Why now is the Time for Hoteliers to Leverage Channel Manager?

By Ahmed Mahmoud - Founder of revenueyourhotel.com

11 November 2019
Mahmoud

Choosing the correct hotel Channel Manager is always a critical decision for hotels. There are many factors can be taken into consideration when you decide which channel manager to select for your hotel, it could be your hotel size, cost, time-saving, ……..etc. If you do not have the right channel manager that distributes your rooms in an organized way, you run the risk of double booking your rooms - resulting in unhappy customers, lost revenue, and even more wasted time trying to rectify the situation.

Why now is the Time for Hoteliers to Leverage Channel Manager?
Why now is the Time for Hoteliers to Leverage Channel Manager?

In looking for the right channel manager for your hotel, hoteliers may start to ask themselves the below:

  • How many distribution channels can it connect your hotel too? (Consider the marketing aspect on this)
  • Does your hotel connected to the most important channels.
  • Does it allow for live rate and availability updates.
  • Can you manage all booking sites (Branded website, OTA, and wholesalers) from one channel manager.
  • Can you upload your hotel inventory for the next 365 days in advance or even beyond.
  • Can you easily see an overview of how your channels are tracking? (Consider the performance and data analysis, i.e. what reports will the channel manager provide you?
  • Will the channel manager show you, which channels deliver the most bookings and which provide the most revenue)
  • Is it affordable cost in the end? (Consider the revenue generated and time-saving vs cost)

Overall, Channel Management Systems have been developed during the last few years in order to updates the availability and rates of a hotel directly to major OTAs and retrieves reservations accordingly, making it easy for the hotel to offer its rooms online, avoiding overbooking and rate parity issues , It also allows a hotel to expand its reach and visibility online, as well as more easily manage its rates, availability, and reservations.

With a channel manager, hotels can connect to hundreds of online distribution channels in real-time. This allows the hotel to boost visibility (and ultimately reservations) with almost no risk of being overbooked, but If you're currently part of the 50% of hotels who don't use a channel manager system you're probably spending hours and hours every day uploading and updating rates inventory and availability in different channels and extranet.

Without a channel manager, hotels must manually update inventory and availability on each channel – a tedious, time-consuming process that often creates inconsistencies across channels.

A channel manager also empowers hotels with greater control over the channel mix where revenue managers can set specific targets on a channel-by-channel basis, and then adjust inventory and/or pricing on individual channels to optimize revenue. By using this dynamic approach, revenue managers can more precisely manage a hotel's distribution and prioritize the most profitable channels at any given time.

Channel Manager and Rate Parity

Nowadays and regardless of being branded hotel or small / boutique hotel, you with no doubt have heard of the term 'rate parity'. Nevertheless, what is rate parity is all about?

Rate parity is the ongoing practice on maintaining consistent rates for the same room types in all online distribution channels - Booking.com, Expedia, Orbitz, Hotwire, etc. - regardless of what commission the OTA makes." Noting that when you collaborate/partner with an OTA, they will usually require you to agree to rate parity within your agreement with them where you are not allowed to undercut the rates they display for your rooms on their websites vs the same you display on the hotel-branded website or any other website. This means that the rates that customers see on OTA websites should be the same as those on your own hotel's website, even though you are making less of a profit from OTA bookings after calculating the OTA commissions.

Although, OTAs spend a ton on marketing, and can regularly bring you a large volume of customers. You can consider the high commission a marketing cost. However, on the other side of the coin, it is a good thing that your room rates match across the web. If customers booking your hotel directly is more expensive than with an OTA, you could easily lose your customers' trust and put you in rate parity.

The OTAs want rate parity to make sure the hotels will not give any discounts to the customers, and therefore in a way "steal" them. But on the other hand, from the hoteliers' point of view, rate parity is a way the OTAs ensure that the hotels don't have any weapon to attract direct bookings. It is just as bad for them as the name bidding policy. If customers knew that the rates on the hotels' websites could be lower, they would surely more often go to those websites.

