Envisioning the Future of Hotel

Distribution and Online Marketing

PETER O'CONNOR

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Executive Summary

Key Findings

Distribution and Online Marketing in turmoil

Pre-session Survey

The Visioning Session

1. Guest Knowledge

2. Systems Integration 

3. Consolidation 

4. Team Organisation / Hotelier Mindset 

5. PCI / PII 

6. Others 

Table of Contents

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Revinate | We believe that guest knowledge is the key to creating valuable long-term relationships.

Revinate helps hotels know more about their guests so they can deli-ver personalised experiences that create valuable relationships and lifelong customers. Using guest data combined with our reputation management, surveys and marketing automation technology, hotels can understand and engage their audiences like never before. Revinate is easy to use and requires minimal technical expertise so anyone at your property can use it to drive loyalty and generate more revenue, delivering on your brand promise. 28,000 of the world’s leading hotels trust Revinate to help them reinvent the guest experience.

For more information, visit www.revinate.com

SiteMinder | Attract, reach and convert guests globally.

As the leading cloud platform for hotels, SiteMinder allows hotels to attract, reach and convert guests across the globe. We serve hotels of all sizes with award-winning solutions for independents and groups alike, wherever they are in the world.SiteMinder’s products include The Channel Manager, the industry’s leading online distribution platform; TheBookingButton, a wholly-branded booking engine for direct bookings via the web, mobile or social; Canvas, the intelligent website creator for independent hoteliers; and GDS by SiteMinder, a single-point of entry to a six-figure network of travel agents and the world’s major GDSs. With more than 20,000 hotel customers and 350 of the industry’s top connectivity providers as our partners, today we have presence in more than 160 countries on six continents.

For more information, visit www.siteminder.com

About Revinate

About SiteMinder

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Peter O’Connor, Ph.D. is Professor of Information Systems at ESSEC

Business School, where he also serves as Director of the Global MBA

and the MBA in Hospitality Management. His research, teaching and

consulting interests focus on technology, distribution, e-commerce

and e-marketing particularly applied to the hospitality sector. He

previously held a visiting position at the Cornell Hotel School, and

worked in a variety of positions within hospitality. His most recent

achievement has been to launch the first MOOC on Hotel Distribution

Revenue & Demand Management. 

Copyright: This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

For further information see: creativecommons.org/licenses/by-sa/4.0/

About Peter O’Connor

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With the hotel sector in a state of turmoil, how and where we sell to the customer is quickly evolving. Competition is increasing from OTAs, sharing economy players like Airbnb, and larger, more marketing-savvy hotel brands. Technology is evolving at blinding speeds and consumer expectations are shifting in new, unforeseen directions.

Such dramatic change makes it challenging to understand what is happening within the hotel distribution and online marketing environment. Many hoteliers are struggling to keep pace, and to assess the implications of the latest developments in distribution, marketing and operations.

To help address this issue, Revinate, SiteMinder and ESSEC decided to host a visioning session with industry practitioners during the 2015 World Travel Market in London. The goals of this session were to assess the current state of hotel distribution and online marketing; forecast future trends; as well as assess how the sector might develop in the short term.

By tapping into the wisdom of the crowd, we were able to identify the key distribution and online marketing challenges faced by hoteliers today. We also established the relative importance of each issue so as to be able to identify which should receive the most urgent attention from the industry as a whole.

Executive Summary

“By tapping into the wisdom of the crowd, we were able

to identify the key distribution and online marketing

challenges faced by hoteliers today.”

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The study yielded five key findings:

1. Focus on the guest experience: To compete in today’s marketplace, we as an industry need to move away from solely distributing and marketing hotel rooms to focus more on managing guest relationships. Far too many hotels invest their all too limited time and resources driving one-off transient bookings, leading to very high customer acquisition cost. Instead, hotels should focus on understanding their guests so as to be able to create the personalised experiences that encourage brand loyalty and repeat bookings.

