After reviewing the segmentations, today and in the coming weeks, we will look at the different distribution setups, systems and channels the hotels use to sell their bedroom stock.
Distribution starts with the Property Management System (PMS) which system has all reservation details for past, present, and future bookings. It is vital that this system is set up correctly with different rate codes for all rates and segments.
Having different rate codes for different channels allows the revenue manager to flex the rates, control availability, apply restrictions, measure production, identify booking patterns, etc. If most of the bookings arrive under the same rate code, it becomes virtually impossible for a revenue manager to maximise revenue as not enough details can be extracted from the system for analysis.
After all rate codes are set up in the PMS and market segmentation is attached, pricing needs to be linked. One set of pricing can be linked to many rate codes which have the same price, so when it comes to the price change, there is no need to change all of them individually. For example, the flexible rate is the same (due to price parity) whether it is sold directly or through the OTAs, so the same pricing table can be attached. Corporate clients should have their own rate code (or promo code, etc. depending on which system is used) so their productions can be measured as it is key for LNR account negotiations. All corporate rate codes which have the same rate and same booking terms, like LRA (last room availability) or non-LRA can be linked to the same rate table. After all rate codes and rate tables are linked and the pricing is set, the next step is distributing these through the relevant channels.
Mapping out what will be distributed to where is a key part of the revenue management strategy. Rate codes used for rooms booked in-house will not need to be distributed online, so these should be the ones available for the front desk and the reservations team. Rate codes for online distribution require an intermediate to make the distribution seamless. Mapping directly to OTAs is possible, but the management of each channel separately is extremely time-consuming and can be error-prone. Having a Channel Manager in place will allow the revenue manager to easily execute the required daily tasks, like rate change, closeout, and restrictions on the PMS and the channel manager will communicate all these changes to the relevant channels. Before this can take place, the initial mapping must be completed between the PMS and the Channel Manager, and the Channel Manager and each online Channel.
What are these Channels? Every intermediary which sells bedrooms for the Hotel is a channel. For example, Booking.com, Expedia or the Hotel’s own website are booking channels, so they need to be connected to the channel manager.
How to connect these channels? First, each room type which is sold on the relevant channel must be created on the extranet or on the booking engine’s back end in the case of the website. After creating the room types all rate types sold on the channel must be created as well, so if the hotel sells flexible or advance purchase rates, they must be mapped independently to the Channel from the Channel Manager. Why? Advance purchase and flexible rates have different prices and different booking terms, so the same double room can be sold for full price or for a discounted price with upfront, non-refundable payment. Without mapping them separately the system would not be able to handle these bookings correctly.
Setting up the distribution systems is a complex task which must be done with appropriate planning and painstaking precision to work properly. Once it is set, the system does all the work without interference unless new channels are added at which point the same procedure must be followed.
Next week we will look at the different distribution channels needed to be in place to have a comprehensive revenue management strategy which allows the hotel to thrive under any economic circumstances.
