Max Starkov, CEO of HeBS Digital argued last week that hotels should adopt a ‘Direct is Better’ distribution strategy. He makes three very valid points in his blog post:
1. Hotels need to link incentives, bonuses and compensation to the direct online channel
A major reason why hotels struggle to get on top of direct distribution is that there is no-one directly responsible for it. If the answers to these questions aren’t clear then you need to call an internal meeting, stat:
- Who looks after your website?
- Who is responsible for ensuring rates are correctly distributed?
- Who makes sure traffic comes to your site?
2. Treat distribution costs the same
A fantastically well articulated point:
For an independent hotel, Expedia charges a 25% commission. If you have a $200 [average daily rate], and the average stay is two nights, that’s $400 in revenue, so cost for this booking through Expedia is $100. The hotel writes off this $100 they pay to Expedia as a cost of doing business, a distribution cost. At the same time, a booking that comes through the hotel website, which for our client portfolio the average is a 4% cost of sales. For the same example of $400 revenue, the cost is $16. But the $16 is not considered cost of distribution. It comes from the sales and marketing budget. The main difference is that the OTA commission is unlimited; there is no budget for that.
If internal structures aren’t set-up properly to manage costs that serve the same outcome - a booked guest - then a small rework can help to readdress the balance.
3. Compete on value, not price - that’s where your direct channel can stand out
Many booking engines we’ve spoken to have emphasised how they are building this into new developments. Providing more value on the direct channel such as packages, better photography and new media is an excellent way to differentiate the offer. However, when it comes to it we know that customers are price sensitive. So the proof in the proverbial pudding with a tool like Price Check helps to overcome that.
Whilst ‘Direct is better’ is a step in the right direction for hoteliers, we’d argue that direct is actually best. It’s not just better for hoteliers but it’s better for guests who - if airlines are anything to go by - want to book direct.