31May

The Changing Landscape of Hotel Channel Costs (Airbnb May Now Be in The Mix)

Author: Ellis Connolly

With rapid technology innovations and customer expectations shifting in new directions, the hotel sector is in a constant state of flux. And that includes the channels hotels use to sell rooms to their customers. In this dynamic environment, distribution channels and their costs are constantly evolving. Hoteliers must be prepared to keep pace by staying abreast of the latest developments and assessing the impact on their bottom line.

Consolidation Craze

Priceline bought Kayak. Expedia acquired Trivago. Just like the major hotel brands, it seems as if the entire “OTA-and-metasearch” universe is engaging in the business of mergers and acquisitions. When the dust finally settles, we may end up with fewer channels, but OTAs and other hybrid marketplaces will still be vital distribution channels in the marketplace. Particularly because travelers appreciate the aggregation of information, along with complementary review scores and maps. Moving forward, OTAs and hotel brands may begin working together to keep the hotel industry competitive.

And while direct distribution may be a priority for large hotel chains, without third-party marketing efficiencies, many hotels would likely experience higher customer acquisition costs and less profitability. In addition, concerns that metasearch websites will favor branded hotels that can afford to pay higher fees for visibility may be unfounded considering that search results on sites like TripAdvisor are based instead on customer review ratings.

brand-computer-desk-67112-min

New Players Enter the Game

Although OTAs and metasearch sites have dominated online distribution channels for quite some time, disruptors such as Google and Airbnb seem poised to knock them off their pedestals.

Google, already nipping at the heels of Kayak in terms of airline referral volume, now allows customers to instantly book hotels via their travel tools. Google offers the same scope of selection and good-or-better conversion rates when compared to Expedia or Booking.com. And with 3.5 billion searches happening on Google every day, the gatekeeper is quietly gaining share. Google’s fixed rate of about 10 percent is good news for hotels that are currently paying OTA commission rates of up to 30 percent.

In a direct challenge to dominant OTAs, sharing-economy titan Airbnb has officially opened its platform to hotel distribution. Boutique hotels and B&Bs are enticed with offers of no long-term contracts and low “service fees” of 3 to 5 percent. And with guests paying those service fees, some pundits claim the unique Airbnb model may have the potential to finally put an end to rate parity.

The Challenge of Multidevice Shopping

With 94 percent of leisure travelers switching between devices as they plan and book vacations, revenue managers struggle to find effective methods for handling attribution costs. A customer may start their initial hotel search on a mobile phone, but switch to their laptop to book the room. To fairly allocate how much credit applies to each customer touchpoint contributing to a booking, hotels are developing “attribution models.” And while there is not yet a definitive model in use, an ideal one should be data driven, and support omni-channel, cross-device tracking.

apple-computer-devices-207589-min

The Increasing Role of Data & Technology

To control costs in this increasingly fragmented distribution network, revenue managers need reliable data and tightly integrated technology systems that facilitate data sharing. You must be able to optimize channels that support your existing business, as well as become equipped to deal effectively with new channels as they emerge.

Understanding all the costs and benefits associated with this changing distribution landscape can certainly be a challenge. But by drilling down into the right data, and using integrated solutions to optimize your revenue, a hotelier can proactively manage a balanced mix based on real performance, keeping costs low and determining the true ROI associated with each new distribution channel.

Learn how Rainmaker’s revenue optimization solutions can help you

Request a Free Assessment and Get Started Today!

Recent Posts