Tuesday, 28 October 2008

Distribution

Travel Distribution at a Crossroads

59% of online travel shoppers stop at online agents, like Travelocity, first, presumably to comparison shop. The average consumer makes 12 searches and visits 22 sites before they book (Uptake, June, 2008). To be found, you need to be seen on “appropriate” sites, even if you don’t get bookings from them. 95% of visitors to these sites do not buy on the site. In 2006, it was estimated that 70% of visitors to sites, like Expedia, ended up buying Direct from the supplier. This is why Expedia has moved into advertising, realizing that they do influence buying decisions at a growing rate. The GDS imposed minimum monthly billings as a way of charging for exposure.

In a fragmented global market, distributors emerged as the place to shop, and hotels have fully supported this channel. But distributors set their own rules and resell price. Prices in distribution are often much lower that the hotel-published rates. As competing distributors try to match rates, the pressure on hotel profitability is intense. Often, a hotel that could not meet a requested price would be dropped. In this aggressive distribution-driven market, the hotel Brand was eroded and rates fragmented.

The large hotel chains moved effectively to take back control with Best Rate Guarantees and by offering consumers the service (technology) they demanded (online costing, bookings, packaging).

Many travelers prefer to deal direct (i) and the technology is helping to drive more business direct to suppliers. Field Management Systems and small travel application developers and travel integrators, such as AXSES, play a large part in driving direct to supplier business.

Consider Intimate Hotels of Barbados. The Intimate portal is powered by AXSES arcRes Portal-keeper.com and arcRes-CRS (Central Reservations Systems). These solutions can be fully integrated with GDS, with the hotel bookings and Property Management System.

In this scenario, the small hotels manage rates and inventory on their own arcRes web booking engine, the Intimate Hotels Barbados Portal and 10 arcRes-powered channels, like BoookingsBarbados.com, BarbadosVacationSpecials.com, etc.

Global Distribution Systems (GDS) are an important part of the market mix and are now affordable for small hotels. GDS is the largest travel distribution network in the world. Over 600,000 international travel agents use them. In addition, many Internet Distribution Systems (IDS), such as Travelocity, have traditionally pulled content from the GDS to offer booking for resorts not signed with them.

The GDS have acted, to some extent, as a channel management tool for thousands of IDS sites. This, too, is changing, as IDS favour direct contracts with resorts and always put their own direct contracts on top of the list. We expect that IDS will drop GDS content when they have a critical mass of direct-contract suppliers.

The issue, then, is how many systems will you, as supplier, be required to manage.

Distribution is here to stay. It offers services, like comparison-shopping, that cannot be feasibly offered by a resort website. Travelers will continue to comparison-shop there to assess which supplier sites to visit.

The role of marketing is becoming very much the role of controlling content, rates, availability and visibility on the Internet (Channel Management).

Channel Management is a top priority of just about everyone in the travel marketing business. The technology is becoming affordable and easier to use. GDS suppliers are now rolling out integrated solutions to let hotels manage rates on other channels. Companies, like Rate Tiger, are reaching a critical mass and lowering their rates.

The new order is taking shape. New technology is driving direct business and making it easier to control and manage distribution. Technology is more accessible and affordable and Suppliers who use it are taking control.



Notes
1. PhoCusWright: "In fact, more than twice as many online travelers (36%) believe that the supplier-direct channel provides the best customer service, compared to 15% who choose the online travel agency channel. Even offline agencies, which are coveted for their personal touch in a technology-driven world, did not fare as well, with 33% claiming they provide the best customer service ...."
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2 comments:

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