The travel booking world has been undergoing a major transformation due to the technological advancements and digital tools, which enticed the travel consumers’ journey to go online. Indeed, according to PhoCusWright, half of bookings are now made online. Online travel bookings are forecasted to reach up toÊ$817.54ÊUS billion by 2020. So what has this meant for businesses in the travel industry?
The rise of digital bookings has severely disrupted the industry in terms of the distribution channels used to sell hotel inventory.
In the travel industry, the hotel product can be available for sale on many distribution channels such as: the hotel’s brand website, the hotel’s mobile app, the central reservation office (i.e. the 800 number), offline travel agents, and online travel agents (OTAs). The Central Reservations System was perfect at handling the transactions performed on the above-mentioned channels, until recently. But with the advent of the channel manager, transactions from OTAs primarily, have exceeded any other distribution channel and is challenging the future existence of CRSs.
To better understand the challenge between the CRS and the channel manager, a look back-to-the-roots for both is required.
The Central Reservations System (CRS)
The Central Reservations System (CRS) is a computerized reservation software used to maintain the information,Êinventory, and rates to manage the reservation process and to conduct transactions for independent or chain hotels. One of the main roots of the CRS lies with offline travel agents who make reservations through GDSs.
The CRS acts as a bridge between the different channels; this link provides inventory to all these channels and sends the confirmation to the hotel. The GDS acts as a middle-man connecting offline retail travel agents and corporate buyers to hotels through the CRS. The commission paid to get the booking to the hotel is expensive as it covers all the intermediaries. Thus, cutting the commission hotels pay in half by using an all-in-one solution known as a channel manager, became the best alternative to manage the online distribution channels.
Channel Managers
Channel managers connect hotels directly to hundreds of OTAs. With 50% of bookings online, is the CRS era becoming obsolete and approaching an end?
Channel Managers handle online distributionÊchannels, i.e. OTAs, and apply parity of pricing in order to sell hotel inventory to multiple channels across the globe. According to PhoCusWright, 60% of the online bookings are controlled by a single OTA, which is booking.com. It is the only way to effectively reach a global audience without risking overbookings.
For instance, when a booking is made at one channel, the inventory is reduced across all of the hotel’s other channels. A channel manager allows hotels to control the inventory for sale, the price at which to sell, and the terms of each channel, in order to optimise the sale of the hotel and get the best price based on the hotel’s objectives.
Launched 20 years ago, OTAs were a natural evolution of offline travel agencies and have for years represented a small but stable distribution channel for major hotel brands. OTAs accounted for just 4% to 5% of reservations between 2004 and 2010; but in the past years, OTAs’ share of bookings has increased dramatically to 8% in 2015 and it has now recently bypassed 10%.
The importance of working with a channel manager is as follows:
1. Channel managers maximize hotel bookings and increase revenue
By giving a diverse range of agents the ability to sell your rooms, you will be able to sell all of your available inventory at any given moment. This is the most reliable way to continue to increase your revenue over time.
2. Channel managers connect with markets that can be challenging to reach
The more OTAs your channel manager connects you to, the more markets you can tap into without charging any additional fee based on how many channels you use.
3. Channel managers provide reporting
A good channel manager will allow you to easily track and measure which online sales channels are working. This gives you the knowledge you need to negotiate commissions and end partnerships that aren’t working for you.
4. Channel managers optimise the implementation of price changes across all OTAs in few clicks
For instance, if you change your price 3 times a day for the coming 365 days and you have 15 different online channels connected with 5 different room types and 3 rate categories, this leads to 3 x 365 x 15 x 5 x 3=870,525 price changes.
About Serge Chamelian
Serge Chamelian is the managing director ofÊh-hotelier,Êa hospitality services firm that offers a holistic approach to business intelligence solutions, revenue management consultancy and training and development programs among many others.
h-hotelier product h-enigma simplifies the concept of business intelligence, making it affordable and very easy to use and understand, while at the same time keeping its rich aspect as one of its main strong points. h-enigma consist of a reporting tool with a yield, CRM and shopping module incorporated in it.
