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- How Can Hoteliers Best Leverage Third Party Distributors? |
Chicago - (October 2003) - It poses a challenge - - determining whether
or not your hotel should participate in the Internet merchant programs
currently available. There are many to choose from, including: Expedia,
Orbitz, Travelocity, and many others. These programs vary in their
flexibility, consumer reach, and distribution costs. Whether you
are contemplating participation in an Internet merchant program, or you
have already jumped in with both feet, it is important to understand these
programs at the outset, and subsequently reevaluate them throughout your
contract term. This becomes even more critical when you consider
the recent acquisitions of merchant distributors such as Hotels.com and
Hotwire.
As a hotelier, how can you best leverage the distribution capabilities of today's internet merchants? First, determine when your hotel should use a merchant program. Next, you must evaluate the merchants to make sure the ultimate impact is both a profitable and non-cannibalizing one. When should I use a Third Party Distributor? Each Internet site offers some unique features that draw specific types of travel buyers. It is the responsibility of the hotel to match its business needs with the appropriate Internet sites. Therefore, you must leverage both these Internet sites and their merchant programs to reach your potential customers. You are looking for a means to acquire either incremental customers or average room rate. A hotel should use a merchant when the merchant's program can provide better distribution to a particular consumer segment versus that of other channels. More specifically, this means your hotel can achieve:
Once you are confident opportunities exist, evaluate your options and determine which merchant relationships will bring the most value to your hotel. Breaking this down to its core components, you must evaluate the merchant's:
Consumer Reach By Customer Segment:
Identifying Channel Conflict:
Understanding Distribution Costs:
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Transaction & Switching fees | Credit Card fees | Marketing costs |
Commissions | Advertising costs | Merchant costs |
It is important to total the applicable costs for each channel as you
compare your distribution options.
Competitive Environment:
Finally, if you decide to execute an agreement with a merchant, be sure to understand how your hotel will be marketed on the site, in terms both of search result placement and advertising. You are compensating the merchant through the mark-up to gain a competitive advantage in both of these areas. You should also strive to attain as much flexibility in your contract terms as possible. Again, retain control of both your inventory and pricing. In a dynamic marketplace like online travel, it is critical to stay abreast of events that may affect the relationship you have with your distribution partners. Software Strategy recommends following both industry consolidation and merchant program changes. This means reviewing and reevaluating your online distribution partnerships on a quarterly basis. How can Software Strategy help? Software Strategy can provide you with research on many Internet merchant programs, and help you stay informed on how you can best leverage them. In fact, Software Strategy provides hoteliers with an objective source for researching technology solutions, including:
About Software Strategy
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Contact:
Lauren Sinai
Software Strategy, LLC
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