The first time I heard it was from a colleague in the office who overheard it in a strategy meeting in one of our hotels. The second time it was first-hand – A sarcastic comment from a GM along the lines of “So I prepare for Finance complaining about commission again?”. And then finally one day, I was confronted and given feedback; I need to be more careful when suggesting OTA focused actions to the hotels as it might send the wrong message. What message I asked myself? That I was an undercover agent trying to drive commission revenues for Booking.com or Expedia?
The more likely answer was that Flash Sales, Commission Overrides, Private Seasonal Sales, Members Rates Discounts, you name it, didn’t align with the long term Net RevPAR and distribution efficiency approach adopted by the hotels. Definitely not in times where “direct is best” is being shouted from the roof tops across the hotel industry. And righteously so! Dramatically rising acquisition costs are eating our bottom lines and hotels must put procedures and systems in place to combat that.
Ironically, I know this better than most others. Being in charge of rolling out Net RevPAR as a brand new KPI in the organization since over two years and, if anything, I should rather be referred to as Mr. Direct! So why would I resort to such non-sustainable tactics?
The simple answer – To achieve short term revenue goals. Where else than on the big OTAs can I put actions in place that will have an immediate and significant impact on the overall pace of the hotel? An email marketing blast to my database promoting my new special offer on Brand Web is not going to do it, as much as I hate to admit it. At least not yet.
So what is my approach to balance short and long term? The solution was never to shut off Booking.com – that will undoubtedly have a disastrous impact on both your RevPAR and Net RevPAR. Rather, I think of it in 3 simplified steps:
Step 1 is to carefully differentiate between strategies and tactics. Shifting bookings to internal channels is a long-term effort and is achieved with small increments and channel shifts at the time.
Step 2 is putting KPIs in place to track the success such as Channel Yield, Sales & Marketing Efficiency and Net RevPAR (Capture Rate), which are supported by strategic actions throughout the year. Still, we are venturing in the world of strategies here.
Step 3 is using adhoc tactics, aiming at recovering shortfalls versus forecast, negative pace or a change in segment behavior. These tactics need to be quickly implementable and immediately drive a strong result. In any case, they shouldn’t favor preferable channel efficiency over gross revenue, which supports cash flow and still has the major impact on market share.
In a nutshell: Strategies and tactics are a fine but important balance. Obviously, I will never undercut my Brand Web and always mirror any discount on my direct channels. But will I say no to incremental revenue for the sake of my direct web performance? Mr. OTA says: No