Solving Distribution — Part 1: Marketing

By Dan Wacksman, CHDM, Senior Vice President of Marketing and Distribution, Outrigger Hotels & Resorts, and Chair of HSMAI’s Marketing Advisory Board

Marketing, distribution, and revenue management have become inextricably linked in our industry, and it is easy to see how each can have a knock -effect on the other. On a recent call for HSMAI’s Marketing Advisory Board (MAB), we discussed one of the most annoying problems for all three areas: having our rates undercut by OTAs that we do not contract with. This impacts our direct channels, our relationships with our trusted (contracted) third-party partners, and our marketing efforts — why pay to appear on meta (or other marketing vehicles) when we are being undercut? 

During a conversation I moderated, MAB members — some of the smartest people in the space — we dissected this issue from every angle, including why it’s a problem, how they’re trying to solve it, and what might be done. (Our colleagues on the Revenue Management Advisory Board did the same; read their insights here.) Here are five key takeaways:

1. Finding the source of the “leak” isn’t easy: “In some cases, [the source of the booking] is two, three, four, levels down. Who knows where [the sites are] picking it up from,” an MAB member said. “It could be some inbound receptive operator in Singapore or outbound group in Spain who’s gone and done this, and then just pushed out the rates. It could be from a hard block, because these guys can’t fill their block. They have inventory risk, so they’re sitting there going, ‘Gosh, we owe 200 bucks a night. Can we at least get 50 bucks a night for these things? Dump ’em!’” Often it can be a good wholesale partner who is giving rates that are supposed to be packaged but are being sold as room only at a very low mark-ups. The bottom line is: T hese rates get out there.

2. Related: Neither is enforcement. “We’ve got brand agreements, and then we also have our own agreements that we negotiate on behalf of the portfolio,” one MAB member said. “Trying to police them separately is difficult, because not only are you trying to identify the source [of the violation], but even when you do, you have to go back and try to figure out which contract is actually the one that’s in violation.”

A potential workaround, according to this member: “Some of the brands are increasing their best-rate guarantee or their price guarantee and [customers are] becoming the police force, so they are the ones now going out and providing the confirmation codes. Previously, we’d make that booking and would end up having to eat that cost, because typically they’re nonrefundable.”

3. But enforcement is possible. “We’ve employed a three-strikes-and-you’re-out policy,” said an MAB member. “If we catch you three times, you’re done with the brand and you’re no longer a partner. We’ve been able to catch a few like that and cut them, and then have them come groveling back at some point with better terms on a brand-wide agreement.”

4. Step one: Get things in writing. “It starts with having very specific terms in your agreement,” an MAB member said. “In some cases, it’s just blatant — they’ve got a 15- or 20-percent discount and they’re just sawing off X percent to the customer. But if you can get terms, particularly for bundled rates — which are supposed to be sold with an airline or a car rental or something like that — that can be helpful.” On a related note, some of the OTAs are now starting to sell package rates unbundled— if you purchase an air ticket, they show you “naked” package rates. Hotels also need to be careful of this and ensure their contracts enable them to opt out of this practice.

5. Step two: Have people dedicated to enforcement. “It could be somebody on the revenue-management team,” the MAB member continued, “it could be on the distribution team — as long as somebody has that in their job description to be aware of this, because they don’t pop up obviously. If you aren’t looking for them, how much do you care?”

Categories: Marketing
Insight Type: Articles