In Part 2 of our 3-part Changing Face of Tourism blogs, we look at alternative tourism distribution solutions in a shifting market.
The beneficial cultivation of direct consumer business
Direct consumer business can be an effective part of an operator’s sales mix as it offers increased operator control of the total customer experience, allows operators to avoid commissions and is one of the better yielding businesses.
In the era of OTAs (Online Travel Agents), expansion in the direct market hinges on offering the customer additional value over and above the sheer convenience of the OTAs. This additional value is particularly important for repeat customers. Through direct marketing campaigns, operators must personalise their message and offering, promising to meet the unique requirements of specific individuals and offering services not available through OTA channels. Operators must also implement systems to gather and analyse their revenue and customer data, develop customer relationships with previous guests and harness social media as a marketing tool.
A number of large hotel chains recently updated their marketing strategy and upgraded their technology with the goal of reducing the volume of OTA business and increasing direct business. Some hotel chains, such as Heritage Hotels in New Zealand, are in a position to generate high levels of their business directly, as in extreme cases of peak demand, and have been moving toward completely abandoning OTA platforms. If economically viable, direct business remains the most attractive way for accommodation providers to sell their product. However, the majority of operators still need to work with OTAs and a range of other distribution channels as part of their total sales mix. To be successful, accommodation operators require base and low yield business and must maximise yield from their peak demand periods.
For many operators, a combination of direct consumer business, traditional wholesale relationships, and OTA bookings will ensure that they trade at good occupancy levels with optimal profitability. Successful operators will focus on achieving the optimal ratio of business and performance across different distribution platforms.
Alternative channels offer new opportunities
Even when employing multiple distribution methods, there are many independent
accommodation operators that experience challenges during low season, off-peak and short-lead unsold periods. Despite repeatedly lowering rates, utilising multiple distribution
channels, and aggressively marketing, these operators often cannot achieve 100%
occupancy. This fact illustrates a critical need for imaginative strategies to combat unused capacity or distressed inventory. Luckily, in the current market innovative operators can connect with a range of alternative distribution channels to solve these issues. Alternative distribution channels allow operators to leverage relationships with non-traditional travel distributors to generate high levels of base business, sell distressed inventory, or create incremental sales.
Private closed-user member groups
Fast-growing Australian aggregator of closed-user groups, ubookdirect, provides a viable alternative distribution method through a ‘members-only’ online travel platform offering well priced holiday packages with personalised service to corporate members of private closed-user groups. Their system helps hotels distribute excess inventory without diminishing returns from traditional open market sales channels, allowing them to reach new consumers on a ’below-the-line’, password-protected platform. Director of Product Development at ubookdirect David Schlottman recently explained how their platform can help operators improve their sales while avoiding the pitfalls of relying on OTAs:
“Discontent is increasing between many independent hotels and OTA’s whereby hotels are subjected to rising commission levels of up to 30% if they wish to be noticed by users. This is putting increased pressure on hotel operating costs as they try to stand out in a crowded market place. There are very few alternative distribution channels that are not in conflict with a hotel’s major OTA contracts around pricing parity. This also inhibits the ability to attract new direct customers by way of lower pricing on a hotel’s own website. As independent hotels are unable to compete with the sheer size of OTA’s marketing budgets in the open market, they are often forced to watch rooms go empty or adhere to OTA terms and conditions and sacrifice yield. ubookdirect provides a viable, closed-user distribution and marketing platform to meet the growing needs of hotels looking for a competitive edge for rooms they are not selling by way of traditional channels in the open market.”
Ubookdirect has already proven itself as a useful tool for accommodation operators. Mr. Andreas S.Philkan, Managing Director and CEO of Humus Hospitality Management, which operates in the Bali market, describes his experience with the platform: “We successfully utilise the ubookdirect platform and enjoy access to their private member groups of consumers, generating incremental sales for our portfolio over and above what the open market provides. The platform also allows us to develop a direct relationship with the member prior arrival, which we highly value.”
Another alternative distribution channel is IncentiaPay, a quickly expanding group of companies that strategically combines rewards, deals and incentives via multiple transactional platforms in nine countries, linking customers with small and medium-sized businesses on a global scale. Although its business spans many industries, IncentiaPay has seen rapid growth in its travel, tourism and leisure divisions. IncentiaPay’s Entertainment Publications travel division provides a password protected OTA platform of accommodation
operators with optimal pricing, and connects tourism operators, car hiring services, attraction operators and leisure partners with their sizeable in-house, closed user member group of
annual subscribing consumers throughout Australia and New Zealand. IncentiaPay’s Corporate Marketing Solutions division provides customised white-labeled travel and leisure loyalty programs to large, private closed-user groups of corporate-affiliated consumers in order to provide value-added benefits, with the goal of stimulating repeat business in their customer base. The closed-user group aspect of these channels provides operators with highly beneficial flexibility regarding pricing strategy and campaign length. This increased flexibility is possible because offers are protected by secure, members-only login access.
About the Author – Mark Ferszt LLB BA
Mark has been involved in the travel and leisure industry for over 20 years in hotels, resorts, casinos, and travel distribution. He’s rapidly grown Bartercard’s Tourism & Leisure Division in the Pacific region for 10 years.
Bartercard Tourism has hundreds of resort and accommodation members at destinations worldwide that welcome visitors on Bartercard and accept a cash-alternative currency of Trade Dollars. By spending Bartercard Trade Dollars instead of cash, hotels and resorts have saved millions on expenses from renovations to maintenance and equipment.
ACKNOWLEDGMENTS & SOURCES:
The World Travel & Tourism Council
- Travel Weekly (Australia)
- Mr. Tata Crocombe – owner & Managing Director – The Rarotongan Beach Resort & Spa, Sanctuary
Rarotonga, Aitutaki Lagoon Resort & Spa
- Mr. Randall Deer – owner & Managing Director – Ignite Travel Group
- Mr. David Schlottman – Product Director – ubookdirect
- Mr. Andreas S. Philkan – Managing Director-CEO – Humus Hospitality Management
- PATA Asia Pacific Visitor Forecasts 2018-2022