2004: the Year of Direct Online Distribution

Now is the time to fight back with a smart Direct-to-Consumer Internet Strategy

By Max Starkov and Jason Price

This past year hoteliers have come to understand the pitfalls of overexposure on the intermediary channel, especially at the expense of one’s own direct online distribution strategy. There is a new realization among hoteliers that direct online distribution cuts costs, preserves brand and price integrity, attracts affluent customers and lessens the dependency on online discounters. Much was learned this past year and now its time to put some of these lessons into action. This article provides several action steps that in aggregate define one’s Direct Online Distribution strategy.

Defining Direct Online Distribution in Hospitality

Build a robust direct-to-consumer distribution strategy

This year over 16% of all revenues in hospitality will be generated from the Internet (14% in 2003). Two years from now the Internet will contribute over 24% of all hotel bookings (CSFB). Forecasters predict that in 2005 Internet hotel bookings will surpass GDS bookings. An estimated 53%-54% of all Internet bookings in hospitality will be direct to consumer (i.e. via hotel-owned websites). Some pro-active hoteliers and several major brands (Marriott, Hilton, etc) already boast a Direct vs. Indirect online revenue ratio as high as 75:25. Some hoteliers already generate total revenues above 30% from the Internet and more than half of this distribution directly to consumers.


So what is a Direct Online Distribution Strategy? Also called “Direct Sphere of Web Distribution Influence”, direct online distribution includes Internet distribution channels, business models, eMarketing programs, and Internet brand and exposure building techniques that all share the same collective goal - to draw in the Internet user to end up transacting on the hotel website. It is all about benefiting from the Internet as the greatest direct-to-consumer distribution channel and positioning your hotel at all possible “touch points” of interaction with the potential online customer.
Here are some of the direct channels, models, programs and techniques that share the same commonality where the Internet user transacts directly on the hotel website: website optimization, search engine strategy, destination web strategy, email marketing, PPC marketing, link popularity, trust building techniques, eMarketing programs, etc.
The direct-to-consumer distribution model should become the foundation, the centerpiece of any hotel company’s online distribution strategy. Why? First of all, the Internet is the ultimate “Direct Distribution Medium”. Second, in the offline world hoteliers are one of the best direct marketers and enjoy more direct sales (75%) than intermediary sales (25%). From wildly successful Dell and Amazon to supermarket upstart Fresh Direct, selling online directly to consumers is more than achievable. Some pro-active hoteliers and several major brands (Marriott, Hilton, etc) already boast a Direct vs. Indirect online revenue ratio as high as 3:1.
Why is direct distribution important? It is the least expensive distribution channel and provides the hotel with long-term competitive advantages, and lessens dependence on intermediaries, discounters or traditional channels that we believe will be less relevant over time. Direct online distribution is not just a theoretical, “ideal scenario” approach. Many surveys show that online customers prefer dealing directly with travel suppliers, including hotels, when purchasing travel online. Recently, Forrester Research found that 69% of US leisure travelers prefer to buy online directly from a supplier while just 27% prefer to buy from intermediaries. This is yet another confirmation that hoteliers should focus more than ever on their direct-to-consumer online distribution and should work hard on regaining control of the Web from the online discounters and intermediaries.
There is another reason why hoteliers should boost their own Internet presence. As a result of aggressive email marketing and Web-only promotions over the past several years, leisure and business travelers alike now firmly believe that all best travel deals are to be found not through a travel agent, or calling a toll-free number, but on the Web. Will online travelers find these travel deals on your hotel website or on the intermediary sites?
With this encouragement, make 2004 the Year of Direct Online Distribution.