2. Integrate technology systems: The collection of customer data is further complicated by the lack of integration between the different technology systems typically used in hotel marketing, distribution and operations. While information technology based systems are widely used, many tend to operate as ‘islands of automation’, rarely consolidating their data to present a single view of the customer. Without proper data integration, creating an accurate and reliable profile of the guest for use in marketing and customer service initiatives becomes impossible.

Key findings

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3. Improve data collection and security: To develop a deeper understanding of each guest, hotels need to be able to collect, store, analyse and use increased quantities of guest data. This task is complicated by the absence of adequate standards and safeguards to protect sensitive digital assets like personal data. Additionally, hotels are increasingly being targeted by hackers and other cyber criminals, making consumers reluctant to share the very data needed to create the above mentioned personal experiences.

4. Modernise team organisation and management: The three above challenges are amplified by how teams are typically organised in the hotel sector. Sales, distribution, revenue management and online marketing often operate independently, with little coordination. Coupled with the highly conservative nature of managers throughout the hotel sector, this makes creating and implementing a climate of change and service innovation difficult. A new breed of manager, with broader competencies in digital marketing and distribution as well as a more strategic viewpoint, is needed to break down the walls between these functional silos and take hotel distribution and online marketing to the next level.

5. Drive urgency: Facing renewed pressure from the OTAs, hotels need to find ways to provide enhanced customer service and differentiate themselves from the pack. This is possible if hoteliers can get to know their guests more personally and subsequently use this information throughout their marketing and operations. However continuing to fight today’s battles with yesterday’s solutions is unlikely to bring success for the future.

“The collection of customer data is further complicated by the

lack of integration between the different technology systems

typically used in hotel marketing, distribution and operations.”

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Most people involved in hotel distribution and online marketing would agree that the whole area is in turmoil right now, with both technology and consumer expectations evolving extremely rapidly. These developments have a knock-on effect on how we as hoteliers can, and should, sell to this increasingly wired and sophisticated audience.

At the same time competition in the online environment continues to become more intense, with the result that hotels need to pay much more attention to how and where they are being sold, as well as invest in the right systems and expertise to insure that they can compete effectively in this highly turbulent environment.

In fact many would argue that it might better to describe the current environment as not just being evolutionary, where change is occurring at a natural pace, but one where a revolution in what we need to do to succeed is occurring. Such dramatic change naturally makes understanding what is currently happening in the hotel distribution and online marketing environments, and assessing the implications of such developments for our chains and our properties, absolutely essential.

For that reason, Revinate, SiteMinder and myself decided to put together a research based study to try to assess current developments, forecast future trends and try to assess how hotel distribution and online marketing might develop in the short term. To do this, we decided to tap into the wisdom of the crowd, leveraging our extensive network of industry contacts to identify the key challenges and concerns being faced by hoteliers in relation to distribution and online marketing. We asked participants both about today and about the near future (over the next three years) to gain insights into short-term priorities. And as part of this process we also wanted to measure the relative importance of different issues so as to be able to prioritise which topics should receive the most urgent attention.

Distribution and Online Marketing in turmoil

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To identify the key challenges that hoteliers face in marketing and distribution, we used a multi-step research process. First, we invited industry leaders in the hospitality field to a breakfast visioning session that was held at the 2015 World Travel Market. Then, we electronically surveyed these hoteliers, asking them to identify the three most important issues they felt would affect hotel distribution and online marketing over the next three years.

To help show the relative importance of the different suggestions, we generated a word cloud (see figure 1) which was distributed to participants at the breakfast meeting.

Figure 1 – Pre-session survey Word Cloud

Pre-session Survey

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This word cloud highlights some of the issues currently on hoteliers’ minds with regards to distribution and online marketing. The topics identified can be broken down into three groups or themes.

1. Fast-paced online environment: Many respondents described the macro environment of hotel distribution and online marketing as being complex, hyper-competitive and highly dynamic. This makes it difficult for many hoteliers, as non-experts, to keep up with the latest developments in the field and take advantage of new opportunities.

