Complete Guide to Hotel Distribution Channels

Let’s be realistic: without a solid hotel distribution strategy, modern hotels would struggle to establish a meaningful presence on the market and keep their properties booked.

However, with the multitude of distribution channels available, each carrying its own set of advantages and disadvantages, it's easy to become overwhelmed and make misguided decisions.

If you find yourself in this predicament, consider yourself lucky because this article is dedicated entirely to hotel distribution.

We delve into the intricacies of distribution channels, their purpose, and guide you on how to construct the right channel mix for your specific needs.

Without further ado, let’s begin with the basics.

Understanding Hotel Distribution Channels

Before we get into the nitty gritty of hotel distribution channels, we must first understand what they are exactly.

In the simplest of terms, distribution platforms encompass every avenue through which you can offer your hotel rooms to potential guests.

Source: WebBookingPro

 

This includes your hotel's official website, online travel agents, metasearch engines, and global distribution systems (we'll delve into these in greater detail later), but also phone, email, magazine ads, and more.

Nowadays, online channels predominantly take center stage, but the history of hotel distribution goes way back.

In the early days of hotel distribution, walk-ins, phone calls, and sporadic physical emails were the main sources of room reservations.

The landscape began evolving in the '60s with the appearance of the first electronic reservation systems.

Fast-forward to the present day, and offline channels are gradually becoming obsolete, according to findings from Statista.

Illustration: WebBookingPro / Data: Statista

Notably, online direct bookings stand out as the fastest-growing channel, closely followed by OTAs, while offline channels like phone, travel agencies, mail, and fax are experiencing a gradual decline.

All in all, the role of distribution platforms is pretty straightforward.

They are designed to:

  • Enhance your hotel’s visibility
  • Increase revenue
  • Boost bookings
  • Expand market reach

However, realizing these benefits and increasing your hotel’s occupancy isn’t that easy.

It requires a well-balanced distribution strategy and the right mix of channels.

Depending exclusively on a single channel or using an ineffective combination of channels can undermine their intended functions, potentially leading to higher costs that outweigh the benefits they generate.

Later in this article, we'll reveal how to construct a distribution system that ensures your property remains consistently booked throughout the year without breaking the bank, so keep on reading.

Hotel Distribution Channels Examples

But first, let's acquaint ourselves with different types of distribution channels and explore their respective pros and cons.

Your Hotel’s Website

Let’s begin with the channel that many consider the number one in their distribution mix: the hotel’s website.

The major advantage of this channel, and the reason hotels prefer to acquire their guests through it, is its high profitability.

Since there are no fees associated with each reservation, as is the case with third-party booking platforms, the hotel’s website has a minimal impact on the hotel’s revenue, allowing the property to retain a higher percentage of the room rate.

However, profitability is not the sole benefit of this distribution channel.

Direct bookings also offer greater flexibility and lead to a better customer experience.

When guests book a room on your website, they can communicate directly with you and easily make special requests such as early check-ins or late check-outs.

Source: Reddit

This level of customization may not always be possible with bookings made through third-party websites, which then prevents you from providing customers with a personalized experience and decreases the likelihood of them returning to your hotel in the future.

When travelers book directly, it’s much easier to connect with them and build customer trust and loyalty. 

But, despite these advantages, hotel websites have their drawbacks as well.

They can be ineffective and dissuade guests from booking if the reservation process on your website appears overly complicated.

That’s why we see a rising demand for hotel booking engines.

Hoteliers, realizing just how lucrative hotel websites can be, are increasingly investing in this type of technology precisely because it streamlines the reservation process and increases direct bookings.

In short, hotel websites stand out as the most cost-effective distribution channel available, but, to fully capitalize on their potential, hospitality professionals must dedicate time and effort to ensuring an optimal user experience.

Online Travel Agents (OTAs)

OTAs, or Online Travel Agencies, serve as platforms enabling travelers to explore and book various travel products and services, including hotel rooms.

Think of popular names like Agoda, Booking.com, or Expedia—they're among the major players in this domain.

Source: Expedia

On these platforms, users can sift through thousands of locations and types of properties, having a convenient one-stop shop to find the best lodgings at the best prices, and in the shortest possible time.

This brings us to one of the key advantages of this distribution channel: heightened visibility.

As many individuals rely exclusively on OTAs for accommodation searches, they are essential for hotels aiming to expand their outreach and tap into new audiences.

Here, it's crucial to note that OTAs aren't merely used for booking; they also play a significant role in research during the trip planning stage.

A study by Expedia Group indicates that online travel agents top the list as the primary tool for accommodation research before making a purchase.

Illustration: WebBookingPro / Data: Expedia Group

In fact, travelers dedicate the most time to OTAs, spending an average of 160 minutes on these platforms in the 45 days leading up to their trip, underscoring the considerable influence they have on the travel landscape and, consequently, the hospitality industry.

