Oct 12, 2012

IN-DEPTH: Today there are distribution channels that offer more than just rooms. On top of this the digital and notably mobile aspects of technology are redefining the travel market and Google and Apple look likely disruptive forces. EyeforTravel’s Ritesh Gupta investigates this rapidly changing landscape.

Working out how much to rely on intermediaries and how much to drive direct business is tricky for hotel firms. Of course, OTAs are an important and necessary distribution channel, but it is important to determine the right kind of ties.

When it comes to the critical things, the role of the OTA has changed very little. OTAs help to reach brand agnostic consumers who may not be familiar with a particular travel brand. In this respect OTA’s do a great job of packaging travel components to give the customer the benefit of one-stop shopping.

So even though hotel companies attempt to go direct, they can’t ignore the fact that travellers can be driven by other priorities. This makes certain hotel companies uncomfortable because there are many instances where online travel agencies include extras such as gift cards on the retail price so OTAs end up having the upper hand.

Understandably this does not please everybody but there are hotel companies that have also accepted the practice. Hotels understand they need to calculate the total value the business gets in terms of marketing and exposure, not least the exposure gained from an OTA listing– known as the ‘billboard effect’.

“Each channel needs to be measured on its merits and value proposition it brings to the table,” says says Brij Bhushan Chachra, director, revenue account management – India, Middle East & Africa, Preferred Hotel Group. “Today each channel has different value propositions and cost structures and as businesses it is important to ensure we maximise the same for our hotels.”

Going forward a lot more is expected from intermediaries. In the future, Chris Murdock, manager, distribution, Fairmont Raffles Hotels International sees distribution channels offering more than just a room. What we will begin to see are channels that offer experiences. “How about a channel where you indicate what type of trip you are looking for (beach, golf and so on), how far you are willing to travel and how long you plan to stay?” he asks, adding that a result set could contain five experiences to choose from.

Hotels also acknowledge more options can mean additional benefits. “One of our strategies is to reach out to a global audience, gain global awareness of the brand and its value. I believe the addition of ‘new players’ in the mix gives the guests more opportunities to view our brand,” says Murdock.

A complex relationship

Clearly the supplier-OTA relationship “is a complex one and a love-hate one, too”, says Lincoln Merrihew, MD of Automotive and Travel at Compete. “If OTAs had nothing to offer suppliers, suppliers would stop using them. If they did not offer consumers anything, there would be no successful OTAs. The advantage to consumers includes being able to search across hotel brands; one advantage to suppliers is using OTAs to dispose of distressed inventory,” says Merrihew.

The path to purchase is an extremely complex one. As Merrihew explains, in some cases, it starts with a search on a generic set of terms like ‘Orlando family adventure’. In this case, the consumer is focusing on the location. Another consumer may search on ‘Disney vacation’ and so is already demonstrating brand awareness digitally. But in general most companies with an online presence are looking to interrupt behaviour. In the above example, Disney wants you to keep going and book with them, including a hotel. But every other travel company also wants that customer too.

So not only is the consumer is faced with many choices, they are also regularly interrupted, says Merrihew. That challenge for the travel industry is piecing it all together, and correctly valuing and attributing cause and effect. For example, how a hotel values its search marketing dollars in the path from search to booking is not simple and linear. It can guess or use surveys, but the best approach is having a window across the Internet with evidence of the digital path to purchase. This allows for connecting the dots across the interruptions.

Murdock says: “What excites me most in hotel distribution today is how easy it is becoming for guests to use many of the channels available through distribution. As we move more and more into a ‘mobile’ world, many of the distribution opportunities now are literally in ‘the palm of their hand’.”

For Murdock, the whole process of booking a room today is straightforward and many distribution channels have made the process considerably easier. “Where I think there is an opportunity or what does not give me peace of mind are the ‘extras’ that you are looking for when staying at a hotel,” he says. Often the things he would like to add to his stay, such as a round of golf or spa treatment require an additional call to the hotel.

One of the other issues to be addressed is rate fluctuation as it can be confusing for buyers. Add to this the inconsistency across different channels of distribution and the consumer begins to question the true value of a hotel room.

Says Murdock: “Our strategy has always been to offer a consistent price for the same product but I do believe that some confusion at times lies in the comparison of just the price without taking into consideration the product.”

Of course then there is the reality of revenue management systems; very often properties have systems in place that could potentially adjust rates for dates in the future, impacting what the guest sees from day to day. Looking to the future

Hotel distribution continues to be about optimising channel profitability and brand awareness. Murdock says when it comes to weighing up the options for distribution, nothing much has changed. A couple of things to look at are connectivity options and source markets. “If the distribution partner can connect via connectivity partners we have this can be part of the decision. If we feel that a certain distribution partner can help us reach a source market that we would like to be in that as well weighs into distribution decisions,” he says.

The increasing competitiveness of the global distribution landscape including disruptive and innovative players like Google and Apple could be an opportunity for improved distribution economics. However, it may just be a case of the same landscape with different players and models.

Both Google and Apple have the potential to significantly disrupt the consumer travel research process. “They each have established deep consumer trust across many categories of products,” says Merrihew. However, while in some cases consumer trust of the Google and/or Apple brands exceeds any fears about using a generic supplier, this is not always the case. So the challenge for the disruptors is gaining consumer trust, offering a unique value proposition and then setting realistic expectations and delivering on them.

For Merrihew the biggest unknown at this point is how the digital and notably mobile aspects of technology change everything further. “Clearly it will redefine it; the question is when and by how much.”

With computers becoming more sophisticated he could envision consumers eventually letting an app handle their entire booking process. For example, a consumer enters that they are travelling to Atlanta. Earlier they entered brand or property preferences and, perhaps, budget constraints. The app completes the booking based on the entered criteria, including emailing hotel confirmation data and digital flight boarding passes.

That would surely reduce the work for consumers when booking but could make travel players’ ability to disrupt that much harder.

cwa

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Direct Versus Indirect Distribution: Making the Most of a Love-Hate Relationship

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  203. I have come to understand that expenses for internet degree gurus tend to be a great value. Like a full College Degree in Communication in the University of Phoenix Online consists of 60 credits at $515/credit or $30,900. Also American Intercontinental University Online comes with a Bachelors of Business Administration with a entire program feature of 180 units and a tuition fee of $30,560. Online studying has made getting the diploma far more easy because you may earn the degree from the comfort of your house and when you finish from office. Thanks for all the tips I have certainly learned through the web site.

  204. The other day, while I was at work, my cousin stole my iphone and tested to see if it can survive a 30 foot drop, just so she can be a youtube sensation. My iPad is now broken and she has 83 views. I know this is totally off topic but I had to share it with someone!

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  214. Gene Atay says

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