2. OTA consolidation: Current developments in the online distribution space have created increased desire amongst hoteliers to drive more business through direct online channels. These include the ever increasing consolidation within the OTA space and the increased adoption of developing technologies such as metasearch and instant booking.

3. Advancing technology: The third theme related to the increased sophistication and complexity of technology systems used to drive distribution and online marketing. Topics such as connectivity, cross-device and customisation featured frequently in responses.

This word cloud demonstrates the need for increased education efforts to help hoteliers understand the implication of rapidly changing developments. In particular, hoteliers have a need to understand how such developments will affect their day-to-day operations and how best to exploit new opportunities to optimise both business and return on investment.

“Current developments in the online distribution space

have created increased desire amongst hoteliers to drive

more business through direct online channels.”

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However, this word cloud was only an introduction to the visioning session itself. There, participants were asked to use nominal group technique to identify and prioritise relevant issues. This is a commonly used envisioning technique where participants are asked to brainstorm and prioritise their ideas in sub-groups. Each group’s findings are then returned to the general session to prompt a discussion on the identification of common themes and issues. Participants then vote to determine the most important and relevant factors identified.

For our study, practitioners took part in a visioning session during the 2015 World Travel Market in November. During the session, participants were asked to vote on which of the issues were (1) the most significant and (2) the most urgent. The most frequently cited of these are presented in the matrix shown in Figure 2, with importance on the horizontal axis and urgency on the vertical axis.

Figure 2 – Importance / Urgency Matrix

The Visioning Session

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To dig into some of the issues, let’s start in the top right-hand corner with the most important and urgent issue identified in the session.

1. Guest Knowledge

During the session, it was clear that the most critical issue for participants was that, if we as an industry want to compete more effectively in today’s hyper-competitive marketplace, we need to significantly change our approach to distribution and online marketing. In a nutshell, we need to move away from simply managing rooms to focus more clearly on managing guest relationships.

The group agreed that many hotels and chains invest too much time and resources on driving one-off transient sales. While such customers may come and stay at the property once, they rarely come back for a second or third stay. This means that the amount invested, through OTA commissions or direct marketing efforts, is to a large extent wasted on a one-time customer acquisition.

Hotels should instead (or additionally) focus on developing a closer relationship with each guest, getting to know them better as customers. With

increased guest knowledge and understanding, hotels could provide much more personalised contact and service at each and every touch point along the customer journey.

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Done correctly, this could act as a significant differentiator. A hotel that knows its guests and uses this knowledge to deliver personalised service can potentially earn the guest loyalty that so many hotel chains strive to attain. And building such loyalty also allows the amount spent on customer acquisition to be amortised over that customer’s now extended lifetime, changing around the economics of online marketing.

Thus understanding our guests by collecting and analysing better customer data should be a priority for hotels. We as an industry are well placed to build up such a data asset. Although many guests book through third parties like OTAs, hotels ultimately deliver the service and thus have direct contact with the customer. As a result, they have every opportunity to collect the required data and use it intelligently to own the relationship with their guests.

However multiple operational challenges stand in the way of achieving this goal, including several of the other issues identified during the session.

2. Systems Integration

In the same way that hotel teams need to work together and management needs to break out of its old ways, technology systems also need to be more tightly integrated. Encouraging teams to work together is one thing. However, unless they have the appropriate and reliable technology based systems to facilitate data sharing, hotels are fighting an uphill battle.

Until now, not only have teams been physically and organisationally isolated from each other, but the technology systems they have been using have also been islands of automation. The technology fails to give teams sufficient access to comprehensive data across systems, preventing them from focusing on the big picture. Such fragmentation makes it difficult to collect, consolidate, analyse and disseminate the type of in-depth guest knowledge necessary to

“In a nutshell we need to move away from simply managing

rooms to focus more clearly on managing guest relationships.”

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provide the highly personalised guest experiences needed to generate lasting loyalty. If different departments are using different systems, potentially with different data standards, then building detailed and a comprehensive customer profile becomes to a large extent impossible.