However, hoteliers using these platforms often encounter drawbacks that can impact their profitability.

OTAs charge fees for every booking made through their websites, thereby eroding hotels' profit margins, especially when it comes to smaller properties.

Besides, OTAs sometimes exacerbate the situation by steering customers away from direct bookings, says Niki Selimi, OTA Sales Manager at Valamar Hotels in Croatia:

“Chains like ours lose credibility because we cannot guarantee the best price to guests and instead of securing direct bookings, we are losing revenue to the OTAs”.

She points out that OTAs can offer discounts that hotels themselves cannot match, discouraging guests from booking directly through the hotel's website.

Many hoteliers see this channel as a necessary evil. Yes, their fees can eat into a hotel’s profits, but without them, many establishments would remain largely invisible and struggle to acquire customers.

Metasearch Engines

Continuing our exploration of distribution channels, we turn our attention to metasearch engines.

These online platforms serve as invaluable tools for users seeking to compare prices and features across various OTAs and hotel booking sites, streamlining their quest for the best deals.

Some examples of metasearch engines include:

  • Kayak
  • Skyscanner
  • Trivago
  • Tripadvisor
  • Google Hotels

Although metasearch engines are often confused with OTAs, the two are not the same.

Metasearch engines operate one level above OTAs by compiling and presenting room inventory information from all the different channels a hotel uses.

One significant advantage of these platforms is that, in addition to enhancing visibility, they boost your hotel’s credibility.

Metasearch engines have become the go-to channels for people looking to read reviews about properties they are considering booking, wielding considerable influence over their decision-making process.

Given that, according to Pete DiMaio, chief operating officer at TravelBoom, a staggering 94% of Internet users are exposed to metasearch, a good review on a platform with such extensive traffic can significantly impact a hotel's occupancy rates.

Illustration: WebBookingPro / Data: TravelBoom

After all, positive word-of-mouth carries more weight than, say, a fancy ad.

On the flip side, these platforms give accommodation providers limited to no control over how their listings are displayed.

While some metasearch engines do allow you to edit your listing, many simply pull data from other distribution channels.

This can be somewhat problematic if you aim to customize each distribution channel individually and present your establishment in the best light possible.

All in all, while metasearch engines serve as excellent tools for expanding customer reach and establishing a trustworthy property image, it’s advisable to conduct thorough research into the terms and conditions of these channels.

This ensures alignment with your specific needs and preferences, paving the way for a mutually beneficial collaboration.

Global Distribution Systems (GDS)

Unlike the previously mentioned channels, Global Distribution Systems (GDS) are primarily designed for travel professionals such as travel agents and corporate travelers.

These systems offer an extensive database of travel-related services and products, making it easier for agencies to search, compare, book, and then provide diverse travel options to their own clients.

The four most notable GDSs are:

  • Sabre
  • Galileo
  • Amadeus
  • Worldspan

GDS proves to be beneficial for simplifying the booking process for clients, enabling them to book directly through the system and choose from a wide range of options.

This not only enhances the customer experience but also increases your own hotel’s visibility, especially among business travelers, says Piyadol Chantadej, revenue manager at Grand Fortune Hotel Bangkok:

“The GDS gives us access to worldwide agencies and online travel agencies which increase our hotel’s visibility and helps us drive more bookings and generate higher revenue, especially from corporate bookings. It has also prevented and reduced booking errors, as the GDS is a real-time system.”

However, one of the advantages he lists—appealing to these corporate travelers—might simultaneously present a disadvantage due to the declining audience in this sector.

For starters, when we compare the post-pandemic recovery of leisure vs business travel, the latter is experiencing considerably slower growth. 

Illustration: WebBookingPro / Data: ARC

In fact, some even argue that the global business travel sector may have reached a ceiling.

Besides, corporations often prefer to stick with a single hotel chain once they find a suitable option, which allows them to negotiate even better prices in the future.

This makes GDS (along with your property) unnecessary for them.

Coupled with the high cost associated with using GDS, this is sufficient to dissuade some hoteliers from utilizing this channel, but ultimately, its effectiveness will depend largely on your target audience and the size of your hotel.

If your hotel isn't tailored for corporate travelers or has fewer than about 30 rooms and is situated in a suburban or rural area, you might find better success with other distribution platforms.

How Much Do Hotel Distribution Channels Cost

The reality is that, while certain channels may show varying degrees of cost-effectiveness, none of them operate entirely without expenses.

To provide you with a clearer understanding of these costs, we’ve made a table, presented below, offering a concise overview of the cost structure associated with various hotel distribution channels.

Source: WebBookingPro

As you can see, even your website, which is often considered the most profitable channel, doesn’t come free.

It needs regular maintenance and updates to continue attracting guests to book directly, all of which, of course, costs money.

