Distribution Channel Strategy: The Path to Profitability

How can your property be the most profitable?

  • Nothing provides more opportunities than an intelligent revenue strategy
  • Not accounting for distribution costs can have a negative impact on overall revenue management strategies
  • Trusting, investigating and understanding RM’s underlying principles pays off in dividends in the end

If attaining guests through loyalty programs, personalization and the provision of choice is the hospitality industry’s Holy Grail, then profitability is the infinite abundance it promises. When it comes to achieving higher degrees of hotel profitability, nothing provides more opportunities for the incorporation of these elements than an intelligent revenue strategy.

Strategic revenue management is also recognized as an important component to increasing asset value, attracting investors and improving overall operational efficiency. To reach the highest hotel profitability, you need to consider the impact hotel distribution channel costs are having and also be equipped with the tools that facilitate these critical activities for hoteliers.

Where Distribution Fits in

The role of distribution is one historically intertwined with the strategic function of revenue management. While distribution strategy has a very micro and specific business focus, it has become a hot topic of interest for hotel executives. As another facet of revenue management, we, as an industry, have spent time over the recent years analyzing and dissecting the opportunities an intelligent distribution strategy can bring hotels.

Most notably, there has been a significant evolution in the role it plays in driving hotel profitability – largely due to emerging industry data sources, channels and various types of technology. Add in the complexity of prices, restrictions, add-ons, channel usage, technology and distribution costs, and many hotel organizations have easily considered this function large enough to split off on its own, increasing job roles that develop, execute and measure their comprehensive and intelligent distribution strategies.

The complexity of distribution and its impact on today’s organizational structure makes it critical for executives to understand how the quality of this role increases their overall hotel profitability. Not accounting for real distribution costs (which include details like basics of percentages, tracking direct costs and monitoring revenue results) can have an extremely unprofitable impact on overall revenue management strategies. Not properly managing or accounting for distribution costs directly affects the net revenue results hotel executives can expect from their property’s distribution channel strategy.

The Tools Driving Increased Profitability

Big data has undoubtedly helped our industry make big moves over the years. One of the profitable ways hotels have capitalized on the influx of big data is by recognizing that most intelligent revenue strategies look past the “big” description and identify “smart” data. Click to Tweet | IDeaS Twitter. For hotels focusing on driving better business through loyalty programs, personalization and a wealth of attractive guest choices, revenue technology that offers them data-driven methods and powerful analytics has become one of the first stepping stones in doing so.

There are many different factors that can influence a hotel purchase decision: online ratings and reviews, competitive pricing, strong loyalty program rewards, location, etc. Hoteliers need to leverage and analyze every one of those factors—and the data sources that drive them—to build guest loyalty, provide a personalized guest experience, boost marketing ROI, attract an optimal business mix and improve their market performance. For a successful data-driven approach to holistic revenue management, it is critical to employ analytical tools and technology that incorporates market intelligence, ancillary revenue data, online reputation sentiments, competitor pricing and historical data. For today’s hotel executives looking to strategic revenue management for increases in profitability, it’s important to recognize that maximizing revenue is different from maximizing profits.

There is a complexity of revenue management—and the data needed to make optimal decisions—that may seem counterintuitive and perplexing at times. However, trusting, investigating and understanding its underlying principles pays off in dividends in the end.

Hotels pairing powerful and analytical technology with the right holistic data sources are finding themselves with the most profitable way to strategically tackle today’s unpredictable climates and fluctuating markets – improving asset values and operational efficiencies.