3. Consolidation

Thankfully one of the other trends identified in the visioning session should help alleviate this problem. Currently, the entire universe of hotel distribution and online marketing is experiencing extreme and rapid consolidation. Everyone, from the major OTAs, to technology suppliers, to the hotel chains themselves, seem to be merging and

engaging in takeovers.

As such consolidation settles, we should end up with fewer channels, fewer systems and fewer sources of data. Fewer, more comprehensive, technology based systems will manage a larger proportion of the overall hotel distribution and online marketing game. This

will make it easier to achieve a synergistic organisational structure, paving the way for the type of personalised communication, marketing, merchandising and operational service needed to compete in today’s hotel marketplace.

4. Team Organisation / Hotelier Mindset Merging two similar issues together gives us the third major challenge identified by the visioning session - that of team organisation as well as the traditional hotelier’s mind-set. Most participants felt that the highly conservative nature of the

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hotel sector, where processes have remained the same not just for generations, but sometimes for centuries, was a major challenge. Despite often overwhelming evidence to the contrary, many hoteliers still cling to their old ways of doing things. Many are still unwilling to embrace the fact that distribution and marketing have already changed

significantly, and will have to continue to change radically in the near future.

This conservatism is often reflected in how the hotel sector’s sales, distribution, revenue management and online marketing

teams are currently organised. Each subgroup typically toils away in its own island of isolation, often with little coordination between teams. Not so long ago one major international hotel company that I am familiar with had twelve different groups of employees working within this discipline. Some teams were even in direct competition with each other as they had conflicting objectives.

Success in today’s highly dynamic and fast moving hotel marketplace depends greatly on breaking down the walls between these functional silos. Teams need to be integrated together with one common goal - maximising the return to the hotel. This requires a different kind of manager - one with a totally new and integrated skill set that combines competencies such as understanding direct and indirect distribution, revenue management and pricing, online marketing, merchandising techniques and much more. It also requires a much more integrated and coordinated organisational structure.

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It’s not that all of these competencies will be found in the same person. Each team will need to understand the other objectives, techniques and methods of operation so as to be able to work together effectively.

Breaking down these boundaries means upsetting the hotel industry’s apple cart, as well as looking outside the sector for inspiration and examples of best practice, particularly from the closely related online retail area. Hotels will also need to overcome the dramatic resistance to change that has typified their sector in the past so that innovations can be rapidly implemented as the environment evolves.

5. PCI / PII The second most urgent issue identified was related to hotels’ ability to store and use customer data, namely that of PCI/PII compliance. Developing a deeper understanding of our guests’ preferences by definition implies collecting and storing large quantities of detailed, often personal, data about them. Payment Card Industry Data Security Standards (PCI DSS) have existed for some time, guiding merchants on how to store, process and transmit card data.

However, hotels also typically collect valuable personal data (such as names, email addresses, passport numbers, mobile, or even usernames and passwords) as part of their normal operations hotels, and comprehensive, commonly agreed, standards like the PCI DSS do not currently exist to help protect this kind of information. And soon, perhaps there will be a need to protect even more personal information such as biometric records.

“Until now, not only have teams been physically and

organisationally isolated from each other, but the technology

systems they have been using have also been islands of

automation.”

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Unfortunately to date the hotel sector has been doing a poor job of protecting guest data. Media feeds are currently overflowing with horror stories, particularly in the U.S. market, about hotel properties being hacked and substantial amounts of highly personal data about guests and transactions compromised. And realistically, this is probably only the tip of the iceberg. As hackers increasingly focus on what they regard as a soft target that provides easy access to detailed and valuable personal data, many more properties are undoubtedly unaware that they have already been hit.

To combat this trend we urgently need to identify and implement effective standards to protect guest data. The Federal Trade Commission has already indicated that it will take legal action against businesses that do not take adequate steps to secure their customer data. Consumers are also becoming more protective of who has access to what data, and what they can do with it. Many are unwilling to share personal data with those who are not transparent about how it will be used.

