Hospitality Distribution Channels Management

Executive Summary

The document examines the distribution strategies that London-based hospitality businesses can implement in order to maximise their customer base, in the current scenario. This analysis is particularly relevant for those seeking business dissertation help, as it explores practical solutions within a real-world context. The problem will be examined in the context of Premium Inn, an inn which is located in London and operates from several locations in London. The report finds that the distribution type that the company is operating in forms is exclusive and the company hopes to make the booking of the hotel more accessible to the masses.

Introduction

This report is concerned with the examination of the hospitality chain of Premium Inn in the UK and providing an insight into the distribution chains that operate within these hotels and how they are factored into the marketing strategy that can have a positive or negative impact on the operations of the chain. The Premium Inn is considered the largest chain of hotels in the UK. They have over 900 hotels in the UK and Ireland and provide hospitality in budgets ranging from below 10 pounds to over 100 pounds for per night. The speciality that the hotel boasts of is that it is accessible in price and location to a wide variety of people, whether they come with their families or by themselves. The following section will look at how Premium Inn manages to keep their hotels functional and working with the usage of their distribution channels and will also look at how technological developments and marketing strategies have helped the company grow over the years.

2. Distribution Channels and Marketing

The idea of marketing mix is the process through which an individual will make their product reach the consumer. It is intimately connected to distribution channels as it depends on them to effectively put its plans of distribution into effect and ensure that there is no gap between demand and supply. Generally, distribution channels can be understood as direct or indirect. Direct distribution channels are channels of distribution which the owner manages themselves and indirect distribution channels are the channels which are intermediating channels which, very commonly, only work for the distribution purposes (Ross, 2019).

3. Key Trends Governing the Hospitality Distribution Landscape

The Premier Inn hotel chain’s success is majorly owed due to the fact that it provides affordable room in a wide variety to all kinds of travellers and makes its services highly accessible to everyone. It has been postulated that one of the major factors in the success of these newly emerging affordable and accessible hotel chains in the UK has been because of the effective distribution of resources across its functional areas (Brotherton, 2004).

3.1 Trends in Distribution

The channels through which consumers book the hotel rooms have drastically changed over the past few years. Earlier, the booking mechanism which people would use be predominantly the fax machine and telephone booking.

3.1.1 Airbnb

Airbnb is an online booking service which books hotels and holiday homes for people, it is a direct booking service, the usage and payment for which can be done entirely online. A major advantage this service has is that it’s service is extremely widespread and customers can clearly see the the prices which have been listed on the website. This provides a competitive advantage to Airbnb over travel agents as it has been found that when individuals find that there is some information missing, they are more likely to not decide to buy that service. Hence, the transparency of operations is an attractive feature which is available in the website. Airbnb booking systems allow for steep competition to traditional hotel systems as they have given the opportunity to smaller property owners to convert their residence into inns (Mao and Lyu, 2017). In the recent hit that the travel industry has incurred due to COVID, Airbnb predicts an unprecedented and significant growth in 2021, with people swapping international and long distance travel for regional travel (Bloomberg, 28 January 2021).

3.1.2 Online Booking Services

A recent survey revealed that over 72% individuals do online research before they make a booking on their holiday. Hence, the growing popularity of Online Travel Agencies or OTAs. The usage of travel websites has increased as the security and sophistication of websites has increased, over 86% of travel users reported a greater sense of security in making purchases via travel websites as opposed to conventional travel agents. Statistically, the fact that 83% of people choose to book their holiday destinations via online portals reinforces the fact that if customer friendly services like chat, customer support are available, paired with the convenience and greater security that online booking offers, customers will flock to such websites in large numbers (Nearkhou, 19 January 2021).

Issues in Distribution

The following section will discuss the issues that some of these distribution channels currently face.

3.2.1 Large Commissions

A recurring problem with some of the online booking sites is the commissions which the owners have to pay, every time there is a booking made using that website. For example, a prominent OTA website Tripadvisor, charges unto 3% per booking which is visible on their site. Business can avoid paying each time if they take the annual subscription of that website, but they are charged an annual fee (rentalsupport.tripadvisor.com).

3.2.2 Airbnb’s Issues

The New York Times reports that unlike other indirect distribution channels like DoorDash for restaurants or Uber for cabs, Airbnb’s business affects those who don’t use the service too. Resentment towards Airbnb owners can erupt as locals do not take too Kindly on tourists who rent Airbnbs and do things like throw loud parties and trash local areas. They may devalue neighbourhood prices and discourage property purchases in areas where Airbnbs exist. Hence, Airbnbs may soon face a burgeoning wave of disapproval from neighbourhoods and hotel chains for higher levels of regulations (Ovide, 2020).

4. E-commerce and Hospitality

The influence of e-commerce on hospitality distribution is enormous, it has led to the increase in customer base and the assurance of customer loyalty. It achieves that purpose by maintaining a database of research, records of the preferences of customers and (Hua, 2016).

4.1 E-commerce and Hospitality

The most important development technologically in the hospitality industry has been in information and communications technology (ICT). This has also created an additionally competition to capture markets (Thakran & Verma, 2013). The development of e-commerce in hospitality has been brought about changes in the hospitality sector whereby the internal management and marketing has been innovation in the marketing phase. Additionally, the development of e-commerce has led to a more integrated and unified system of planning and making budgets for their operations (Buhalis and Jun, 2011).

