It’s widely understood that hotel distribution is technology-intensive and that business opportunities can be missed — sometimes without even knowing it.
Tracking the right metric across distribution channels can pinpoint operational or business inefficiencies that impact revenue. Using five simple data sets (readily available as part of normal operations), distributors can identify unnecessary operational blockages or business revenue leakages.
Optimising performance across the different distribution channels is all the more important given some of the sweeping changes on the distribution horizon, such as OTA consolidation, entrenchment by Google, and the growth in mobile bookings.
Witness the market leaders GTA and Hotelbeds facing the prospect of new ownership. Both companies are well known for the scale of their operations. Yet what’s less well appreciated is that their pioneering developments in distribution technology and in API strategies have contributed to each one’s strong growth.
Both were early adopters of XML analytics to get deep insights into performance. They continue to use analytics to drive their daily businesses. The intelligent use of their data will continue to keep GTA and Hotelbeds at the top of their games and to maintain stakeholder value.
There are lessons here for the rest of the industry.
Given that look-to-book ratios are still growing, enormous system and network capacity is required. Distributors have these assets in abundance. But to keep ahead of their competition, they need to manage the performance of each of the supply chain links within their control.
Of course cost factors also carry weight. Each distribution channel carries a cost and delivers varying degrees of benefit in return. Choosing the right mix of channels capable of yielding sustainable profit streams is an important balancing act.
Recognising excellent ones from very poor ones might be straightforward. But differentiating the many others that may or may not be adding value to a distributor’s operation is often not even measured, never mind taken into account.
So what does the hotel distributor need to effectively optimise his operations to be competitive? Having good systems and processes in place is just part of the answer. Decision makers need data translated into actionable insights, too.
We believe there are five critical data sets derived from XML transaction streams that are essential for every distributor’s toolkit when managing daily distribution challenges:
1. Timeouts – It is almost inevitable that sometimes networks, servers, applications and even errors in requests cause timeouts. That means offers to customer requests can’t get through, thus missing the sales opportunity. The bigger the business with the channel partner, the higher the lost opportunity costs, especially if poor response times cause a ‘lock-out’ for a period.
To mitigate the adverse impact of timeouts, distributors need to be alerted to when a timeout happens, pinpoint why, where and how it happened and then fix it as quickly as possible.
2. Response times – Measuring speeds and feeds from end-to-end is a critical indicator of the health and performance of the systems (as well as the end-user experience). Persistently poor response times cost money. The distributor needs to know how long it takes to process requests, or how often timeouts occur.
With the latter, just taking the average of these events across a time period isn’t really accurate enough for this speed-driven business. Using percentiles to look at data, rather than just average ranges, is more meaningful.
For example, a 90% percentile view can capture more of the timeouts that occurred over a given period than the average view, where a number of timeouts disappear from the graph, and end up literally off the radar.
3. Inventory – Distributors need real-time visibility into what the market is looking for and what they have available. Getting the wrong balance or running out of popular products can be very costly. Indeed it is all too common for distributors to show no availability to a request despite actually having availability, or to genuinely run out of a popular product before taking action to replenish the stock.
Monitoring system performance, error-checking XML messages, and analysing real-time search to keep inventory levels in line with demand, are three simple data-gathering steps that can save a distributor millions in annual revenue.
4. Margin management – When contracting with many different suppliers, dealing with different room types and destinations, a range of costing and pricing structures apply where different margins prevail. When returning rooms in response to a request, distributors need to take account of the margin variations between their buying price and their sale price, especially when the same room is sourced via different suppliers.
Optimum margin management is all about getting the right rooms for the best cost prices and securing fulfilments at the best sale prices – all within the usual parameters of real-time accurate pricing and optimum speed.
5. Revenue per search – The look-to-book ratio is the way the industry measures activity levels between trading partners, but it is a poor indicator of overall channel contribution. Searches continue to rise, as does the overhead of managing them, so it is important for distributors to know not only who is hitting their systems with requests but also the quality of those requests in terms of delivering revenue.
Measuring the financial contribution of searches is a much better way of working out who is loading systems with high request volumes but few bookings, or delivering high-value bookings for relatively few searches. Evaluating channels according to their revenue-per-searches is a more accurate barometer of channel performance.
Being successful in online travel is all about measuring and understanding distribution performance in real-time. These five data sets can help distributors get the optimal channel mix in an optimised operational environment.
Without this insight, distributors will continue to fall short of their potential and sadly remain unaware of the cost of the missed opportunities.
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