Distribution Channels and Your Competitive Set
|By Paolo Torchio, October 2004
Look-to-Book ratios are becoming more and more prevalent in measuring the effectiveness and Return on Investment of hotel Website marketing strategies. But what has not yet been fully understood is that these ratios can be highly effective in actually monitoring the other online distribution channels and your competitive set.
To explain this concept we need a quick economics refresher on the concepts of Supply, Demand and Price Elasticity. An extension on the classic definition of price elasticity of demand would have buyers purchase goods through the lowest priced channel should the same good be available via multiple channels. The online hotel distribution network in which we conduct business today provides consumers this easy access to rate information for each online channel.
Recent studies have shown that travel buyers are using multiple Websites to research and compare prices before purchasing from the Website or hotel that offers the best deal. This behavior is being encouraged by the best price guarantees offered by many of the large hotel chains and has resulted in a market that is extremely price elastic.
In simple terms this means that if a potential guest shops your Website but finds a better deal with either a competitor or on a third party Website they will complete their purchase elsewhere.
One of the great things about the online marketplace is that shoppers are leaving behind detailed logs of everything they viewed on your Website. Also, due to the dynamic pricing hoteliers use to set rates based on stay dates, additional intelligence can be derived from booking engine visit logs that are not available to online retailers selling fixed price merchandise.
One of the much touted online metrics being used to measure e-commerce effectiveness is Conversion Rate or our hotel industry equivalent: Look-to-Book ratio.
There are several interpretations of Look-to-Book or Conversion ratios:
Over time if you are accurately pricing your hotel in all the distribution channels and within your competitive set you should see very consistent Look-to-Book ratios for a given level of interest in your hotel.
As long as your Internet marketing partner is keeping you exposed and well ranked in the Search Engines even seasonal hotel interest fluctuations will not affect these ratios.
The actual dynamics are quite simple: If you price yourself above your competitive set for a given date range, or if your hotel is available for less through a third party Website, you will see an immediate decrease in the Look-to-Book ratio while your Visitor-to-Look ratio remains consistent.
If the Look-to-Book ratio decreases the following actions may be necessary:
In the end Look-to-Book ratios can be used for more than simply justifying Return on Investment. These ratios can be used as an effective monitoring and positioning tool in order to accurately determine market activity.
About the author
About E-site Marketing
Paolo Torchio, Vice President
E-site Marketing, L.L.C.
4835 Cordell Ave. Suite 101
Bethesda, MD 20814
|Also See:||RezTrack™ Offers New Product To Measure Hotel Web Activity, ROI / June 2004|
|E-site Marketing Wins Big with HSMAI's Golden Click Awards / March 2004|
|E-site Marketing Announces New Clients and Record Growth in 2002 / March 2003|
|E-site Marketing Delivers Maximum Return on Investment for Destination Hotels & Reorts / March 2003|
|Bethesda-based E-site Marketing Expands With Prestigious New Clients / March 2002|
|Four Distinctive New Clients Seek Out The Internet Marketing Services of E-site Marketing in Bethesda, Maryland / June 2002|
|Puerto Rico Convention Bureau and El Cid Mega Resort Use E-site Marketing to Improve On-line Marketing / March 2000|