Electronic Channels of Distributions: Challenges and Solutions for Hotel Operators

This paper addresses the issues of hotel operators identifying effective means of allocating rooms through various electronic channels of distribution. Relying upon the theory of coercive isomorphism, a think tank was constructed to identify and define electronic channels of distribution currently being utilized in the hotel industry. Through two full-day focus groups consisting of key hotel electives and industry practitioners, distribution channels wen identified as were challenges and solutions associated with each This article is available in Hospitality Review: http://digitalcommons.fiu.edu/hospitalityreview/vol24/iss2/7 Electronic Channels of Distribution: Challenges and Solutions for Hotel Operators By: Pearl Brewer, Andrew Hale Feinsteh and Billy Bai Thispoper addnsses the issues of hotel operafors idenhhing gectiue means of allocating moms tbmngb various ekctn~nic hanneb ofdism'bution. Rebing @on the theoy @coeniue isomotphism, a tbink tank tuar comtnuted to dent@ and define ehctmnic charneb o f distribution m m n t b being ntilixed in the hotel industry. Tbmugh iwo full-@focus pip conszsting of& hotelexemtiues and indnsbypra&tioners, distribution channels wen i&na$ed as wen chaNenges and solutions associafed with each. Introduction In today's global competitive environment, hotel revenue managers need to deal with various methods of distributing their room inventory, includng Internet-only rates, distressed room inventory web sites (such as Priceline and Horwire) and an increasing number of room consolidators or agencies, e.g, Hotels.com, Expedia.com, ctc. To achieve their goal of distributing their rooms more effectively requires knowledge and selection of a variety of distribution channels. One challenge is determining the combinations of distribution channels and relative number of hotel rooms to be offered for sale through each channel (O'Connor and Frew, 2004). The hotel's channel management strategy is the key in determining the outlets for rooms inventory. Hotel revenue managers know that the cost of sehng a room through one channel, such as a consolidator, is different from the cost of selling through the front dcsk, the hotel's website, or through a third party Internet site. The ability to manage and selectively use a multitude of channels is the new focus of hotel managers u.ho now concentrate on how to best sekct and work with third party intermediaries and channels instead of attempting to eliminate them (Brewer, 2005). It was this importance of channel management strategy that was at the center of discussions for two focus groups conducted by researchers at the University of Nevada, Las Vegas (UNLV). At these focus group sessions, hoteliers had cxprcssed difficulries in keeping control of their inventoty and rates (Brewer, 2005). The focus groups were conducted over a period of nine months and were exploratory in nature. The purpose of the focus groups was twofold: (a) to define the distribution channels and (b) to identify in order of importance, the issues and challenges in electronic hotel room distribution. In addition, the focus group participants identified and discussed the real world barriers and chdlmges to electronic room distribution and made recommendadons of how to overcome each harrier. The research was conducted usingfocus groups and the data were analyzed using content analysis (Miles and Huberman, 1994) and Yin's (1994) case study methodology. Literature Review The Evolution of Channel Distribution Strategy In the last few years, the hotel industry has evolved rapidly in terms of determining and defininginvcntory and rate management for rooms inventory. In the eady 1990's, hoteliers felt that the light approach was to use the rack rate as their basis for determining rate parity (Brewer, Christodoulidou, and Rothenberger, 2005). Based on the rack rate, hotels were able to calculate corporate rates, government rates, and membership rates (e.g., AAA or AARP). In addition, some hotels were offering a large part of their inventory to wholesalers at a pre-negotiated discount (Brcwcr, Christodoulidou, and Kothenherger, 2005). FIU K&w VoL 24 No. 2 -