(AppBus)_CHAPTER 04 - Maximizing Revenues through Global Distribution

Learning Objectives

1.1 Define distribution and explain channels

1.2 Understand the many roles of global distribution system

1.3 Explain the distribution core competencies

1.4 Understand how quickly distribution changes

1. Overview (1 of 2)

Definition of Global Distribution - attaining the broadest possible reach to the largest available audience meeting a company's target market segments at the most affordable cost and with the highest potential for winning conversion (for example, generating bookings).

• Channel Manager - works closely with the revenue manager or management team, overseeing all of the distribution channels, making sure that content, rates, availability information and selling rules and restrictions are up to date in each channel, verifying whether each channel is properly representing the property portfolios.

1. Overview (2 of 2)

• GDS = Global Distribution System - the entire network of people, systems, technology, and distribution channels used to help lodging providers sell their products and services.

• Single-image inventory = products and services purchased with full (transparent) disclosure of rates and availability.

• Cross-selling = selling complementary products such as spa, golf tee times.

• Up-selling = for example, room upgrades and packages.

• Consider the strategic implications of using certain distribution channels while avoiding others.

• Developing a distribution strategy.

2. Importance of GDS (1 of 2)

GDS fulfills five major roles:

1. Inventory Control and Rate Management

• Simple utility, transaction processing, and maintaining, controlling and reporting rates

2. Data Repository

• Learning system for guest history, preference, profiles and buying patterns

3. Information Dissemination

• Communication vehicle

2. Importance of GDS (2 of 2)

(Continued) GDS fulfills five major roles:

4. Revenue Generation

• A source of revenue-room nights, fees, transactions, etc.

5. Strategic Positioning

• Provides access to markets; implement unique functionality, etc.

GDS is the cornerstone for the service industry process in a hospitality property. Need to master "core competencies."

3. Developing a Distribution Channel Strategy (1 of 5)

Strategic choices and resource allocations in the hospitality industry

• Example - Southwest Airlines/Focus should be placed on distribution shares per channel (marketing mix) Finding and competing for electronic shelf space

• Example - Expedia.com/Make a strategic commitment to visibility to the consumer

Cost implications

• Connectivity to airline GDS's and listing services have been costly but necessary.

• Costs should be evaluated based on ability to attract new consumers, revenue generation and overall ROI.

3. Developing a Distribution Channel Strategy (2 of 5)

Understanding share of distribution

• Consider which distribution channels will be most advantageous and participate in only those channels.

• Consider the medium and its targeted audience and compare them with your customer base.

• Stay abreast of new trends impacting the way consumers shop and purchase hotel stays.

• Do not ignore the "look-to-book" ratio (number of people who shop versus the number of people who actually make reservations).

3. Developing a Distribution Channel Strategy (3 of 5)

Inadequate GDS Technology Infrastructure

• Some hotels may not have the necessary technology and information systems in place

How Hotels Find Return on Investment in Third Party Distribution

• Typical models used in the distribution process include:

1. Agency Model

2. Merchant or Wholesale Model

3. Opaque Pricing Model

4. Expedia Travel Preference Model

5. Pay per Click

• Typical models used in the distribution process include:

1. Agency Model

2. Merchant or Wholesale Model

3. Opaque Pricing Model

4. Expedia Travel Preference Model

5. Pay per Click

3. Developing a Distribution Channel Strategy (4 of 5)

The Rise in Meta Search Engines

• Disintermediation will result as new electronic paths are built between customer and supplier to create a more direct link.

• Travel meta search engines (Trivago; Kayak)— information brokers

Shift in Balance of Power from Supplier to Customer

• Consumer is armed with knowledge easily obtained from the internet and develop greater expectations and demand higher values in pricing.

3. Developing a Distribution Channel Strategy (5 of 5)

New Models of Distribution and Pricing

• Many new distribution models are changing the model for how guestrooms are bought and sold; many hoteliers are unfamiliar.

Accelerated Rates of Change

• A/B Tests-controlled version (A) versus another version (B) to measure against a specific metric to find which version is the most successful. "Test and learn." Technology growing at very fast rates.

Relinquished Control of the Customer Relationship

• Control and management of the customer relationship are being involuntarily relinquished in favor of outside forces such as Google.

New Models of Distribution and Pricing

• Many new distribution models are changing the model for how guestrooms are bought and sold; many hoteliers are unfamiliar.

Accelerated Rates of Change

• A/B Tests-controlled version (A) versus another version (B) to measure against a specific metric to find which version is the most successful. "Test and learn." Technology growing at very fast rates.

Relinquished Control of the Customer Relationship

• Control and management of the customer relationship are being involuntarily relinquished in favor of outside forces such as Google.

4. Trends in Hotel and Resort GDS (1 of 3)

Disintermediation and Reintermediation

• Basically the elimination of the middleman.

• Until recently-travel agents had near-exclusive access to information; now—public has access to easier software.

• Now-elimination of travel agents, but with complexity of options available, consumers need help "wading through" the many options.

Digital Divide

• Competitive advantage for those companies who keep up with changing and evolving technologies

Disintermediation and Reintermediation

• Basically the elimination of the middleman.

• Until recently-travel agents had near-exclusive access to information; now—public has access to easier software.

• Now-elimination of travel agents, but with complexity of options available, consumers need help "wading through" the many options.

Digital Divide

• Competitive advantage for those companies who keep up with changing and evolving technologies

4. Trends in Hotel and Resort GDS (2 of 3)

Transparency: A Hope for the Future

• Importance of Consumer Interface

• Transparency = more direct communication between customer and management

Packaging: The Bundling of Air Tickets, Lodging, and Car rentals

• A win-win proposition for the consumer and the hotel because they are able to capture a different customer segment while protecting their ADR's.

4. Trends in Hotel and Resort GDS (3 of 3)

Leveraging Technology to reduce Overhead

• Outrigger Hotels and Resorts-use of Voice-over IP (VOIP) • United Airlines-also using VOIP to make reservations

Smart Device Apps Applications

• Amazon-voice-activation booking through Alexa, Echo- Dot and

Amazon Tap Shopping Bots

• Robotic, computerized agents that will carry out tasks (such as placing orders for people)