Managing Distribution Channels

Good distribution channels produce room sales for a hotel. The best channels deliver those rooms with high net ADR yields. Traditional travel intermediaries, the GDS, the IDS, and fees that franchisors of franchisee-owned chain hotels pay for use of that brand’s CRS all affect net ADR yield.

As you learned in Chapter 4, net ADR yield is the percentage of the normal or standard room rate that is actually realized by a hotel after subtracting from the selling price the cost of fees and assessments associated with the specifi c distribution channel responsible for a room’s sale.

Net room rate / Standard ADR = Net ADR yield

In this formula: Standard ADR - Distribution channel costs = Net room rate

Of course, it is important for RMs to know the overall ADRs achieved by their properties. It is even more important, however, that RMs know the net ADR yields produced by each of their distribution channels. This is so because the costs related to selling in different channels vary dramatically. As a result, RMs must be especially aware that in addition to the number of rooms sold, it is net ADR yield, and ADR that should be considered when evaluating the effect on hotel profi tability of any individual distribution channel utilized.

It is an oversimplifi cation to assume that high net ADR yields are always more desirable than lower net ADR yields. This is so because a very low standard or overall ADR with a high net ADR yield can be as undesirable as a higher ADR with a lower net ADR yield. It is for this reason that RMs must recall the importance of GOPPAR. In Chapter 1 you learned the formula for GOPPAR is:

Total revenue - Management’controllable expense/ Total rooms available for sale = GOPPAR

As you have now learned, profitability is directly affected by net ADR yield because that refl ects how much of its room revenue a hotel gets to keep. As net ADR yields go down, and as ADRs go down, GOPPAR declines as well.

Nonelectronic Distribution Channels

Nonelectronic distribution channels are those in which room rate and availability information is delivered to buyers face-to-face. Nonelectronic distribution channels tend to be lower cost in terms of fees assessed, and they enhance the accurate exchange of information and provide for easy information updating. To illustrate, consider the walk-in guest. At the

time of the guest’s arrival, completely up-to-date and accurate room availability information can be verifi ed via use of the PMS. In such a scenario, real-time updated room rates can be quoted and the room sale made quickly and without unnecessary and excessive selling (distribution channel) costs.

For most RMs, this will entail devising and managing revenue optimization programs for the following distinct nonelectronic distribution channels:

_ On-property transient sales

_ Direct telephone sales

_ On-property group sales

_ Convention and Visitors Bureau (CVBs)