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The long tail: SiteMinder sees travel distribution diversify

October 10, 2013 Corporate, Headline News 1 Comment Email Email

egtmedia59Travel distribution is diversifying. An economic force known as “the long tail” is driving the rise of the niche – and hoteliers can charge 11% more on their rates if their reputation is one point better than their competitor on a scale of five.

As American author and entrepreneur Chris Anderson notes in his book “The Long Tail: Why the Future of Business is Selling Less of More”, the cost of reaching consumers has dropped dramatically, driving markets to shift from a one-size-fits-all model of mass appeal to one of unlimited variety for unique tastes.

“From supermarket shelves to advertising agencies, the ability to offer vast choice is changing everything, and causing us to rethink where our markets lie and how to get to them,” Anderson notes.

Erik Munoz

Erik Munoz

In the travel sector, fast-growing global online distributor SiteMinder is in a good position to observe the diversification of distribution and its effects. It’s also well placed to see the advance of another game changer, social media, into the field.

A global company that develops cloud-based technology to help the accommodation industry market its rooms online, SiteMinder runs offices in London, Dallas, Sydney, Bangkok and Cape Town. About 10,000 accommodation providers in over 105 countries use its suite of products.

Distribution diversification is having “a huge impact” Erik Munoz, the company’s Executive Director, Strategic Sales and Global Partnerships, confirms.

“There’s been much talk about this concept of the long tail of distribution, Munoz says. “Now, that long tail is getting longer.

“If you look at US statistics,” Munoz adds, “people booking online travel in the past five years has grown 73%. So people are booking their airlines, booking their hotels online in greater and greater numbers.

“You’ve got low-cost carriers helping out with the affordability of travel, and alongside that, your hotelier today is a lot more educated.

“Not so long ago, if you wanted to connect with, say Russian or Brazilian travellers, you’d have to go on a trip, meet all the travel agents and all the wholesalers. That still happens – its always important we have those personal relationships between hotelier and travel supplier.

“But, now, I know Sydney-based clients who rather than set up a sales office in Europe, simply tap into or a couple of other European channels and really work that relationship from Sydney, rather than having to have feet on the street up there in the UK.

“The technology allows it and the hotelier today is a lot more educated. For some hotels, signing up to a big chain like Best Western or Choice is the right thing, because they gain all the franchise benefits and brand standards and so on. But an independent operator who doesn’t really want to roll u their sleeves and get involved in the business, can choose to tap into those international markets through the technology available today. That technology just wasn’t available a few year ago.”

As for social media, the biggest impact on hoteliers so far lies in the review sites, Munoz says.

People regard Facebook as primarily for family and friends, he says, and LinkedIn for business, “but the big disruptor, or opportunity, for hotels in social media lies in reviews and ratings and hotel reputations. TripAdvisor is obviously the giant in this space and it has recently added metasearch.

TripAdvisor is effectively part of social media because it consists mainly of user-generated content, Munoz says.

While hotels can argue that not every review is legitimate, “the sheer volume of these reviews and ratings is a valuable tool and from a hotel’s perspective, people who are browsing and shopping on a site like TripAdvisor are not just looking for the cheapest price, but the best value,” Munoz says.

Hoteliers must adjust to the new transparency, knowing that “not only is my pricing is out there, also my score and reputation are out there. Am I 4.1 out of 5, or 3 out of 5? All that is in the public domain.”

For hoteliers, “you’re in hospitality so if you deliver great hospitality, your guests will share those experiences – and not just on TripAdvisor or Facebook. Cornell did a study on this in the last six months and they showed that a hotel can charge 11% on their rate if their reputation is one point better than their competitor. That was based on a score out of 5. So let’s just say you are a 4.2 out of 5, and your competitor across the road is a 3.2 out of 5, you can charge 11% more on the rate.

“The hotelier in me says ‘this is a good thing; if you are delivering good product and good value, people will share that’. But you can’t have one good week and drop the ball the next week, because this is a dynamic medium.

“The other  big mover there is Google Hotel Finder. I don’t think we have seen even half of what is going to be offered by Google.”

Increasingly, when asked where they make bookings, consumers say they just go to Google, Munoz says.

“The reality is that a big part of the market just go to their search engine, start typing in a few details and then will end up booking with an OTA [online travel agent]. Google Hotel Finder is there first and foremost right behind the search results. That’s another big game changer.

“Hotels can have a Facebook page or even a booking engine on Facebook. There’s a lot of untapped potential we haven’t seen from Facebook.  For me, if it benefits the individual hotelier, then great!”

After all, Munoz points out, online bookings have hitherto been dominated by big chains.

“Anything that makes the independent operators more competitive, or levels the playing field, I’m all for. We do supply the big chains an we supply regional hotel groups like Mirvac or Accor – but a lot of our clients are independent operators. We have a vested interest in ensuring we are successful with our solutions.”

Written by : Peter Needham

Currently there is "1 comment" on this Article:

  1. Actually, The Long Tail model as applied to travel (and most other businesses too) means the revenue generated by the selling of lower cost vacations over time can equal or surpass the revenue generated by selling one or two big ticket items in the short term. e.g. sell one luxury cruise in Q1, sell fifty 7-day packages over Q1-Q2.

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