Redressing the balance

Yunna Takeuchi, Director of e-Distribution, explains why greater investment in electronic and direct-to-consumer online channels is such an essential element of effective revenue management today.

G-News: It seems many independent hotels and resorts are missing opportunities to maximise their revenues by relying too heavily on traditional booking sources. How could they benefit from embracing direct-to-consumer channels?

These electronic channels, including hotels' own websites and other internet travel portals, are offering a serious challenge to traditional tour operator business. This is why it has become absolutely essential that independent hotels harness these technologies more effectively. Within the industry, we've seen how upscale, hotel chains, such as Marriott and Hilton, have managed to secure up to 40% of their bookings through their own websites.

Unfortunately, many independent hotels are still clinging on to the old way of doing business by relying on tour operators too heavily for their advance business, especially in high season. If you have been fully booked for months in advance through the tour operator channel, the big question you have to ask is whether you could have secured higher rates for some of this business and therefore maximised your revenues through electronic channels.

So what are the main disadvantages of favouring the tour operator channel?

The way in which tour operators work is very inflexible compared to online channels. For example, they often require a fixed allocation of rooms and a cheaper rate than other channels. Additionally, contracted rates for tour operators stop hotels from increasing their rate structure in response to heavy demand. I've seen situations in which hotels have closed out the GDS inventory, including high-rated business, for up to three months, despite significant demand during this period. It is worth considering that clients who are willing to pay high-end rates are also more likely to spend additional money at the hotel using the facilities.

Does this mean independent hotels should disregard the tour operator channel completely?

No, tour operators will continue to form an essential part of business, but hotels should endeavour to reduce the number of bookings they derive from this source. How can they achieve this balancing act? It's tough but hoteliers should review the amount of tour operators they need to work with and switch some of their investment to electronic distribution. This involves deciding what percentage of their business they want to bring in under tour operator conditions - then, they need to choose which partners to work with and plan a strategy to replace the remaining business. Factors to consider are whether tour operators are bringing in business during your low and high seasons and whether they are targeting the right profile of traveller. Hotels' own websites can prove extremely effective in attracting the business of affluent travellers.

How is G-rez able to assist hotels that want to invest more in online channels?

We can create a tailor-made online strategy for members. First, we identify the business that is being sourced from tour operators versus online channels and assess the rates that are being secured. The next step may involve reducing the in-house allocations for tour operators and then ensuring that these allocations sell at higher rates online. We also recommend reviewing the number of travel websites that hotels work with and reducing the extranets they have to manage. G-rez can help to identify productive websites, especially those that work with the best affiliate partners and thereby offer maximum online exposure.

The most crucial element, however, is our ability to help hotels develop their own websites and associated booking engine technology. Our sophisticated G-wiz booking engine will soon be available to all members and provides the perfect solution for hotels that want to generate more traffic and bookings on their own sites. At G-rez, we have had great experience in generating traffic and increasing revenues from the online channel - and can assist members to do the same.

For more information, contact Carly Gotz on
cgotz@ghorg.com or +44 (0) 20 7380 8592.