NB: This is a viewpoint by Tim Unwin, executive vice president of hospitality solutions at RateGain.
Hotel distribution is like a complicated tapestry. It is an intricate weave made up of systems and interfaces that looks impressive from a distance, but doesn't make much sense when you are up close enough to see the detail.
So how can you find clarity in this world of grey?
The number of individual channels of distribution potentially available to a hotel is difficult to estimate with any accuracy but can easily be in the thousands. There are a variety of ways to categorize the channels:
- Online or offline
- OTA or GDS
- Direct or indirect
- Push or pull
- Retail or wholesale
With so many moving parts, it is often difficult to understand the relevance and contribution of one particular channel.
Below are few examples of complexities involved in hotel distribution:
- The PMS talks to the CRS, but only to receive bookings
- Central systems have one set of rates for the corporate customers who book through the GDS and a different set of rates for online travel agents resulting in additional effort when rate changes are made
- Revenue management systems can also talk to the PMS, but if either of them tries to control the distribution side, the complications multiply
- The traffic from the larger OTAs is so critical that there's a separate channel management tool to help keep them all up to date
- The channel manager is of little help for the GDS
- No one has any idea what to do about Twitter or Facebook —that's a problem for the marketing team, not the revenue managers or the distribution folks, since social media is not yet treated as a mainstream “channel” of distribution
The complications don't just lead to inefficiencies and errors, there can be turf wars between revenue, distribution and marketing if an early adopter team member tries to redraw the “traditional” division of labour boundaries.
Technology can help make processes more efficient, but it is rarely without financial impact. Tracking the cost of distribution, with all the hidden as well as visible elements, is as much fun as trying to decide which OTA channel does least damage to the hotel's brand value —in other words, no fun at all.
Turning complexity into clarity
The need to interact with a CRS can arise because the hotel is in a chain which offers or mandates it as part of the brand. Marketing and representation companies also use a CRS as the base component of their distribution technology, which contributes to the value they deliver to member hotels.
CRSs originally evolved their form and function to handle two main distribution routes: call centres and electronic channels (GDS).
Later, when the wide, deep and shapeless market that is the Internet became established, CRSs also grew new arms and legs in the form of booking engines for the hotel or brand website.
The common advantage for CRSs was that they held a centralised view of the world and offered a definitive source of real-time room and rate availability to anyone who wanted to ask.
Innovation without interconnection
The flexibility and expansion of the Internet as a distribution medium created new ways to book travel. Some of those methods were compatible with the single, centralised view of the world that was at the core of the CRS model.
Fifteen years ago the largest source of electronically generated reservation traffic to a hotel came from the GDS (assuming that there was any electronically generated traffic – resorts, leisure destinations and hotels outside major cities were still relying on the phone).
Today, the largest and smallest demand generating websites in the travel domain exist as parts of the interwoven tapestry with vast amounts of data – rate changes, availability counters, confirmation numbers, credit card details (PCI compliant, obviously) – chewing up internet bandwidth as they pass constantly from one system to another in an endless stream of XML.
Channel management tools emerged to solve the next generation of distribution problems – similar to a CRS, but on a different scale because of the number and diversity of the channels.
Initially built as simple robotic screen-scrapers, channel management technology has become much more sophisticated. Now there are significant overlaps in the capabilities of advanced channel management applications and their CRS equivalents.
Channel management - seeing more color, less grey
More shades of grey appear in the form of booking engine providers and from PMS companies who are extending the scope of their property-centric systems to encompass the demands of the distribution bandwagon.
There are a wide variety of collaborations, integrations and white-label (or should that be “grey-label”?) concoctions and combinations which present a vast range of options to the hotelier with no clear differentiators to guide in decision-making.
The shades of grey proliferate, whether viewed from the property, from a hotel chain head office, or from the distributor's side of the picture. If we want yet more shades, we can always add in the differing expectations and needs of owners, operators, franchises and representation companies.
The desire for simplicity and more clarity drives many hoteliers to ask:
- Can we include both channel management and a CRS in the same picture?
- Is there a way to reduce the number of shades and make the world look simpler?
- Could a simpler picture reduce the cost of distribution?
The answer to those three questions is simple: yes, yes and maybe (but probably yes).
Tying together channel management and CRS applications into a single, coherent solution will address the first two questions. There is more than one way to do it. The preferred option depends on a variety of factors, such as the commercial model and the requirement for centralization of data or ease of use for the hotel.
CRSs often have direct connections to the largest OTA sites, sending updates in the form of changes to rates and availability, and receiving details of reservations.
CRSs should also have the option to use a channel manager in the background as a way of expanding the range and number of distribution channels available.
For maximum benefit this should be a two-way communication, where the CRS provides the channel manager with rate and inventory information for each channel and the details of reservations are passed back to be delivered to the hotel via whichever mechanism it prefers.
From the hotel viewpoint, everything remains centralised and all of the productivity reporting, flexibility and control of the CRS is retained.
Finding the right balance of flexibility and functionality
Utilizing a channel management tool has the potential to make CRS providers unhappy. A CRS is a sophisticated system which is designed to sit at the centre of the hotel distribution universe.
However, for some business models, and for some hotels, it is just too complicated.
For hotels that only use the CRS for GDS connectivity, tying up everything else into the CRS is a costly proposition.
In situations where the decisions about revenue management and distribution strategy are made at the hotel, rather than by a remote or central control point, the CRS will likely be seen as only one of a number of channels.
The primary objective in this model is simplicity. It is attained by simplifying the management of all of the channels and setting controls which match the hotel's strategy.
There is still an important role for the CRS in this picture: Managing the demands of the GDS and the other “pull model” channels. This requires the ability to handle large numbers of transactions quickly and reliably in real time.
The advantage of having the channel manager at the front is that it provides a single control point, updating each channel in the language it understands, while keeping everything as simple as possible for the user.
The functionality and flexibility of channel management tools is constantly expanding. The concept of pooled inventory is one example of an innovation that has had tangible benefits.
A pool implementation enables product inventory to be shared across a number of distribution channels. It also provides the flexibility to create multiple virtual pools of inventory from the actual rooms available at the hotel.
The most advanced versions provide automated controls which adjust rates and change the channel mix as the inventory in the pool is consumed or as lead-time to a date of arrival reduces.
There are many different ways to measure the distribution cost and these are made up of a number of direct and indirect contributors. Ultimately, the size and sustainability of the revenue generated by the various channels and distribution methods will determine which are retained and which are replaced.
As a general rule, a shorter path from the guest making the booking to the hotel providing the room means a lower overall cost of sale for the hotel.
In some situations, using a channel manager to coordinate all distribution can shorten the path to a particular channel and make it more cost-effective.
In other situations, managing all distribution through a CRS can lead to greater economies of scale, which also has cost benefits. In either case, access to accurate and up-to-date information is essential.
Overall
As technology continues to evolve, the options for combining and simplifying to create optimal solutions will increase.
The interaction between previously separate components and vendors will become essential rather than optional.
The providers with the broadest perspective will be best positioned to meet the future needs of hotels in their quest for cost-effective and straightforward distribution.
And maybe the tapestry will finally be finished and all its many shades of colours will be able to be viewed with clarity and precision.
NB: This is a viewpoint by Tim Unwin, executive vice president of hospitality solutions at RateGain.