Industry  |  17 June 2021  |  Eva Lacalle  |  4 minute read

How to build an effective hotel distribution strategy

hotel distribution strategy
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With 148.3 million travel bookings being made by people online every year, having an effective hotel distribution strategy is key to your success as a hotel. Distribution leads to more guests and more bookings which will effectively grow your hotel revenue. 

With so many ways to reach potential guests and online visibility, developing an effective strategy is critical – and implementing it carefully is an even more important step. So how exactly can you build a successful strategy?

Distribution is by no means a one-size-fits-all scenario, so it’s important to keep in mind several elements when designing your approach, such as: who is your target guest, i.e. which type of guest generates the most profitability; have clearly defined business goals; use a mix of online and offline channels without neglecting direct; set competitive prices; and use technology to your favor.

In this article we’ll look in detail at what is a hotel distribution strategy and how to build the perfect one for your hotel. 

 

What is a hotel distribution strategy?

A hotel distribution strategy is a methodical approach to deciding when and which channels you will use in order to sell rooms profitably. 

Hoteliers must first understand and calculate all the costs of acquisition before they can finalize their distribution list. The idea is to pinpoint and use the most cost-efficient channels during the high season in order to maximize profitability. The main objective is hence to increase visibility and drive occupancy by targeting the right segments.

This is achieved by using a mix of channels, whether it be via direct, indirect or global distribution systems. Examples of indirect channels could be OTAs, Travel Agents, Tour Operators, and DMCs (destination management companies) whereas direct channels could be sales representatives from your own hotel and your hotel’s own website. 

 

How to build the perfect hotel distribution strategy to sell your rooms

Building the perfect plan of action for distribution across different channels will help generate positive growth and give you a competitive edge over other hotels. So, let’s take a look at some tips.

1. Define your target guest

One of the most important elements of creating a strategy for distribution is to define who your target guest is. By knowing your target guest, you’ll be able to decide the most profitable means of distribution because your ideal guests tend to book on channels that are aligned with their modus operandi.

For example, older markets tend to favor direct channels whereas the younger, tech-savvy generation tends to book using metasearch sites and OTAs as they tend to be less brand loyal and more price-motivated. In doing so, you should also have your value proposition clear, so that you are sure to attract the right kind of customers.

Now that you know your target market, you can choose the booking channels such as OTAs accordingly. Keep in mind there are generic OTAs where all properties should be such as Booking.com and Expedia, as well as niche OTAs that should be identified according to your target guest. It is important for your distribution strategy to reflect the hotel booking channels that are preferred by each target group.

2. Have clearly specified business goals

Every strategy should start with clearly-defined goals. Start by understanding where you are currently and where you want to get to. Are you trying to reach international guests? Do you want to improve shoulder season or mid-week bookings? Do you want to boost direct bookings?

By pinpointing these business objectives, you can choose distribution to meet those goals, and once implemented, you can better measure your successes with those particular channels. 

3. Set competitive prices

Now that you have your target audience and have your business goals in mind, it’s time to look at prices. You’ll need a pricing strategy to help you achieve your goals. Monitor the market to make sure your prices are competitive, and choose your prices based on occupancy forecasts. OTAs and channel managers will often give you revenue management tools to optimize prices based on the latest demand trends.

Another method is to use dynamic pricing based on demand and occupancy. In this case you can raise prices when demand is high and lower prices when demand is low in order to increase your occupancy rate. When using different distribution channels you can then decide to offer different prices based on where your bookings are coming from, i.e., online, offline or direct, or you can decide to use the price-parity model where your prices are uniform across channels. 

4. Mix online and offline channels

Mixed distribution is key to success. By mixing both online and offline channels you have the advantage of being able to reach the most diverse guests on a global scale. You should use a combination of online and offline channels in order to achieve your business goals. OTAs and metasearch engines will help increase visibility and drive traffic, but at the same time have high commissions. 

Offline channels, on the other hand, tend to have lower or no associated commissions. For example, putting a listing on a travel guide will usually be a one-time fee instead of a set commission. With offline channels you can also attract older guests and those who are not internet-savvy as well as locals, and last-minute bookers through tourism offices throughout the city. 

5. Use technology to your favor

The last step in coming up with a successful distribution strategy is to tie together all of the above-mentioned strategies with the right technology choices. One of the top tools to invest in is in a hotel property management system. A PMS not only allows hoteliers to manage their hotel better by coordinating reservations, booking availability, and giving you reporting tools that will help you segment your population, but also the data and the integrations provided can be used to devise an appropriate plan of action for your structure’s distribution.

Having the right technology is an important part of your strategy because it will allow you to connect with different channels, while using market intelligence to update your pricing in order to maximize bookings. Make sure you invest in the right products offered by companies such as Mews who have a powerful API integration. Important technology choices include: an online booking engine for direct bookings, a channel manager and a PMS.

Conclusion

Distribution is complex, and will not be uniform for all structures, but it is without a doubt one of the most important decisions hoteliers can make in order to improve profitability and boost reservations. Distribution drives demand and revenue growth because the more you distribute your hotel’s rooms and services, the more guests you will attract. Without distribution it’s as good as if your hotel didn’t exist. It’s as simple as that.

Distribution should be approached holistically, keeping in mind all of the above-mentioned tips. Start by defining your target guest; then with clearly defined goals in mind, set competitive prices; choose your channels with an appropriate mix of on and offline; and then use technology to tie it all together. Using this formula is a recipe for your hotel’s success.

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Eva Lacalle
17 June 2021