OTAs can deliver reservations to hotels at a net rate, meaning they can and do reduce prices below minimum contracted margins by reducing their commission margins. This puts tremendous pressure on hotels especially the small ones to keep checking the OTAs' rates daily so they can match their prices, but it is a time-consuming activity. Then there is the challenge of technology. When OTA channels are not directly linked to a hotel's PMS system through a channel manager, rate parity is even more difficult to manage. Small hoteliers have to log into multiple systems to update their rates, but a good channel manager will allow you to easily push the most up to date room rates (and inventory) to all of your connected OTAs, Not only does channel manager offer connectivity to various channels but also delivers multiple options to manage each channel separately.

The most harmful result of the rate parity is the price the hotels often have to pay to the OTAs. Since the rates have to always stay on the same level, the OTA can raise the commission and therefore earn more while the hotel loses.

Rate parity is simply an unfair practice, putting hoteliers in a very tough situation and making them in a revenue loss situation.

Rate parity also highly anti-competitive, as it often gives no choice to the customers but with any channel manager, you can easily avoid any rate parity issue that can arise by checking your prices on different online sales channels, and if you have a Two-Way Channel Manager, you can feed your sales channels simultaneously and eliminate the risk of a rate parity issues.

Channel Manager and Overbooking Situation

Overbooking for hotels is a revenue management strategy that helps to maximize the total capacity and increase the room revenue although, overbooking situations is a major concern for hoteliers; in the meantime, overbooking is a situation when the total number of rooms reserved for a certain period exceeds the total number of rooms available for sale for the same period.

In other words, it is the number of additional reservations hotel needs to fill the hotel available rooms to achieve 100% occupancy. A hotel needs to reach 100% occupancy for obtaining the maximum amount of revenue and to achieve this, you need to take into consideration in your forecast the following fluctuations factors - stay over, last-minute or same-day cancellations, stay extension, early departures and no-shows.

Hotels will calculate those factors based on historical trends and reach to the calculation point on how much they can overbook the hotel to reach a perfect sell out. What hoteliers need is a well-calculated strategy to avoid hotel-overbooking issues and keep occupancy high all through the year with a managed inventory.

More bookings are good business. Isn't that right? Well, not always. Any hotelier's greatest and unpleasant nightmare is the overbooking of hotel rooms. What follows next if the overbooking situation accrued can be damaging to the reputation of your hotel, adding to the revenue loss. You may have to accommodate the angry guests on other hotels at higher costs, which is why; hotel overbooking is a calculated risk that may lead to serious consequences. This can bring down the number of customers in the end. The new age traveler is well-read, well-informed, and can indeed make better decisions to avoid such hassles.

For hoteliers, the fear of wasted or unsellable room inventory with the challenge to manually update room inventory details on multiple OTA channels. The result? Incorrect room inventory reflected online leading to hotel overbookings, also the fear of wasted inventory and profits/loss (Allowing overbooking for increased revenue in case of no shows, or fear of zero revenue due to unused rooms.)

Conclusion

Whilst it's true that Channel Managers significantly automate work, save time and avoid human error, we know that having an 'all-in-one' solution is in most case the best option! As An all-in-one solution is composed of a Property Management System (PMS) - with a Channel Manager - to track reservations, increase your online visibility, avoid rate parity and avoid overbookings, and finally you need Booking Engine to push direct bookings to your website and social media, save you money on commissions and to allow you become more competitive within search engine results.

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Revenue Your Hotel

P.O. Box 362
Ismailia, 41511
Egypt
www.revenueyourhotel.com

Ahmed Mahmoud

Ahmed Mahmoud has more than 18 years of international hospitality industry experience, specializing in revenue management implementation and execution. He began his career in 1992 holding a variety of management positions with such top hotel chains as Accor Hotels, Hyatt International and Starwood hotels. In 2006 Mr. Mahmoud founded revenueyourhotel.com, a website dedicated to revenue management. Designed to help individual hoteliers and hospitality businesses improve their market penetration, deliver service excellence and increase their profitability. Ahmed also offers consulting and online training to both independent hoteliers and hotel chains. With two decades of revenue management experience, Mr. Mahmoud is considered a successful hospitality executive, educator, author and consultant. He is a frequent keynote speaker and seminar leader at many hospitality industry events and contributes articles to a number of industry publications.