Hotel online distribution explained

Hotel online distribution can be complicated to fully understand and shows no signs of letting up.

Where does your hotel fit in? How does it all work? Where do you start?

In this post, I’m going to breakdown the hotel online distribution landscape into four bite sized levels. After this post you should hopefully have more insight into how it all works.

Four Levels

You’ve probably seen those spaghetti junction looking online hotel distribution images floating around the internet?

online hotel distribution landscape

Online hotel distribution landscape. Image from Tnooz.

If you’re overwhelmed, you’re not alone. And imagine, this image just scratches the surface of the travel market. Many companies are not mentioned.  To make matters worse, the market is constantly evolving, new technologies and new market players pop up all the time.

To keep things simple and clear, let’s think about hotel online distribution as 4 simple levels. With the ultimate aim of appealing to potential guests wherever they might be.

Let’s jump right in.

Hotel (Internal). Technology inside the hotel.

Primary & Secondary Distribution Groups. Sales points outside the hotel.

Marketing & Special Offer convergence. Marketing and special offers created by the hotel and sent out to points of sale.

Customer & Micro moments. Everything is about appealing to the right customer, with the right offer, on the right platform at the right time.

Level One: Hotel (Internal)

Hotel online distribution that happens inside the hotel.

Level One is made up of seven parts and without them working together, the diagram you saw previously would not exist. To get a better understanding, let’s take a brief look at each part.

  1. Property Management System (PMS)

Property Management System or PMS for short are complex systems. Think of it like the human brain. It controls bodily functions. Similarly, the PMS controls important functions in the hotel. Unlike the brain where functions are mostly automated, the PMS requires lots of input to function properly. Reservations, housekeeping, maintenance, room types, rates, contracts, banqueting, good and beverage among others. In-turn the system can give hotels operational insights to make decisions.

The PMS receives reservations and cancellations information from a channel manager / revenue management tool or the hotels reservations department.

  1. Market segmentation mix

A Market segment is a source of business. It likely includes Tour Operators, Travel Agents, Direct, MICE/Groups, Corporate, Weddings and of course hotel online distribution (internet). Each source segment will have separate pricing, with allocated or committed availability.

  1. MyRatesMagic® Hotel rate plans in the cloud.

MyRatesMagic® is a software as a service solution that lets you quickly and easily manage their hotel rate plans. It also automates hotel rate calculation and offers insight comparison and reporting tools. Consisting of 5 modules:

  • Rate Plan Creator
  • Rate Plan Designer
  • Calculation Engine
  • Loading Reports
  • Scenario Planning

Furthermore, it saves hundreds of employee-hours, eliminates errors and ensures only great quality rate structure data is generated for hotel online distribution.

  1. Customer Relationship Management System (CRM)

Customer Relationship Management or CRM for short, is a software system that allows hotels to reach, impress and retain guests. It’s sole target is to offer hotels with data that can be used to maximise guest experiences pre-stay, during stay and post stay.

With that said, CRM’s are connected with the hotel PMS, as well as reputation software to ensure they continuously receive the latest guest profile updates.

Moreover, CRM systems that contain accurate guest profile data help hotels analyse data, break profiles into groups and empower marketing teams to schedule targeted marketing campaigns.

Finally, loyalty and e-mail marketing programs are normally part of the system, although more often than not hotels tend to use non-integrated solutions.

  1. Reputation Management

Hotel reputation management is a method of actively monitoring and influencing how a hotel is perceived by potential guests throughout the social media and major review websites around internet. Since, the hospitality industry is most vulnerable when it comes to reputation management, a close connection with the PMS keeps the constant flow of fresh reviews.

Receiving constructive feedback from a variety of locations, helps hotels prioritise and make changes.

In conclusion, efficiently managing reputation, means properties are exceeding guests expectations, which in-turn boosts hotel revenue.

  1. Channel Manager

A Channel manager is a software application that helps properties manage multiple hotel online distribution channels.

With the aim of maintaining hotel rooms (inventory), rate plans and restrictions across major channels worldwide.

Channel managers connect properties with large agents, such as OTAs, as well as smaller retail agents in different markets. The software allows properties to receive reservations and cancellations, as well as submit restrictions, manage room types, apply rate increases or decreases.

Working from within pooled availability, the system adjusts availability as and when rooms sell or are cancelled.

Channel managers are normally connected to the PMS for receipt of reservations and cancellations. This process avoids time consuming manual reservation entry and avoids data input errors.

