Assessing the True Value of Distribution Channels

Profit Means Nothing to Potential Demand.
A great article from Simon Carkeek of EyeForTravel - How to know and asses the true value of each of your distribution channels.
"A hotel must be able to distribute its products to the widest possible audience in the most profitable manner. "
Truer words were never spoken, and in the internet age right now
"A lot of people believe this to be different pricing through different channels. If one is going to break the pricing parity rule, then there is a need for a value variance strategy (or product variance strategy) to be in place to justify the pricing variable. "

"A particular channel may appear to be more expensive due to the margins, commissions, etc. However, if it requires minimal direct marketing spend and can drive large volumes in times of need, then it would be actually ranked as a highly profitable channel. Commenting on this, Shawn K. Jereb, corporate director of revenue management, Orient Express Hotels, Trains & Cruises, says, “I think this is an area we as hoteliers make a huge mistake in.” “We tend to put blinders on when it comes to cost and focus in on items such as room cost, commissions etc. and completely leave out costs such as labour management, marketing spend, participation fee’s and sales deployment costs,” said Jereb, who is scheduled to speak at EyeforTravel’s Travel Distribution Summit in London. “If you look at third party vendors in particular we rarely take into account the massive amount of money they spend to maintain cutting edge web technology, marketing spend, PPC and SEO spend etc. We just look at the higher margin. Versus a Consortia programme where we will pay a participation fee, commissions as well as deploy Sales resources against the account like sales calls, road shows, client events etc. but do not factor that into the overall cost of doing business with that source or channel,” explained Jereb. "

Shawn is hitting it right on the head here, you are essentially as a Hotelier paying these third parties for advertising but at what costs are we giving these third parties money at the expense that we could be giving directly to the consumer.

Opaque's take it even farther with extreme discounts, but at what cost to the hotel and the guest, will the front desk treat you the same as the guest checking in right before you paying twice the rate? How about to the hotel? Will Hotel's be able to afford their levels of service when guests are checking in paying 65% off regular rates? How can the Luxury market still continue to provide the flawless great service to their upscale guests if they have to stoop to hugely discounted rates to entice travelers?