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How to Define your Distribution & Channel Mix

How to Define your Distribution & Channel Mix

__Why is distribution and channel mix so important? __

You’re a property manager working hard to grow your inventory, perfect your listing and guest experience, and optimise your pricing. However, this all means nothing if your listing isn’t in front of enough of the right eyes to pick up bookings. So much of your revenue as an owner or manager rests on how many reservations you can attract, and so it is crucial to give each property the visibility it needs.

Why Use Online Travel Agents?

The huge growth in short term rentals over recent years has caused a boom in the Online Travel Agent (OTA) market.

There are many benefits to using these booking channels:

  • huge scope of distribution
  • international language accessibility
  • the billboard effect
  • a trusted and frictionless booking process
  • access to reviews and performance data for fuelling unit and process improvements
  • technical support and in some cases guest support and insurance

Of course, in an ideal world, you would be drowning in direct traffic and source sufficient bookings through your own site, commission free. However, in reality, very few businesses have the financial and personnel resources to generate enough traffic in a saturated market - against these OTA behemoths.

OTAs tend to get bad press over commission costs, but it is worth considering that these costs only exist in proportion to success, and that often the cost of selling directly is at least comparable. This being said, these platforms can be hugely profitable operations, and a result, today we have countless options for our distribution & channel mix.

Major Players for your Distribution & Channel Mix

Booking.com is the world’s most popular travel site. They report that over 1.5 million room nights are booked daily from 5.8 million listings, and the site is accessible to over 220 countries in 42 different languages.

Airbnb The number of Airbnb listings around the world has now eclipsed all the rooms operated by the top seven hotel chains combined, and a guest now checks in every six seconds. They operate in 220+ countries and are a popular option for alternative listings, including their 3,000 castles and 2,200 treehouses!

Vrbo (Expedia) meanwhile, the 2nd biggest rental site in the US, has over 2 million properties listed in 190 countries.

Agoda also has over 2 million accommodation options. Along with CTrip or Trip.com (the largest online travel agent in China) Agoda is a main operator in Asia. Don’t forget, China boasts the largest population on earth, and with only 8.7% of Chinese citizens currently holding passports, there is huge scope for growth in this market - watch this space.

__TripAdvisor __ is home to 775,000 vacation rental listings and has received over 730 million reviews.

Major OTA Channel Mix

Channel Mix

An overview of individual channels can only get you so far. Any vacant unit forever forgoes that potential revenue, and additionally, fixed costs still have to be paid. Therefore in order to maximise profitability, selling as many nights as possible at the optimum rate is absolutely essential.

To increase the odds on achieving that occupancy, many property managers enhance their reach by listing on as many channels as possible. Yet selection should be evaluated. To be effective, content and set-up on each channel must be carefully considered, tailored and maintained, meaning each additional channel can be a drain on time, product quality or money. Limited unit availability may also make the ‘as many as possible’ approach impractical. Further, with the objective being occupancy, you might think it makes no difference which channel a booking comes through. However, each channel has different booking characteristics. We want to select platforms attracting the most desirable mix of bookings for our situation to achieve high occupancy at high rates. One element to this is inventory control, where availability or pricing are selectively managed across channels to encourage sale to the most profitable guest at that time.

So, having a range of channels is important, however, we don’t want to consistently sell through, or waste resources onboarding, less beneficial channels. And so, the holy grail of distribution is identifying the optimal distribution & channel mix - managing and balancing a select combination of channels is imperative in driving optimal profitability.

Evaluating Distribution & Channel Mix for a Specific Property

We want to prioritise distributing to the more appropriate segments for our property. Reach of a channel is important but relative to how suitable its typical consumer is. Amazon has incredible reach but you wouldn’t list your car there… yet. So, which channels fill your property best?

As we said, different people use different channels for different things and business or solo travellers, couples, friends and families of various numbers and ages each have a different booking footprint. Booking types can vary; a 6BD ski chalet in winter will attract longer bookings with more guests and larger booking windows than a 1BD in a city business district.

Also, the origin of bookings varies hugely from market to market; of bookings derived from Airbnb or Booking.com, Airbnb has an 80% share in Chicago, while in Lisbon, 65% come through Booking.com. Different channels attract a different audience and booking type, as described by the following figures:

The following figures illustrate how the major OTA booking characteristics and market share can differ:

Average Booking Characteristics by Channel

Figure 1 demonstrates the varying nature of bookings across platforms, while Fig 2 highlights just how much different countries favour different sites. Understanding your property and market is essential in aligning the most effective channels.

Relative Website Visits

Tracking your own inventory and revenue can be a reliable way of understanding which channels work best for certain stock or locations and market data can help us by building localised profiles for each channel, considering the average:

  • Reservation - booking window/origin/length of stay/number of guests/day of week/season
  • Listing - room/flat/serviced apartment/house/castle/boat/treehouse etc and amenities
  • Geography - user origin and destination

Considering your property and market type alongside an understanding of how channels differ allows you to narrow down options to the most appropriate platforms. Market data will also highlight seasonal booking trends - who is travelling to a destination at any given time and so which channels are going to be effective in your market and when. Supply of your property type within a given market can also be something to consider.

Using this information you can start to build a picture of a specific, seasonal and effective combination of channels. Then you can prioritise or manage by value added, onboarding resources required and commission charged to identify an efficient channel mix that can achieve optimal occupancy and rate throughout the seasonality of your market. Remember - keep testing different approaches and tracking performance as the ideal combination will shift over time. Once you have defined a channel mix, the good news is that channel managers can aid implementing your strategy across the board.

This section would be remiss not elaborating on direct sales. According to VRMA, 67% of travellers think it’s easier to book directly through a ‘brand.com’ website rather than a third-party website, and one study found that being listed on Expedia increased direct bookings between 7.5% and 26%. Tools such as a brand.com website have their place: They save on commission and can encourage repeat business and upselling, but creating a high converting website with a frictionless booking process and enough of a presence is an expensive and time-consuming task.

In summary:

  • Understand your property, market and channel characteristics
  • Identify a property-specific channel mix to optimise RevPAR
  • Account for seasonal changes in supply and demand
  • Consult market and portfolio data and monitor platforms to keep your distribution specific and current
  • Consider direct booking options

Data is key in weighing up channel options can and in pinpointing the optimal strategy for different channels. Market visibility can also boost your occupancy, optimise your rates and empower your inventory growth. To learn more about the power of Transparent data, you can read more here or book a personal consultation here.

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