Here are brief commentaries and case studies on some of the main aspects of the Direct Online Distribution Strategy:

Website Optimization Strategy

Direct online distribution starts and ends on the hotel website. But is your website user-friendly, search-engine-friendly and online booker-friendly? Performing a comprehensive evaluation and website optimization of your hotel website should become a top priority this year if you want to stay competitive and take full advantage of the Direct Online Channel.
What is website optimization? To begin with, a hotel website is not an online brochure. A hotel website is the hotel’s only chance to achieve significant growth and competitive advantage in difficult times, and steal market share from its “sleepy” competition. The website is the hotel’s incremental revenue producing “virtual” 24/7 sales office. It is a “living organism” and should constantly evolve to better respond to the dynamics of online distribution and changing patterns of consumer purchasing behavior.
Website optimization deals mainly with three key issues:

o Making the website user-friendly (tiered navigation, relevant and credible copy, easy to use booking technology, customer support, eCRM features, etc)

o Making the website search engine-friendly (relevant, web-friendly copy with embedded keywords, destination Web strategy, optimized website architecture, domain name strategy, target keywords, meta tags, description tags, etc).

o Making the website travel booker-friendly (boosting the bookability features of the website, increasing the comfort level, booking engine functionality, website credibility, building trust issues, etc)
In other words, your website should be optimized to become a robust money making “machine”. Partnering with a hospitality eBusiness consultancy specializing in Direct Online Distribution and proficient in website optimization can help turn your hotel website into a 24/7 sales force and achieve much needed growth in revenues and conversion rates through best practices and website optimization strategies.

Case Study:

HeBS has evaluated hundreds of websites using its proprietary Internet Audit Methodology and Cyberscore system. The results showed that a typical independent hotel website scores in average 44 out of 360 points i.e. it utilizes only 12% of the “best practices opportunities” it has at its disposal to reach new online travelers, convert them into bookers and retain their loyalty. Solution: Unless a fundamental Website Optimization Strategy is performed, the hotel cannot expect any meaningful revenues from its website and will have to continue relying on the online intermediaries.

Search Engine Strategy

Search engines are an essential component of the direct online distribution strategy. According to Forrester research about 80% of overall website visits begin in a search engine or a directory service. Many other surveys also show that up to 85% of Internet users rely on search engines to locate relevant information on the Web (e.g. Google, Yahoo, MSN, etc). Lodging companies that do not have the marketing budget of the major intermediaries must rely even more on search engine referrals. Therefore good positioning of your hotel website on the major search engines is of critical importance otherwise no one will find your hotel.
Unlike other e-commerce categories, Internet users search for travel and hospitality services and offerings within the context of a particular destination. Therefore the search engine strategy for the hotel website is subject to different methodology than what the generalist SEO (Search Engine Optimization) companies usually offer. This destination-focused search engine strategy requires in-depth knowledge of the travel and hospitality industry, extensive destination research, destination target keyword analysis, etc. Only a destination-focused search engine strategy can help the hotel website leverage the popularity of the destination for the hotel’s benefit.
How can your website avoid becoming part of the “Invisible Web”? By avoiding quick fixes provided by many SEOs that may result in “banning” your website by the search engine majors, and employing a robust search engine strategy based on fundamental principles and best practices in hospitality. A Website Optimization and Destination Web Strategies are a good start to improve your website positioning on search engines and boost direct consumer bookings. 
A word about the major brand websites. Though some of the major brands have done a good job with their global websites, none of them fare particularly well on the local search engine level. For example, in order to be picked up by the search engines, a local Hilton property has to implement relevant copy and destination content with specific target keywords, page title, description tags, etc that are completely different from the global Hilton.com website. Each property has to have a marketable domain name and achieve link popularity on its own. Hence, the need for any franchised or branded hotel to pursue its own website, search engine and online distribution strategy is strongly advised.
Case Study: A Luxury Hotel in New York

Problem: Flash-intensive Home Page. A website built in frames is a hotel hidden from search engines. Navigation is complicated and confusing. Page titles and tags all missing. The rich content of the website is not optimized for the Web, and the website has no meaningful amount of website bookings. Solution: Perform a Website Optimization Strategy, coupled with Destination-focused Search Engine Strategy. Results: Website traffic quadrupled within 6 months, website among top 50 listings on top 100 search engines, and top 20 on 40 of them. 

Destination Web Strategy