Optimizing Your Hotels Online Distribution StrategyGUIDEIndexIntroduction 3What Is Online Distribution Strategy? 5OTAs vs. Direct Bookings 10Pricing Strategy 17Managing Reviews on Distribution Channels 23Case Study: Pure Salt Luxury Hotels 282IntroductionHotels have virtually unlimited options when it comes to distribution channels, but with a finite number of rooms to sell and limited resources available, you must be careful about choosing channels that will deliver the highest profits for your property.While costs can vary by channel, overall distribution coststhe fees hotels pay to market and sell roomshave climbed significantly in recent years, often at a faster pace than rooms revenue. This has resulted in lower profits for hotels. Until recently, the impact of this trend has been partly obscured by relatively strong demand for hotel rooms. But in many regions of the world the hotel industry is experiencing or forecasting a downturn in demand driven by economic uncertainty, reduced travel, increases in supply, and new competitors like Airbnb. To maintain or increase profitability, hotels will need to find ways to reduce costs, increase market share, and implement a smart distribution strategy that reflects todays market conditions. In this guide we discuss how to take a focused, strategic approach to online distribution. Well show you how to develop a distribution strategy, choose channels, manage OTA business, increase direct bookings, manage reviews and measure results. And well look at how one hotel company is reaping the benefits of a smart distribution strategy. Introduction4What Is Online Distribution Strategy?Online distribution strategy is a hotels plan of action for selling rooms on digital channels to maximize profits and advance financial objectives. A hotels financial objectives are laid out in the annual budget and typically include yearly and monthly targets for total revenue, rooms revenue, average rate, occupancy and RevPAR. The budget also specifies the amount of money allocated for achieving these objectives through marketing, revenue management and distribution activities. Strategy is defined as the actions the hotel takes to achieve its objectives, whereas distribution is the channels on which a hotel chooses to list room inventory for sale. To optimize is to make distribution as efficient and profitable as possible.What Is Online Distribution Strategy?6Distribution ChannelsDistribution channels can be online or offline. Offline channels include voice reservations, walk-ins, groups, wholesale/tour business, and the GDS (travel agent and managed corporate business). In this guide we focus on online or web-based distribution channels, which can be divided into two main types: direct and indirect. A direct online booking is a reservation that is made by a traveler directly with a hotel without using an intermediary. Direct online channels include the hotels website, mobile app and, if applicable, affiliated brand or group website or app. For direct bookings, no commissions are paid by the hotel to an intermediary. However, the hotel may pay a booking engine fee, brand fee, pay-per-click fees or other related fees.An indirect booking is a reservation made by a traveler through an intermediary website. The hotel pays the intermediary a fee for completing the transaction, typically in the form of a commission or percentage of the room rate. Indirect channels include OTAs like Expedia, Booking and their affiliates and assisted booking channels like TripAdvisors Instant Booking and Book on Google. Metasearch channels like Kayak, Trivago, Google Hotel Ads, TripConnect and Skyscanner act as an intermediary but refer bookings to hotels and OTAs for completion, charging a pay-per-click fee for doing so. However, some metasearch channels also process bookings and charge a commission for doing so, which makes them a source of both direct and indirect bookings. 7Distribution MixA hotels distribution mix refers to the breakdown of bookings or revenue among its booking channels or market segments. Typically, a hotel establishes targets for each segment and tracks weekly, monthly and annual performance. While the optimal distribution mix can vary by hotel, most hotels strive for a diverse mix to avoid becoming overly dependent on any given segment or channel. Every year Phocuswright surveys U.S. travelers on hotel room purchase behavior, and the results have been fairly consistent over the past five years. (See graph.) In 2015, 34 percent of respondents said they typically booked through an online travel agency, up four points from the previous year, and 23 percent said they purchased through the hotel website, down 4 points from the previous year. Metasearch remained flat, at 10 percent, and calling the supplier climbed slightly, to 18 percent. Note that this data applies to American travelers only; OTAs are generally more popular in Europe and other regions of the world. 8Satisfied with Your Distribution Mix?During the ReviewPro webinar, Optimizing Your Hotels Online Distribution Strategy, we polled attendees on their distribution challenges. To our surprise, only 7 percent of respondents said they were satisfied with their current distribution strategy. See the results below. How does your hotel measure up?64%47%36%22%7%0% 10% 20% 30% 40% 50% 60% 70%Not enough direct bookingsToo dependent on OTAsNeed a more focused distribution strategyMarketing/acquisition costs too highWere happy with our current distribution strategy Which of the following applies to your hotel/hotel group? (Check all that apply.)9OTAs vs. Direct Bookings