Hotel Distribution vs. Revenue Management

I must confess that, in these times of constant change in which we live, and especially now that there is so much talk about Web 2.0, I feel uncomfortable talking about hotel distribution, as I understand that the two concepts may, in a way, contradict each other, or at the very least pursue the same goal through two completely different routes. A hotel’s distribution strategy, together with its Revenue Management strategy, must be the key driver in achieving its occupancy and average rate targets—in short, its RevPAR. This requires constant evaluation of the objectives achieved in order to make decisions that affect short-, medium- and long-term results. Both strategies—Distribution and Revenue Management—define, or should be defined in, a hotel’s marketing plan, if one exists, and must go hand in hand in any initiatives undertaken by the hotel or hotel chain. In fact, one of the most common mistakes hotels make is separating these two strategies. First of all, we must understand that distribution is the way we bring our product to the customer, rather than a mechanism for being present in as many places as possible. The rest is about knowing which customers we distribute to, at what prices and at what cost. Logically, there are two groups of hotel distribution systems. We are talking about Direct Distribution, which we mistakenly associate solely with the website of the hotel or hotel chain, and Intermediated or Indirect Distribution—that is, distribution in which the hotel relies on a third party to represent it, in exchange for remuneration for intermediation when it adds value. I have always liked to compare the hotel market mix—and, ultimately, its marketing, Distribution and Revenue Management strategies—to a culinary recipe, where the quality of the ingredients, together with their proportions, combinations, the order in which they are arranged, their presentation, the degree of cooking and, above all, each chef’s individual expertise, determine the success or failure of every dish. With this in mind, we must create our own particular recipe, where what matters is knowing which dish we want to cook, rather than seeing which dish results after mixing the ingredients. In my view, the mix that makes up the recipe for success for any establishment should be:

• Customer value: customers who are valuable because of their frequency and the revenue they generate, alongside more price-sensitive customers.
• A balance in intermediation costs.
• ROI
• Brand building.
• Sustainability and independence.

This is where CRM plays an important role, as does knowing the customer before undertaking initiatives aimed at acquiring them. One of the things that strikes me is that hotels are aware of the positive effects of a sound Revenue Management strategy. However, their distribution strategy is limited to contracting distribution channels without the necessary strategic considerations. I hope to explore hotel distribution channels, intermediation and the implications of merchant agreements in greater detail in future articles.