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In our latest guide, we cut through the noise to provide the essentials every independent hotelier should know about revenue management. Get answers to the following topics and more.
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Hotel Pricing & Distribution: Charging the Right Prices on the Right Channels
Knowing where to list your hotel and the prices to charge can be tricky, especially for busy operators of small, independent properties.
It’s not just about being visible on booking channels to help travelers find you; it’s equally important to set room rates that convert these travelers into guests.
What are the pros and cons of different distribution channels? And how can you make your property stand out? In this quick guide, we explain the essentials of hotel distribution and pricing.
What is Hotel Distribution?
Hotel distribution is about listing hotel rooms on a variety of booking channels to bring in a steady stream of reservations and revenue into your property. It involves three key steps:
- Decide which channels to be listed on.
- Make your listings appealing.
- Manage pricing and availability.
Let’s take a closer look at each of these steps.
1) Decide Where to List Your Hotel
Distribution channels vary widely, each serving distinct market needs and offering different benefits. Here’s a breakdown of the main types of channels:
- Direct channels: These channels enable travelers to book directly with your property, including on your website, by phone, or by walking in.
- Online travel agencies (OTAs): These are websites where travelers book accommodations and other travel services. Globally, the OTA space is dominated by two companies: Booking Holdings, which owns Booking.com, Priceline, and Agoda, among other sites; and Expedia Group, which owns Expedia.com, Hotels.com, Vrbo, Travelocity, and others.
- Global distribution systems (GDS): These reservations networks are used by travel agencies to book hotels and other travel arrangements on behalf of clients. The three main providers are Sabre, Amadeus, and Travelport.
- Wholesalers and bed banks: These companies purchase rooms from hotels in bulk and sell them to tour operators, OTAs, and travel agencies. Three of the largest are Hotelbeds, WebBeds, and HPro Travel.
- Metasearch platforms: These sites display hotel pricing and availability from various booking channels, allowing travelers to compare the options on a single page. Popular platforms include Google Hotels, Tripadvisor, Kayak, and Trivago.
OTAs: Too Much of a Good Thing?
Considering the commissions charged by online travel agencies, typically from 18 to 25% of room revenue or even more, some might say hotels have an unhealthy dependency on OTA business.
This is particularly true of small, independent properties, for which 60% of bookings on average came from OTAs in 2023 – the highest level in five years, according to Cloudbeds data. In Europe, OTAs accounted for an incredible 76% of bookings, compared to 64% in Asia Pacific and 48% in North America.
Distribution Strategies for Independent Hotels
Rather than signing up to every possible channel, hoteliers are wise to choose channels where target guests are most likely to book. Here are some tips:
- Diversify your distribution mix. Relying too heavily on one or two channels is risky, especially expensive ones like OTAs. By listing on several channels, you can reach a variety of traveler types in different regions of the world.
- Boost direct bookings. Direct bookings are usually more profitable because you don’t have to pay a commission. To encourage guests to book directly, make sure your website booking process is easy to navigate and mobile-friendly.
- Include smaller OTAs. In addition to big names like Expedia and Booking.com, consider specialty OTAs like Airbnb and Mr. & Mrs. Smith, as well as regional OTAs like HRS in Europe, Despegar in Latin America, and Trip.com in China.
- Explore other channels. For hotels in leisure destinations, wholesalers are an important part of the distribution mix. For city hotels, the GDS can be an effective way to attract corporate business from travel agencies.
- Try out metasearch. While not a traditional booking channel, metasearch platforms can help increase your visibility. They may also be cheaper than OTAs because they charge for clicks to your website rather than commissions on bookings.
Did You Know About the Billboard Effect?
Love them or not, OTAs are a key source of bookings for most hotels. They can also be a powerful advertising channel. Some travelers discover a hotel on an OTA and then go to the hotel’s website to book. This is known as the “billboard effect,” and it can lead to a boost in reservations of up to 26%, according to research from Cornell University.
2) Make Your Hotel’s Listings Stand Out
Small, independent properties compete on distribution channels against big hotels and global brands with deep pockets for marketing. Here are a few ways to stand out.
- Provide detailed information. What makes your property special? Describe the amenities, room layouts, bed configurations, views, and other distinctive features.
- Promote your location. What makes your neighborhood the ideal home base for travelers? What attractions, transportation options, activities, and services are nearby?
- Display quality photos. Seeing is believing. Show off your property with lots of great photos that capture its look and feel, including rooms, facilities, and views.
- Manage reviews. A high guest rating can boost your property’s visibility and conversions on OTAs. Respond quickly to guest reviews and use the feedback to improve.
- Keep information fresh. Regularly review and update your listings to ensure the information is always current and accurate.
3) Manage Hotel Pricing and Availability
Getting your pricing right on distribution channels is vital to attracting bookings.
- Use dynamic pricing. Adjust rates up or down in response to changes in internal and external demand, including during busy dates, quieter dates, and special events.
- Keep an eye on competitors. Monitor market rates to ensure your pricing is competitive with similar properties in the area.
- Offer promotions. Offer special deals during slower periods to attract more guests, such as early-bird and last-minute discounts, non-refundable rates, and discounts for longer stays.
- Include value-adds. Rather than always discounting rates, offer value-adds such as free breakfast, an upgrade, or a welcome amenity to maintain a higher average rate.
- Keep pricing consistent. Try to maintain the same rates across third-party booking channels to avoid confusion and build trust with travelers.
- Give the best deals to direct bookings. If OTA agreements allow, offer the best rates and perks on your website to encourage guests to reserve directly.
- Target different segments. Tailor your pricing strategies to appeal to different types of travelers based on their needs and booking habits.
- Monitor costs of distribution. Each channel has its own fee structure. Understanding and comparing these costs is crucial for knowing what rate plans to offer on which channels.
- Manage availability by channel. When you’re projecting to fill, consider closing out or restricting availability on lower-value channels such as OTAs and wholesalers.
- Spot-check your rates. Sometimes OTAs might adjust your room rates without your knowledge. By monitoring pricing across channels, you can address discrepancies and ensure you’re positioned where you want to be.
Make Pricing and Distribution Easy with These Tools
The last piece of the distribution puzzle is technology. To manage distribution and pricing efficiently and effectively, these two solutions are essential:
- A channel manager: Allows hotels to easily connect to a broad range of distribution channels and manage rates and availability from a centralized platform.
- Automated pricing software: Manages day-to-day pricing for hotels, dynamically adjusting rates based on booking patterns and market conditions to maximize revenue across channels.
By automating a range of tasks, these solutions save hours of time and reduce manual errors, freeing up time-strapped hoteliers to focus on other areas of the operation. They also integrate with the property management system (PMS), enabling the seamless, real-time flow of rates, availability, and reservations.
Let the Bookings Roll In
To wrap up, nailing your pricing and distribution strategy is key to standing out in the crowded hospitality market. This means expanding your channel mix, fine-tuning your listings, and using smart technology to streamline operations.
As you hone your approach, you’ll gain the assurance that you’re engaging the right channels at the ideal prices. Stay proactive, and watch your property thrive.
For more tips on hotel revenue management, be sure to check out RoomPriceGenie’s newly revamped Content Library.
About RoomPriceGenie
RoomPriceGenie is the easiest way to ensure your rooms are priced right, every night. Purpose-built for the independent hotelier, RoomPriceGenie is fast to implement, intuitive to use and simple to understand. In an uncertain world, it’s revenue that you can count on. To find out more about automated pricing, start your free trial today.
