Monday, October 17, 2011

Channel Connectivity: The Changing Trends, Part 1: Yesterday v/s Today


Heads in beds is the key driver for all hotels – you need good daily occupancy to meet your property’s running costs and thereafter make profits. With thousands of hotels listed online, how can you ensure your property stands out from the rest?

As online travel grows, accommodation owners need to position offerings appropriately, using the right channels. Google’s success is based on page ranking through keywords and relevance, all searchers will type in what they want to see and results will be made of popular channels. In other words, on the internet, the more visible and optimized you are, the more customers you will attract to your hotel!

Just 10 years ago the environment was wholly different. Booking a hotel room over the telephone or through a travel agent was the norm as only less than 5% of all travel was booked online. Today the travel booking landscape has changed significantly:

We used to distribute inventory evenly between tour operators, corporate contracts, telesales and the GDS. Most of our business was stable and regular rate changes and inventory changes were not required. Sales departments were busy but not overloaded.

However in recent years the internet has taken over GDS and telesales; a 2010 eTRAK Reservation Sources for Major Hotel Brands Report shows that major hotel brands experienced 52.3% of all reservations coming from the internet compared to 22.9% from GDS and 24.7% from Voice (2006 figures show Internet: 37.6%, GDS: 31.3% and voice: 31.3%).

In this respect let’s take a peek into the developments of Y2K, a significant period in many ways. The internet has been growing at a fast pace with the likes of Expedia, Travelocity, and Priceline having launched in mid-late 1990s during the dot-com boom.  The bubble burst and many online industries had to rebuild their sales model. Online travel was not greatly affected, on the contrary it started to grow - though it meant the offline hotel industry had to start paying attention and, more importantly, hotels had to realize that something was changing.

By 2000 the total annual online hotel booking rate was around 4% of total bookings. In only 10 years this has reached around 35%, according to a report by PhoCusWright's Global Online Travel Overview Second Edition, 2011.

This goes to prove the ongoing importance of the internet and the changing consumer buying trends. While it took almost a decade to achieve this level of sales, within the maturing APAC market there has been increasing focus on mobile internet as this is adopted faster than the traditional computer access. This is deemed to grow at a faster rate than the internet over the next decade.

With such changes comes the necessity to adapt. Business has become more volatile and requires adequate planning. Product has to be constantly optimized, prices analyzed and yielding performed. Tasks that do sound natural to hotel operation but are still not honed to perfection.

Staff needs training but not only sale is affected. All departments within a hotel need to brush up as the consumer has options to review services with the general public. From rooms division to management, the hotel has to be organized and prepared.

Another factor, often not recognized enough, is that marketing has changed too. Gone are the expenses for costly brochures. Not that we can spend less now, but the likes of Google, Kayak, trivago, Groupon have taken their place, still marketing but a different caliber with different rule sets. Also, some OTA’s require additional commission for better placement. One could argue that this is not just cost of sales but to a degree brand marketing too. A battle the two departments will need to have in order to best place the house.

Check out Channel Connectivity: The changing trends Part 2 next week.
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