REPORT FROM THE U.S.—As hoteliers are eager to learn more about the complicated process of hotel room distribution, Tuesday’s scheduled release of the highly anticipated Distribution Channel Analysis study could be a giant step forward for the industry.
The 214-page report, which was organized by hotel-industry associations and research companies that saw the need for a “comprehensive study on the value of each of the channels,” will be released at a news conference Tuesday at the Americas Lodging Investment Summit in Los Angeles. It will immediately be available for free download from each of the organizations’ websites, as well as on HotelNewsNow.com.
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Mark Lomanno |
If hoteliers learn as much from the report as the authors say they did, it could lead to major changes in the way room inventory will be distributed in the future.
“I learned that distribution is way more complicated than I thought it was. I learned that the industry is reacting instead being proactive,” said study co-author Mark Lomanno, board member at NewBrandAnalytics who was president of HotelNewsNow.com’s parent company STR when the study was conceived in early 2011. “While certainly from a brand standpoint they’ve given considerable thought to it, at the property level they’re simply reacting and leaving someone else is in control of their inventory.”
Lomanno said researching distribution data for more than a year led him to the determination that, in two or three years, mobile search will have a profound effect on the way hotel rooms are found and booked.
“On first glance, it doesn’t sound like mobile search is all that different, but with apps and third-party intermediaries come different ways to get to the booking site,” he said. “It’s not the mobile application that will be so different; it’s what mobile really means. It will be a different kind of pricing model. Hotels aren’t going to be making rooms available, as they have been. With Google and Facebook, the hotels aren’t allocating room inventory. It’s not supply and availability; it’s a totally different way of thinking.”
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| The Distribution Channel Analysis study will be released Tuesday at the Americas Lodging Investment Summit |
Lomanno said the new concern for hoteliers won’t be with lowering third-party commissions but rather with lowering costs-per-click.
Cindy Estis Green, managing partner at The Estis Group and co-author of the study, said the research wasn’t intended to help hoteliers with pricing, but rather help them better understand the cost implications of certain channel decisions.
“Even those who directly work in the hotel industry don’t fully understand the complexity (of channel mix),” she said. “It will help hotels—both chains and branded hotels—understand how they can apply the benefits and the costs and make better decisions.”
However, Lomanno and Estis Green said the study does not provide a silver bullet for solving the challenges to hotel distribution because … well … there isn’t one.
“It just doesn’t work like that,” Estis Green said. “Even within a (competitive) set you can’t say, ‘This is the leader in the comp set and I want to be like them.’ Because different hotels have different customers and the cost of certain channels might be different for different reasons. And therefore the decisions you make might have different results.
“You have to decide what is optimal for you and know the costs you’ll incur.”
Lomanno said hoteliers will see in the study that a hotel’s channel mix may end up altering a hotel’s competitive set. Another hotel with a similar channel mix, he said, could be considered more of a competitor than the hotel across the street.
“Similar channel mixes are probably a pretty good predictor of who you’re competing with,” he said. “You’re probably fishing in the same pond.”
Data collection
Within the study, the authors go into detail to reveal the research methodology, which is something that was important to all parties involved.
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Cindy Green |
The study—published by the Hospitality Sales & Marketing Association International Foundation—was conducted by collecting and analyzing data from various sources: interviews with nearly 200 industry executives, economic data from Tourism Economics, and historical demand data trends from STR, among other sources. STR collected channel mix data from more than 25,000 hotels, including monthly roomnights, revenue and the number of reservations from January 2009 through June 2011.
Steve Hood, senior VP of research, served as STR’s point person during the research period. Hood said STR’s goal was to collect a large volume of actionable channel-related data to help the industry make strategic decisions.
“We worked with the data providers to determine their capabilities,” he said. “We wanted a complete set of all channel data so that we could tie it to the STAR data and apply all the same business rules and methodologies.”
Hood said the data will allow hoteliers to compare a set of their hotels to comparable hotels and track performance over time.
Chris Crenshaw, newly appointed VP of strategic development at STR, said the data will help hotel companies and individual hotels evaluate their distribution strategies “with an eye to impact costs for reservation acquisition and evaluate if their fair share of demand is coming through each channel.”
“The word ‘distribution’ has a universal definition, but in practice the details below the surface vary greatly between hotel companies,” said Crenshaw, who previously oversaw marketing intelligence for Loews Hotels. “Some of the variances are philosophically driven and some technologically driven. At the end of the day, everyone has a distribution strategy, but how the strategy is developed, implemented and measured varies widely. Standardizing this was probably more difficult than initially envisioned.”
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Joe McInerney |
Also contributing to the report was the HSMAI Resort Best Practices Initiative, which shared distribution data by channel reflecting upscale and luxury resorts. Expedia and Cornell University provided comScore data that was used in the billboard effect study published in April 2011 by the Center for Hospitality Research. ISM Marketing and Norbella supplied advertising spending data and acquired creative from 2010 consumer marketing campaigns and Kantar Media provided data on media spending for the same time period.
Joe McInerney, president and CEO of the American Hotel & Lodging Association, which helped fund the report, said the study will arm the AH&LA with comprehensive demand data when it visits Capitol Hill to lobby for the hotel industry.
“Anytime we went to Capitol Hill, people would ask us for specific channel data and nobody could ever give a clear cut number. All the chains were looking at it different ways,” he said. “Now we have a comprehensive analysis of where our business comes from.”