Key Problems
One of the biggest challenges to a hotelier’s bottom line is guest acquisition costs. As we discussed in part 1, the dominance of third-party online travel agency (OTA) sites has reinvented how many customers choose to book rooms. Yet, many hoteliers are still seeking to wean themselves completely off these sites that in many cases deliver a large chunk of guests to hotels.
Their reason, according to Forbes.com, is based on cost, as OTAs can charge up to 30% in commission fees per reservation. This means that, on a room that sells for $100 per night, a hotelier is spending as much as $30 to secure that room reservation. No wonder many hoteliers are anxious even as the hotel industry has seen more than 100 months of positive RevPAR gain.
However, with a smartly thought through distribution strategy powered by a hotel operations platform such as a cloud-based property management system (PMS), the rules have changed. This is because, while there are OTA sites that charge a large commission rate, there are also many that do not. With the right hotel management software, hotel rooms are easily distributed to a wide swath of these lesser-known, but cheaper OTA brands, that can deliver customers to your hotel for less.
“The rate center [in our PMS] is one of the most important tools we utilize for our managers,” according to Josie Kilgore, Brand President with Cobblestone Hotels. Often our managers are not seasoned hoteliers, so whatever systems, tools, and resources we can provide to help them be successful in their jobs, without them having that foundation of knowing how the industry works, is important. We’re a rate integrity brand. This helps us align those practices with how we want the properties to operate. The rate features in our PMS are there to basically set it and go. You simply enter the parameters and the system automatically changes the rate, which is nice as a failsafe.”
Like the hotel industry itself that’s seen the creation of many brands seeking ever smaller subsets of the traveling audience, OTAs are also becoming more niche audience focused. For example, there’s the wellness-focused Yovada, pet-friendly site BringFido, and even one geared towards smokers.
It can be difficult to coordinate with a myriad of OTAs. Fortunately, a best of breed cloud-based PMS has a requisite functionality to connect a hotel to numerous distribution sites through two-way channel management via XML connections with OTAs, the Global Distribution System (GDS), and a customizable (branded) Internet Booking Engine (IBE). In simpler terms, that means an available hotel room is viewable and bookable on all distribution channels at the same time.
When a room is booked through a lower cost OTA channel, it’s removed from those higher commission sites automatically. Combine that strategy with a rate management strategy that automatically adjusts BAR levels based upon changes in actual occupancy or number of rooms sold, the OTAs can become a positive force for a hotel’s bottom line.
In addition, real-time automation helps boost understanding of where customers are specifically coming from. Hoteliers can see which booking channels are delivering the most revenue and which ones are underperforming and adjust strategy accordingly.
“We’re able to connect to all booking channels with the new hotel management system and make automatic pricing updates. Our intention, in the long run, is integrating all levels of the guest experience with the system,” said Peter Allen, Director of IT with Shilo Inn.
With a little forethought combined with a cloud-based property management system designed to help hotels be visible across the full spectrum of OTAs, you could pay less for reservations. Remember, all OTAs are not created equal. Neither should your strategy.
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