Intermediaries like OTAs, GDS, or offline distribution channels, on the other hand, impose different fees, ranging from booking commissions and set-up costs to marketing fees for premium placement on the website or additional marketing services.

Increased visibility sure comes at a cost.

When it comes to exact numbers, insiders estimate the following:

Distribution channel Percentage fee Average cost per booking
Direct online channel (website) 0% $2 - $12.50
Global Distribution Systems 10%-25% $24.50 - $74.50
Online Travel Agents 15%-25% $40 - $150

Even seemingly cost-free platforms like social media may entail certain expenses if you intend to use them for occupancy maximization, whether through hiring someone for platform maintenance or through investing in advertisements within those channels.

What does all of this tell us?

It tells us if you’re not careful and strategic about your distribution plan, you might end up losing more money than making it.

Instead of indiscriminately investing in each channel, it's crucial to work towards building an efficient distribution platform mix, prioritizing quality over quantity.

But how do you do that, you might ask?

We explain that next.

How To Build a Good Hotel Distribution Channel Strategy

A successful hotel distribution strategy is all about achieving a delicate balance with the optimal number of channels—not too many, not too few— that yield the highest bookings for your property.

To achieve this balance and identify the right channels for your hotel, the first step would be to understand your target audience. You should know who they are, where they come from, and why they are traveling in the first place.

This can tell you a lot about which channels are most likely to be used by these guests.

For instance, if your guests are mainly older individuals, you can expect to receive a large number of bookings through the phone.

On the other hand, if you're looking to attract millennials or Gen Z, OTAs and social media will be a more worthwhile investment.

Source: WebBookingPro

Once you've defined your customer base, the next step is to understand their preferences, which, in turn, enables you to fine-tune your distribution platforms for maximum effectiveness.

Stay on top of the latest trends and travelers’ needs so you can adapt your strategy accordingly.

For example, another survey conducted by Expedia Group reveals that people pay a lot of attention to the surrounding area, want detailed photos, and look for positive reviews when searching for accommodation.

Illustration: WebBookingPro / Data: Expedia Group

Knowing this, you can enhance your own distribution game by incorporating high-quality images of the property, providing information about the local area, and featuring positive reviews on your website or social media.

At the end of the day, building an effective distribution strategy requires time, effort, and research.

So do your due diligence, understand your customers, and you’ll see positive results in no time.

How to Reduce Dependency on Indirect Distribution Channels

Finally, we arrive at the question on many hoteliers’ minds: how to increase direct bookings, reduce reliance on third-party channels, and consequently lower distribution costs?

The good news is that several things can be done to make that happen, all centered around one key element: adapting your direct channels, i.e., your website, to the preferences of modern-day travelers.

What does this adaptation entail?

Primarily, it means optimizing your website and making sure it’s as user-friendly as possible.

This involves a clean, clutter-free design, fast loading times, and intuitive navigation.

Results of the GoodFirms survey, shown below, further support this point.

Illustration: WebBookingPro / Data: GoodFirms

Showcasing the most common reasons for website abandonment, all of which result in poor user-friendliness, the study serves as proof of why good website design is a must for visitor retention.

It makes sense. If a site is hard to navigate, why would users waste time on it?

Likewise, the booking process on your website should be uncomplicated as well.

Fortunately, modern booking engine systems, such as our own WebBookingPro, facilitate a quick, easy, and streamlined room reservation process.

Below, you can see our software in action.

Source: Hotel Pax Split

Easily installed, fitting seamlessly into the website, and offering a straightforward, hassle-free booking experience, it provides your potential guests with all relevant information about the room inventory, without overwhelming them with unnecessary features.

WebBookingPro is designed to keep users on your website, make the reservation process easier for travelers, and increase your direct bookings.

Another thing you can do to reduce dependence on third-party sites is to incentivize direct bookings with initiatives such as discounts or complimentary amenities for those who book a room through your website.

Source: LxHotel on X

This can either be a free massage, breakfast, or drinks. It’s completely up to you.

Let's face it—a good bargain and complementary goods are hard to resist.

Now, while this last tip is optional, the first two are non-negotiable.

Today, a seamless user experience on your website is the only thing that stands between you securing more direct bookings and third-party distribution channels eroding your profits.

Conclusion

We hope that this article has effectively illustrated the significance of hotel distribution and offered valuable insights about establishing a robust distribution strategy.

The crucial takeaway is to listen to your customer base and understand their needs.

But remember, developing a distribution strategy isn't a one-time task.

The market is ever-evolving, and so are your guests.

Therefore, stay vigilant, measure your channels’ success, and adapt accordingly.

In the end, adhering to these principles becomes the catalyst for sustained success.

Results may not manifest overnight, but over time, the resilience and adaptability of a well-crafted distribution strategy will undoubtedly speak for themselves.

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