  1. Revenue Management System / Predictive Analytics

A revenue management system is a software application that applies disciplined analytics that attempts to predict consumer behaviour at the micro-market level and optimize product availability and price to maximize revenue growth. A crystal ball, if you like.

Predictive analytics or machine learning, the system uses a number of variables, such as historical data, reservation flow, occupancy, competition prices, to predict consumer behaviour.

Predictive analytics can only achieve those new levels when disparate sets of data are gathered into one place. After all, for analytics to find the relationships that will increase revenue, margin and share, they need to run through consolidated data. ‘Jasmine Lee – Crowd.com’.

Hotel (Internal) conclusion

Hotel distribution really starts with you. All the essential initiating components take place inside the hotel, without them nothing will happen. Most hotels around the world have a PMS at their core as well as a balanced market segment mix and use a combination of technology.

Customer Relationship Management System (CRM), Reputation Management help properties manage relationships with guests, boost loyalty and safeguard online reputation. Nevertheless, they are not responsible for initiating online hotel distribution.

The Property Management System (PMS), MyRatesMagic® Hotel Rate Plan management in the cloud, Channel Managers, Revenue Management Systems / Predictive Analytics are all responsible for initiating and maintaining online hotel distribution.

Rates, room types, inventory, price increases, price decreases, special offers all flow into Level 2: Primary & Secondary Distribution Groups. In return hotels receive reservations and cancellations

Lets take a look at level 2.

Level 2: Primary & Secondary Distribution Groups – hotel online distribution

Level 2 consists of 4 major groups, which receive rates, inventory and restrictions from the hotel (internal level).

Brand.com (your booking engine)

OTAs – online travel agents

Wholesalers B2B

GDS (Global Distribution System)

screenshot of hotel online distribution level 2

screen shot of hotel online distribution level 2

Let’s take a deeper look at each.

  1. Hotel Website (Brand.com / hotel booking engine)

The hotel website, also known as brand.com, contains the hotels direct booking engine. According to a 2017 study by Fuel Travel the hotel website is the top influencing factor for potential guests. A great hotel website is a very powerful tool for building a strong online brand. A site that effectively portrays a captivating hotel story and drives booking conversion.

Rates, availability and special offers usually feed down into 9 different secondary distribution levels.

  • Loyalty members
  • Travel agent portals
  • Social media
  • Dedicated special offer landing pages
  • Meta search engines
  • Review websites
  • Blogs
  • Mobile applications

Corporate / business portals.

  1. OTAs – Online Travel Agents

OTAs or Online Travel Agents are online companies whose websites permit consumers to book accommodation and travel services over the internet. They are agents that invest heavily in digital and offline marketing to sell trips, hotels, cars, flights, vacation packages for commission or compensation.

Some incredibly popular primary OTAs are:

The Priceline Group (Booking.com, Priceline.com, agoda.com, KAYAK, rentalcars.com, OpenTable).

Expedia, Inc. (Expedia.com, Hotels.com, Egencia, Hotwire, Trivago, Venere.com, CarRentals.com, Classic Vacations, Expedia CruiseShipCenters, Expedia Local Expert (LX), Wotif Group, Travelocity).

OTA popularity with travel consumers makes them an essential part of online hotel distribution for properties around the world.

Properties utilising channel managers or revenue management systems can control the distribution of rates, inventory and restrictions over the different channels. This ensures rate and inventory parity is maintained.

These primary OTA’s then feed into their own secondary levels.

Expedia, Inc, for example is a primary level, feeding around 8 secondary levels:

  • Packages
  • Members
  • Airlines
  • Travel agents
  • Meta search
  • Business portals
  • Social
  • Mobile apps
  1. Wholesalers B2B

A Wholesaler is a 3rd party organization that contracts hotel inventory and sells them in the so called B2B market. They are also known as bed banks. Wholesalers purchase rooms in bulk then sell them to a variety of customers, including travel agents, online travel agents, airlines and tour operators.

Wholesalers have complex distribution methods. A contract signed with a hotel, can find its way to:

  • Traditional tour operators
  • Travel agents
  • Airlines
  • Dynamic package operators
  • Online travel agents
  • Online tour operators
  • Other wholesalers

Each wholesaler is a primary distribution point in this group. They then expand into any number of secondary distribution points. This is because hotel rooms are traded between wholesalers and agents, before eventually reaching the end client. Examples of large wholesalers are Hotelbeds and GTA.

Partnering with wholesalers via a channel manager is a great way to gain access to a wide range of markets that are normally unreachable. It also gives properties the ability to control wholesaler rates.

