Electronic Distribution Channels

Effectively managing electronic distribution channels is increasingly important to the overall success of RMs. Given the hotel industry’s centuries-old existence, however, it can safely be said that only fairly recently have electronic distribution channels affected hoteliers’ revenue management efforts.

CRS

If you are like most RMs, you work in a branded hotel. As well, if you are like most RMs, your brand has developed a CRS whose use is mandated by your hotel owner’s franchise agreement. The CRS accepts reservations from a variety of electronic and nonelectronic distribution channels and feeds those reservations to your hotel’s PMS. Today, most brands accomplish this electronically. A few smaller hotel brands, however, still operate manual systems. In either case, room sales are communicated to your property while rooms availability and room rate information must be communicated from your property to the CRS.

To demonstrate the effectiveness of their CRSs, most brands provide RMs with monthly or, more frequently, CRS business generation reports. These reports typically include information about a designated time period (usually a month) and the prior year’s equivalent time period data. Data reported most often includes information about:

· Reservations made

· Reservations canceled

· ADR achieved

· Sales revenue generated (Reservations made _ ADR)

· Average length of stay (ALOS)

· Source of reservation

GDS

The existence of the GDS changes the RM’s world. When your room types and their accompanying rates are displayed only on your PMS and a CRS whose data are displayed on your brand’s Internet site, potential buyers can compare your revenue management decisions only with those of other hotels within your brand or perhaps within the family of brands operated by your franchisor.

Effective RMs can best manage the GDS when they:

_ Understand all fees associated with accepting a reservation via each member of the GDS used at their hotels.

_ Monitor the communication link between their property and the GDS.

_ Ensure that the information included in their GDS listings is accurate and-up-to date. Review the data on a regular basis.

_ Ensure all approved rate codes loaded for use by the GDS are accurate and up-to-date.

_ Ensure that top revenue producing travel agencies and wholesalers are well informed about property product improvements and enhancements as they occur.

_ Ensure travel agents commissions are paid in a timely manner.

_ Regularly analyze the revenue production reports supplied by the GDS including data sorted:

_ By booking source

_ By travel agent

_ By room type

_ By room rate code

_ By country or region

_ Make a review of the monthly (or more frequent) GDS report part of the revenue optimization team’s regularly scheduled meeting agenda.

IDS

To better understand how to manage the IDS as a unique channel, however, it can be helpful for RMs to view it as consisting of three major divisions. These are:

_ Property web site(s)

_ Third-party web sites

_ Web 2.0

Principles of Distribution Channel Management

The management of distribution channels is the management of partnership relationships. In the lodging industry, the type and forms of these partnerships will continue to evolve. It is important to remember that a distribution channel is effective only to the degree that it helps you achieve your revenue optimization goals. Both your hotel and the channel you

use must benefit.

12 Principles of Distribution Channel Management:

1. Evaluate channel effectiveness based on net ADR yield as well as the channel’s total revenue generation ability.

2. Use distribution partners to promote rack rates and premium rates as well as selected discount rates.

3. Regularly measure the proportion of revenue generated directly as a result of the hotel’s brand affi liation.

4. Design or employ shopper services to regularly evaluate the quality and information accuracy of nonelectronic distribution systems.

5. Regularly measure the proportion of revenue delivered via nonelectronic distribution channels.

6. Develop and aggressively promote their own well designed proprietary (not brand controlled) property web site.

7. Assign one or more individuals to regularly evaluate the accuracy of those electronic distribution partners listing the property’s inventory and room rates.

8. Avoid distribution channels that require manual uploads of inventory and rates.

9. Seek out commission-based IDS partners; avoid merchant and opaque model site operators if they lead to product commoditization.

10. Implement a proactive Web 2.0 strategy via CGM initiatives such as blogs, tweets, guest experience, and photo sharing.

11. Seek out specialized distribution channels to advertise unique hotel offers based on unique product attributes. Utilize sound differential pricing strategies to price the offerings.

12. Aggressively implement strategies designed to shift guests’ future bookings from more expensive distribution channels to lesser expense channels.

Questions

1. How profitability impacts net ADR yield

2. What is the difference between GRS and GDS?

3. Name principles of distribution channel management?

Literature:

1. Hayes, D. & Miller, A. (2011). Revenue Management for the Hospitality Industry. Hoboken, NJ: John Wiley & Sons, Inc.

2. Stanislav Ivanov. Hotel Revenue Management: From Theory to Practice. 2014. Varna: Zangador

3. Revenue Management. American Hotel & Lodging Association (AHLA), 2006

Topic 9. Evaluation of Revenue Management Efforts in Lodging

9.1. The Lodging Revenue Paradox

9.2. STAR Reports