What the Changing Distribution Landscape Means for Hotels in 2019
December 18, 2018 10:17am
By Kevin Duncan, Senior Director, Strategic Commercial Initiatives at The Rainmaker Group
As traveler behavior and hotel technology undergo momentous transformations, the hotel distribution landscape is transforming right along with them. Your hotel distribution strategy plays an important role in your business, and understanding your true demand in light of dynamic distribution developments has become more crucial to your profits than ever before.
Changing Travel Shoppers = Changing Distribution Players
Guest paths to purchase are changing as customer demographics transition from Baby Boomers to Millennials. On the plus side, travel is showing itself to be a top priority with Millennial families driving that growth.1 And with regard to loyalty, a Deloitte study, “Winning the Race for Guest Loyalty,”2 found that Millennials will pay a higher rate per night and travel up to 15 minutes out of their way to patronize their preferred brands. In addition, these “digital natives” value mobile capabilities and unique, exclusive experiences – a travel mindset which has expanded into older generations as well.
This changing audience behavior has led to seismic shifts among the major distribution players. For instance, the rise of the experiential travel trend has led to the growing demand we see today for alternative accommodations through sites like VRBO and Airbnb. In 2017, more than 330 million people searched the Airbnb website3 for accommodations. This is leading B&Bs, independent, and boutique hotels to take advantage of Airbnb’s marketing power, showcasing their properties on the platform for fees that are significantly lower than most online travel agency (OTA) commissions. Changes like these require hotel managers to view their business from new angles and necessitates taking a fresh approach to their distribution strategy. Let’s take a closer look at key factors affecting the distribution landscape and how those factors impact hotels.
FACTORS IMPACTING DISTRIBUTION
After experiencing a downturn in the wake of the Great Recession, recent data shows group demand is on the rise,4 with Millennials accounting for the largest segment of business travelers.5 Savvy hoteliers are capitalizing on this growth by implementing group sales enablement tools that allow them to more efficiently prioritize requests for proposals (RFPs) and respond quickly with instant, optimal pricing on group bids. This enables group sales teams to optimize revenues by applying the same RM principles for groups as their revenue teams do for transient and leisure business. Another factor to consider with regard to groups and distribution is the trend toward “bleisure,”6 – with more than half of Millennial travelers combining business trips with leisure travel.
Online reputation management has emerged as a way for hotels to both increase bookings and foster customer loyalty. Approximately 65 percent of consumers check online reviews7 before making a purchase. And with 3.2 billion global users, social media has become paramount for obtaining positive and negative feedback from guests. One study reported in Harvard Business Review8 showed that when hotels thoughtfully respond to reviews – both positive and negative – they actually receive more reviews and their overall ratings increase.
Beyond Facebook & Twitter
In addition, social media is being harnessed to build effective brand recall, with 97 percent of Millennials posting while traveling,9 and 75 percent posting at least once per day. Many hotels understand the value of being active on Facebook and Twitter, but are less aware of the importance of including Instagram in their social media marketing plan. The Facebook-owned social network has grown exponentially over the past few years and now has more than 1 billion active monthly users. Furthermore, U.S. consumers rank Instagram10 as among the most influential platforms for travel advertising (along with YouTube and Snapchat).
THE TRANSFORMATION OF SEARCH
Although social media continues to be an important factor with regard to your distribution strategy, search engines have actually overtaken social media11 as the top referrer of traffic to content sites. Nearly half of U.S. travelers begin trip planning via a search engine, with Google ranking first12 for obtaining information and pricing. As a result, hoteliers who master the nuances of SEO keywords and Google AdWords campaigns will achieve more direct bookings.
Metasearch engines began mushrooming not long after OTAs entered the distribution game, and they now account for 45 percent of global unique visitors13 in travel. They’re popular with travelers due to their comparative rate model. And hotels appreciate their ability to nab the top spots in search engine results, driving direct and indirect bookings. In addition, metasearch advertising is largely based on a pay-per-click (PPC) model, so hotels with tighter budgets eliminate high OTA commissions, only paying for their hosted ad when someone clicks on it.
