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Visit us on HITEC booth 412
5 April 2017

Direct Distribution and OTAs – How does that go together?

By Michael Toedt - Managing Partner and CEO at TS&C GmbH
  • Direct Distribution and OTAs – How does that go together? | By Michael ToedtDirect Distribution and OTAs – How does that go together? | By Michael Toedt

Direct distribution is vital for the profitability of a company. Hotel managers are fully aware of this, as shown by the many direct distribution activities and the direct booking campaigns launched by hospitality associations.

Hotel manager have regained the pricing power

The core of most direct booking campaigns is rate parity. What was once highly valued has been given up by the competition regulators. Hotel managers used their regained pricing power to offer lower room rates to direct bookers on the hotel website than to their distribution partners, the big Online Travel Agents such as Booking.com, Expedia, and HRS.

Fatal: Losing the OTAs' favour

It does not come as a surprise that the OTAs did not like this obvious attack on the attractiveness and competitiveness of their portals. They responded by punishing hotels that ignored rate parity with a lower ranking than hotels that respected rate parity. Since the amount of generated bookings strongly correlates with the ranking of a hotel, as do search results on Google, the consequence is a decrease in bookings. The regained pricing power now often has a negative impact on the profitability, as hardly any hotel can compensate the loss with bookings through their own channels.

Many hoteliers thus have to reconsider their strategy in order to compensate the lower occupancy. Is there way to generate direct bookings without being punished? What possibilities does digitalization offer? There is indeed a way to offer lower rates on the hotel website than on the OTA platforms by simply not publicly showing and not making them bookable for everybody.

The new strategy: a customer club

The solution is a consumer club. Nowadays, it is common that consumers visiting a shopping website are requested to register. The marketing machine can only start when a customer has registered. But nothing usually happens when a consumer visits a hotel website. The site may be appealing in design, but there is mostly no guest-centric central data strategy. The only thing that can be found is a hidden button to subscribe to a newsletter. This website strategy will, however, not help to generate structured, high quality data, which can be used to identify consumers.

The transparent customer

In the Big Data age, a full-service hotel should consolidate the following seven data sources: the hotel website, the newsletter system, the PMS, the POS and the table booking system, the WLAN as well as the survey tool. All these systems should be centralized and integrated in so-called Central Data Management System. Only then can the information be used for marketing, analytics, and operations and customers become transparent.

A consumer club can also be integrated into such a system. Consumers visiting the hotel website can be asked to subscribe to the club through an Overlay, a new form of Pop-up. Upon registration, the new club member automatically receives a special rate code showing the discounted rate in the booking engine. With this strategy, OTAs can no longer punish the hotel by lowering their ranking and the hotel can generate new customer data and use it for marketing purposes. The positive result is an increase in revenue. A consumer club can also be pepped up with a bonus points system. But in most cases this is not even necessary. And it only makes sense, if it is actively used and is part of the communications strategy. All in all, a consumer club is a simple and effective digital tool to support direct distribution of a hotel. If you want to find out how to implement a conumer club, don't hesitate to contact us via info@dailypoint.com.

Michael Toedt

Dr. Michael Toedt is the founder and CEO of Toedt, Dr. Selk & Coll. GmbH, a leading Big Data Marketing and CRM company. Operating at the intersection of business and technology, he helps hoteliers with the software dailypoint™ to use the tremendous increase of data in order to become data-centric. Dr. Toedt has over 25 years of experience in operations, technology and marketing. He is the author of several books (among others “Big Data – Challenges for the Hospitality Industry” (2013) and “Data Revolution – How Big Data Will Change the Way of Doing Business” (2014) and his articles are published by journals on a regular basis. Dr. Toedt holds a doctoral degree in management science. He is assistant lecturer at the University of Applied Sciences of Munich for the subject “Customer Relationship Management in Tourism” and as guest lecturer at various universities such as the University of Applied Sciences of Bad Honnef, Kempten or NDS Hôtelleriesuisse. In the past, Dr. Toedt was regional vice president of SANSORA INTERNATIONAL, a subsidiary company of the Schoerghuber corporate group and accompanied many hotel associations during the production of their central customer and marketing data base. He was raised in his parents’ hotel and after completing a mercantile apprenticeship he graduated as cook to be employed in the 5-stars restaurant Hotel Koenigshof in Munich. 1995 he began his business economics studies at the University of Applied Sciences in Munich. During this time he visited the Cornell University, NY and is now President of the German Chapter.

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CRM & LoyaltyOnline Travel Agencies (OTA)Digital MarketingGlobal

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