  1. GDS (Global Distribution System)

The global distribution system is a computerised network system owned or operated by a company that enables transactions between travel industry service providers, mainly airlines, hotels, car rental companies, and travel agencies. There are three important primary GDS systems (Travelport (Galileo, Apollo, Worldspan), Amadeus and SABRE.

There are 5 major client types receiving rates and inventory from the GDS:

  • Travel agents
  • Airline sales offices
  • Corporations
  • Travellers
  • And the internet

While it is possible to connect with each GDS individually, it can be time consuming and expensive. Each GDS has its own set of connection fees and special procedures. Participating on the GDS improves properties room inventory exposure to 400,000+ travel agents across the world in real time.

Level 2: Primary & Secondary Distribution Groups Conclusion

Primary and secondary distribution groups make up the main gateways for hotels to access the global travel market. The hotel’s website, Online Travel Agents, Wholesalers in the business to business area and the global distribution system.

Properties participating across all major groups, maximise their inventory and rate exposure.

To summarise up to this point…

We’ve seen how core technology in the 1st level Hotel (Internal) are responsible for starting online hotel distribution.

The PMS, MyRatesMagic® hotel rate plans in the cloud, channel manager, revenue management system / predictive analytics lead the way. Generating rates, room types, inventory, price increases, price decreases that feed all primary and in-turn all related secondary distribution groups.

Now, let’s take a look at what happens when everything converges in the level 3: Marketing / Special Offers / Distribution Convergence.

Level 3: Marketing / Special Offers / Distribution Convergence – hotel online distribution

As a result, the 3rd level is where, all 4 major online hotels distribution groups converge. Any content, including rates, inventory, room types, photos, descriptions, videos will be used by everyone participating in the 4 distribution groups to drive conversion. Thus all have access to around 11 different groups of marketing and promotional tools and techniques:

 

  • Search engine optimisation
  • Paid search
  • Remarketing
  • Display ads
  • Video
  • Mobile
  • Members
  • Content marketing
  • Affiliates
  • Meta search
  • Social media

Consequently, convergence sees all participating channels attempt to be in all places at once. By bombarding travellers with their relevant marketing campaigns. Everyone, including the hotels direct channel is targeting travel shoppers at various stages of the micro moments journey.

Level 4: Client and Micro Moments – hotel online distribution

The entire online hotel distribution process has been focused on the Client and Micro moments level; Dreaming, Planning, Booking and Experiencing. It is the pinnacle of hotel online distribution. It was the main reason why distribution was initiated in the first place.

Throughout the entire distribution process, everything has been trying to appeal to travellers on the right platform at the right time. The right time being a specific travel micro moment.

Furthermore, let’s take a look at these Travel Micro Moments:

I want to get away moments (dreaming moments).People are exploring destination options and ideas and have no firm plans. At this stage, people are looking for inspiration.

Time to make a plan moments (planning moments).When people have chosen a destination. They’re looking for the right dates, the right flight, the right place to stay and all the things they’ll do while they’re there.

Let’s book it moments (booking moments).This happens when the research is done, and people are ready to book their tickets and reserve their rooms.

Can’t wait to explore moments (experiencing moments).This occurs when the trip is under-way. Travellers are ready to live the trip they have been dreaming about – and share it with others.

Most noteworthy are that travellers use between 9 different platform during the micro-moment phase.

 

Search Engines

Video

Meta Search (Price Compare)

Reviews (TripAdvisor) – integral part of the booking process

OTAs

Mobile

Social

Brand.com

They also use word of mouth, friends and family etc

Conclusion to hotel online distribution

In conclusion, the online hotel distribution landscape is a method for property owners to sell their rooms/spaces to potential travellers during micro moments. It is initiated by 4 technologies in property level.

The Property Management System (PMS)

MyRatesMagic® rates calculation & planning engine

Channel Managers

Revenue Management Systems / Predictive Analytics

Responsible for generating rates, inventory and special offers.

Information flows into the 2nd level: Primary & Secondary Distribution groups;

Hotel Website (Brand.com / hotel booking engine)

OTAs – Online Travel Agents,

Wholesalers B2B

GDS (Global Distribution System)

The data is filtered down through the primary groups, into secondary distribution points and all converges in the 3rd level: Marketing / Special Offers / Distribution Convergence – Crazy Town. In addition, the convergence area, includes key marketing & promotional methods and techniques to appeal to travellers during the micro moment traveller phases.

Finally, the travellers booking journey is logical, however human beings can be illogical at times! As they say “Life happens when you’re making plans!”

To your successful distribution,

Richard Bedenham

MyRatesMagic® Founder

Connect with Richard on Linkedin.