October 11 2012

Where to Sell a Room?

It is not that long ago,  when hotel rooms were sold via voice, using the PMSs revenue management capabilities to determine the rate, price and availability. Holiday Inn invented the CRS in the late 60-ties, that enabled Holiday Inn to sell all hotels from one central point, many other big chains followed the same principle. During the 80-ties and 90-ties hotel rooms were ONLY soled through the hotels PMS, chains CRS, or travel agents using a GDS. The majority of the PMS vendors build there products during the same time, focusing their efforts on strong and complex rate strategy and revenue management features.

Than the internet appeared, now hotels needed a web site to sell their rooms.  It was relatively easy to deal with, PMS and CRS vendors added a mostly basic booking engine, hotels would than integrate it with their website.  Next the term OTA appeared, (virtual travel agents). Expedia was the first or one of the first, followed by Orbitz, Priceline, Hotels.com etc.. At first OTA’s were welcomed by hotels, than they became to expensive to sell rooms on. Small internet companies appeared, they would help hotels to sent as many bookings as possible to the hotel’s own website or booking engine, minimizing the cost per booking. SEO, PPC and internet marketing, was new to most hotels, so hotels contracted marketing agencies to help them to drive as much guest to their website.  Today this no longer works, partially as the marketing budgets and strategies from OTA’s simply were (and are) much more effective. But also because there are simply to many OTAs hotel offer their rooms on.

Being an OTA can be good business, with Expedia, who started it, today there are hundreds of OTAs, and it seems a new one launching almost almost everyday. The latest trend is last minute mobile booking apps.  A great example here is hotel tonight.com. With all these OTAs and guests actually becoming loyal to many of them, hotels cannot afford not to be available on them. Now that there are so many, hotels are in a better position to negotiate commissions and drive the cost per booking down. With a good channel manager, hotels can manage availability, price and revenue strategy, from one point.

Back to the PMS (build for voice and CRS… remember). With the hundreds of OTAs available now, controlling revenue strategies, price and availability is complex and can no longer be a “on property” function. While the PMS will continue to manage the hotels physical inventory, to have an effective and accurate revenue management strategy the hotels should partner with a strong distribution or channel manager partner. Ensure there is a strong 2-way interface with the property in place, manage room inventory from the PMS, but set price, rates and yield controls in the distribution system. Good distribution vendors are Cloud based, will be able to add new OTAs quickly and as they have more “flat” rate strategies are able to achieve greater rate parity  amongst all connected OTAs.

Tomorrow there will be another OTA on which your guest wants to book your hotel, with a good PMS <> Distribution strategy, any size hotel can react quickly and maximize revenue while controlling the cost per booking.