Chapter 8 | Distribution Channel Management Flashcards
What are the online distribution channels?
OTAs: highest cost
Brand.com: lowest cost
GDS: reach offline guests through travel agents
What are the offline distribution channels?
Property direct: the largest channel. Business generally acquired by sales and FD.
CRS: still larger than OTAs or GDs
Why manage distribution channels?
To maximize profits by selecting an optimal combination of distribution channels
How to manage distribution channels?
Reach the target customers
Set optimal prices
Allocate optimal inventory
Why do customers go offline to book?
- Unanswered questions
- Personal service
- Better customer service
- Wanted specific travel agent
- Technical issues
What is the merchant model?
OTAs buy inventory from hotels at wholesale price and make money from markups
What is the agency model?
OTAs make money from commission
What is the opaque model?
Reverse auction: customer gets great discounts but doesn’t know the brand at the time of bidding
A great way for hotels to sell distressed inventory while protecting brand image
What are the advantages of online channels?
- Effective for selling last minute rooms
- Easy to collect customer data
- Better revenue optimization
What are the disadvantages of online channels?
- Price transparency intensifies price competition
2. Customers become very price sensitive
Which companies use OTAs?
Independent companies
Which companies use Brand.com?
Large corporate chains
What are the benefits of OTAs?
- Marketing tool
- Revenue source
- Access to corporate accounts
- Billboard effect
What are cost related issues with online distribution channels?
- Different channels have different ADR and ADR ≠ profit
- Longer stays, lower distribution cost
- Look at GOP when deciding between OTAs, not RevPAR
- Look at all channels as a combination for accurate distribution cost
- Utilize optimal distribution channel combination for best revenue source