4.2 Development Through E-Commerce

There are several aspects of development which can be associated with the development of e-commerce. Firstly, programs like membership deals of hotels become much easier with e-commerce tools. Secondly, there is more scope for the hotel to keep track of the preferences and likes of individual customers, making it easier to provide a customisable experience. Thirdly, e-commerce branding gives a unique opportunity for the business to develop a brand name online. Marketing strategies involving social media is a practically free and accessible way for the brand image to be developed (Xionge, 2015).

5. Key Digital Tools Used in Hospitality Industry

The following section is a critical analysis of two digital tools which have significantly shaped the evolution of the hospitality industry, namely social and SEO marketing. The section discovers that social media is the most cost-effective and SEO marketing is the most targeting form of tools which can be used by hospitality industries at present. A smart business will preferably use both these tools in tandem.

5. Distribution Strategy for Premium Inn

The following section will attempt to map out a distribution strategy for Premium Inn which is located in London. The distribution strategy is being built for a chain of new hotels that the enterprise is building and marketing.

5.1 Target Market

Premium Inn wants to open up its services more to local and national travellers who do not want to travel a very long distance and pay upwards of 20-25 pounds per night for a hotel. Additionally, the hotel wants to target populations like students who are travelling in groups and also backpacking travellers. For this reason, the hotel wants to concentrate on developing pocket-friendly hotel rooms.

5.1 Distribution Tools

5.1 Distribution Tools

The distribution strategy will be using the following tools:

5.1.1 Social Media

In 2019, Statista reported that in the UK, social media penetration reached about 45%. Social media apps like Facebook and Instagram are free to install and charge a nominal fee to sponsor posts and ads. Engaging customers in a direct fashion and integrating with them in an informal way directly targets the customers that Premium Inn wants; tourists and customers who are looking for a low to medium budget holiday within the city of London. This approach is to be used for its cheapness and integration within target market.

5.1.2 SEO Marketing

As already observed, search engines are the most popular way through which individuals check for deals on holidays and hotels. The distribution strategy of Premium Inn will consist on the creation of the ‘Premium Economy’ website, a separate website which will only cater to the individuals who want to book rooms which are under 10 pounds for a night. These websites will advertise the dorm style rooms and the sharing rooms which are available for around 5 pounds per night. This has been chosen for its cost effectiveness and integrated approach to marketing.

5.1.3 OTA and UX

The idea of using an Online Travel Agency or OTA has already been discussed in the previous sections. Another important aspect that the distribution strategy needs to concentrate on is the user experience of the customer who will access the travel booking website. The travel agency will depend on a cloud system of channel management which will keep records of all the data which is stored with regards to bookings, transactions and other official records.

5.1.4 Metasearch Platforms

Metasearch platforms are different from OTAs as they only show information about the hotels and the booking needs to be done from the hotel’s website or from other OTA websites. It is advantageous as it allows for the business to display its comparatively better deals on rooms and allows travellers with niche needs to discover the hotel better.

5.2 Impact and Scope

Based on the strategies which will be implement, especially the ones directed at increasing the traffic at both the Premium Inn and Premium Economy’s website, the conversion optimisation strategy expects to stand at 10%. While there may be several factors which can impact the rate, it is likely that the slow rate of business which has been caused by the pandemic may have an impact on the business. However, the distribution strategy has been made while taking into consideration this particular phenomenon. The new hotels which will be opened by Premium Inn will centre around tourists who plan on travelling with the UK and regional travel.

6. Key Behavioural and other Emerging Concerns

This segment shall critically identify and evaluate key behavioural and other emerging concerns. The segment shall identify the challenges posed by these concerns and identify the opportunities generated by these concerns, and also propose feasible solutions to these problems.

7. Recommendations for Improvement and Further Areas of Development

The above strategy and examination of the hotel distribution methods and the general and specific examples of the Premium Inn and what it could do to maximise its bookings when the market is saturated with similar business and similar advantages. There are several strategies that the business can adopt to improve the functioning and implement several policies for the purposes of improving the sales. They are presented as follows:

The company needs to update its branding and use marketing to percolate the image of being friendly to budget travellers as well.

The company’s strategy at present only includes cost-effective methods like social media marketing and SEO marketing. It needs to develop further plans into the marketing strategies which are capital intensive as well. The company needs to look into the strategy of paid advertising in print and broadcast media as well.

The company needs to work with marketing teams in order to build strategy for proposing their hotel as an economic destination, as that has not been their image so far.

The company needs to capitalise more on developing a strategy for metasearch ads, which will direct consumer straight to the official website or to third party websites like Trivago or Booking.

The company needs a tie up with services like Galileo, Amadeus and Sabre which are Global Distribution Systems. This is to ensure that there is a smooth transactions between the website and the merchant sites. Premium Inn hopes to conduct all the transactions online, this is important especially in the case of the current pandemic.

8. Conclusion

The purpose of this document was to intimately understand the idea of distribution networks and mechanisms and understand how marketing strategies relate to it. The report discovers that the patterns of consumer behaviour in the London area depends heavily on the kind of amenities the hotel provides and the methods through which individuals are able to access these amenities. Ideally, the hotel should be able to make all its bookings through its own website. However, until the website has garnered enough attention, the hotel should encourage the usage of third party websites to build customer loyalty. While there are certain challenges in the distribution tools that the hotel is trying to engage, in the present time, it is most profitable for the kind of business that the hotel is trying to attract a new generation of travellers who are looking for budget-friendly trips. In order to reach its target audience, the hotel postulates, that online forms of marketing will be the best option. The report recommends that there needs to be a systematic review of the performance of the hotel in relation to its distribution strategies in a few years.

Total words: 2946

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