| Chicago - (October 2003) - It poses a challenge - - determining whether
or not your hotel should participate in the Internet merchant programs
currently available. There are many to choose from, including: Expedia,
Orbitz, Travelocity, and many others. These programs vary in their
flexibility, consumer reach, and distribution costs. Whether you
are contemplating participation in an Internet merchant program, or you
have already jumped in with both feet, it is important to understand these
programs at the outset, and subsequently reevaluate them throughout your
contract term. This becomes even more critical when you consider
the recent acquisitions of merchant distributors such as Hotels.com and
Hotwire.
As a hotelier, how can you best leverage the distribution capabilities
of today's internet merchants? First, determine when your hotel should
use a merchant program. Next, you must evaluate the merchants to
make sure the ultimate impact is both a profitable and non-cannibalizing
one.
When should I use a Third Party Distributor?
Each Internet site offers some unique features that draw specific types
of travel buyers. It is the responsibility of the hotel to match
its business needs with the appropriate Internet sites. Therefore,
you must leverage both these Internet sites and their merchant programs
to reach your potential customers. You are looking for a means to
acquire either incremental customers or average room rate. A hotel
should use a merchant when the merchant's program can provide better distribution
to a particular consumer segment versus that of other channels. More
specifically, this means your hotel can achieve:
-
Strong room night volume against the competition
-
A reasonable net room rate
-
Minimal channel conflict
How should I evaluate Third Party Distributor?
Once you are confident opportunities exist, evaluate your options and
determine which merchant relationships will bring the most value to your
hotel. Breaking this down to its core components, you must evaluate
the merchant's:
-
Consumer reach by customer segment
-
Effective distribution costs
-
Conflict or overlap versus other channels
-
Usage by competitors
With this information, you can optimize your channel management strategy.
Consumer Reach By Customer Segment:
Most merchant programs offer some basic information about their target
consumers. You should take steps to gather as much of this information
as possible. For example, ask the site for both their total number of unique
visitors over the last twelve months, and for the average month.
See if they are willing to provide you with the same statistics for those
unique visitors that booked your destination in the same period.
Now, take this information and compare it to your own activity from all
channels.
Identifying Channel Conflict:
Your goal is to determine whether or not the site can offer you access
to customers that you have been thus far unsuccessful in reaching via alternate
distribution methods - this is your opportunity. Likewise, it is
critical to understand whether you will lose customers to this site if
you begin using it to distribute your rooms - this is your cannibalization
risk. To the extent possible, you want to target your opportunity,
but minimize the shift of consumers away from more profitable distribution
channels. To do this, you will need to compare the rate, volume,
and distribution costs across the conflicting channels, and then estimate
the trade-offs you expect.
Understanding Distribution Costs:
Merchants have introduced new costs to the distribution equation.
They have assumed some of the cost of marketing your hotel in exchange
for a mark-up on the rate, and in some cases, control of your price.
Across your hotel's distribution channels, there are many distribution
costs, including: |