An important development for hotels to consider with regard to search, is the increased use of video to generate bookings. Hospitality has historically been a great vertical for visual content, and by 2021, 80 percent of all Internet traffic is projected to be video.14 Travel content is extremely popular on YouTube and 67 percent of hotel bookings are more likely to occur when you have a video tour. Moreover, of the Internet shoppers who view your video, an astonishing 89 percent are more likely to book.15
We’re also seeing steady growth in voice search, with ComScore estimating that more than half of searches will be voice based by 2020. This significant change in search behavior has huge implications for hotels, particularly with regard to SEO strategy. While a search query typed into a browser delivers the travel shopper hundreds of pages of search results, voice searches through virtual assistant technology such as Siri and Alexa deliver far fewer results, sometimes only one.
INNOVATIONS IN TECHNOLOGY
While most hotel bookings still occur on desktop computers, mobile is catching up. The number of smartphone subscriptions is forecasted to reach 7.2 billion by 2023,16 making the ubiquity of mobile undeniable. A study from HotelsCombined revealed that hotel bookings on mobile devices increased 67 percent in the U.S. between 2015 and 2016. This, combined with the facts that Google is beginning to prioritize mobile-first indexing, and mobile apps are Millennials’ preferred method of interacting with brands,17 means that it’s becoming essential for hotels to provide an app or have a mobile website that accommodates these on-the-go travel shoppers. Even further, last-minute hotel bookings are on the rise and up to 80 percent of those are now made on mobile.18
Artificial intelligence (AI), is impacting hospitality technology from revenue management solutions to AI chatbots, which have proven themselves effective in boosting direct bookings. Hotels benefit from a chatbot’s ability to provide an efficient 24/7 concierge at a fraction of the cost of a standard support team. And a HubSpot survey suggests that many consumers enjoy communicating with chatbots because of their ability to respond instantly.
Although still in a relatively nascent stage, blockchain technology is poised to become an effective medium for hotel distribution. The technology is making OTAs nervous because it eliminates third-party costs and commissions, encouraging direct provider-to-consumer interaction.19 As an example, the blockchain company, Lockchain, provides a platform where customers can book rooms directly with hotels using any currency they like for a minimal fee of 1 to 3 percent. Or they can book using Lockchain’s special “LOC token” and pay no booking fee at all.
The ultimate takeaway from all these developments, is that in order for your business to thrive in 2019, you must not become complacent. You should continue engaging in established channels but consider investing in fresh approaches such as creating visual content and becoming active on Instagram. And it’s no longer a question of whether or not to adopt technology, but rather what technology to adopt. Be vigilant concerning new developments in the distribution landscape – consider the costs and returns expected from each – and get a firm grasp of each catalyst. Then craft a sophisticated approach in your distribution strategy, one that effectively drives occupancy, engagement, and revenue.
group pricing optimization
Kevin Duncan is an energetic leader who has been an innovator of total revenue management principles for the entire hospitality industry. His strategic guidance at every hotel he has interacted with has helped increase profitability and overall service levels. He brings over 20 years of hotel experience and has achieved tremendous success through his hands-on approach of leadership creating a positive working atmosphere. Kevin is currently the Senior Director, Strategic Commercial Initiatives at The Rainmaker Group. He has the rare blend of revenue management experience combined with years of hands on knowledge of sales, marketing and operations. He has volunteered his time for industry associations to ensure the education of our future leaders. He continues to look at how to advance Total Hotel Revenue Management for our ever-changing economy.
Rainmaker is the hotel revenue and profit optimization cloud. The company partners with hotels, resorts and casinos to help them outperform their revenue and profit objectives. Rainmaker's cloud-based solutions for transient and group pricing optimization, forecasting, and revenue-centric business intelligence are designed to help hoteliers streamline operations, enhance revenue optimization processes, improve lead performance, and drive guest bookings. Recognized as one of the top privately-held companies in the United States, Rainmaker has been named to Inc. 5000's 'Fastest Growing Privately Held Companies' for the last seven years and to the Atlanta Business Chronicle’s list of '100 Fastest Growing Companies in Atlanta'. Rainmaker serves hospitality customers throughout the world from its corporate headquarters in Alpharetta, Ga., and from offices in Las Vegas, Singapore and Dubai. To learn more about Rainmaker and its suite of hotel revenue and profit optimization solutions, visit www.LetItRain.com.
Contact: Dana Glaze
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