Thus as an industry, if we want to encourage guests to share the type of in-depth personal data required to better understand their wants and needs, we need to take steps to reassure them that their data will not only be protected but also not misused.

6. Others

A variety of other issues were also identified during the visioning session. These included several related to how hotel distribution is evolving, as well as some broader, more generalist topics.For example, several participants highlighted the subject of OTAs’ ever increasing domination of the hotel online distribution space today. Interestingly, the issue was ranked as less significant and less

“If we want to encourage guests to share the type of in-depth

personal data required to better understand their wants

and needs, we need to take steps to reassure them that their

data will not only be protected but also not misused.”

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important than might have been anticipated from the amount of media attention that it currently receives. From the discussions it was clear that many participants had moved on from their hitherto conflictual relationship with the major OTAs, finally accepting the latter as valuable distribution partners that positively contribute to the financial success of their businesses.

The challenge gaining and maintaining visibility on consumer search engines was also frequently cited. Search engines such as Google are devoting increased proportions of their search engine result page real estate to either paid search placement or their own (often revenue generating) content. As a result, it has become increasingly difficult for hotels to gain visibility through this now essential customer communications channel. Participants dubbed this development ‘the death of SEO.’ Most agreed that the only way to now gain sufficient visibility in search is to play Google’s paid search and metasearch games.

Complicating this, most participants agreed that they face challenges in gaining sufficient funding for online marketing efforts. With overall budgets tight, marketing spend is often one of the first things cut by short-sighted corporate executives who fail to realise the highly competitive nature of hotel distribution and online marketing. In addition, many participants felt that their total marketing budget was paltry in comparison to the massive spend of the major OTAs. This makes it necessary to be highly clever with their limited resources so as to have maximum impact and generate an acceptable return on investment.

One of the challenges in justifying marketing expenditure is the increased use of multiple devices by the consumer, which makes channel attribution difficult. While the consumer may initially see the hotel’s marketing effort on their iPhone, they may actually make

“It has become increasingly difficult for hotels to gain visibility

through this now essential customer communications channel.

Participants dubbed this development the death of SEO.”

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the booking through their desktop device, making it problematic to associate the marketing expenditure with the resulting booking. Such cross device challenges are likely to increase in the short run as consumers increasingly make use of multiple devices and online marketers struggle to find effective techniques to handle such attribution. However on-going efforts by platforms such as Google and Facebook may deliver acceptable solution to this challenge in the longer term.

And not surprisingly the sharing economy was also on the minds of participants. Increased competition from industry giants such as Airbnb affects hotels’ distribution and online marketing strategy and efforts. However instead of battling yet another powerful online company, participants felt that hotels needed to find a way to work together with the peer-to-peer giant, potentially helping it to solve its growing supply problem by developing some sort of a win-win synergistic relationship.

One of the challenges in justifying marketing expenditure is the

increased use of multiple devices by the consumer, which makes

channel attribution difficult.”

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Overall, as can be seen from the above discussion, a wide variety of very different issues were identified during this year’s visioning session with industry practitioners. What is quite remarkable is the level of interconnection between those identified. Even though working independently in subgroups, each came up with not just similar ideas, but themes and concepts that are indisputably intertwined with each other.

For example hotels simply cannot collect and leverage increased guest data to improve customer service and online marketing efforts until these issues around personal identifiable information (PII) standards, system integration, team organisation and managers’ mindsets are addressed. Similarly, the challenge of system integration cannot be attacked until rules about PII are clear and questions about how the hotel organisation of the future will be structured are addressed. Sometimes it seems like “Catch 22” – nothing can move until all of the other pieces on the board fall into place.

But make progress we must! If hotels are to survive in today’s highly competitive online travel marketplace, then we need to significantly up our game, better manage our distribution and online marketing, and fight more intensely for the customer.

To succeed we must establish our own destiny by adequately addressing many of the issues identified in this study. Once these issues are resolved, we can take back control over our property’s distribution and online marketing and ensure the hotel’s future

Complacency is simply not an option!

Conclusion