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The changing consumer behavior impacts distribution channel costs

30 November 2021
The pandemic has changed travel patterns which impacts the market segment mix in hotels. In addition, new consumer booking behavior changes the distribution channel mix, which affects the customer acquisition cost. As a result, hotels need to rethink the distribution strategy to control the distribution costs.
Has the pandemic has changed consumer behavior temporarily or permanently? 2021 Travel Industry survey from Travel Weekly shows a shift in the revenue mix for travel advisors. The revenue from all-inclusive resorts, hotels, travel insurance, and theme parks has increased significantly, while revenue from cruises, air travel, and tours has decreased. This change in revenue share confirms the earlier findings that people stay closer to home while vacationing. Domestic leisure is recovering faster than business travel and much faster than international travel.

Latest research about channel mix

According to research from the channel manager SiteMinder, there is a shift in the distribution mix between pre-pandemic and pandemic towards more direct bookings and regional distribution channels. The primary reason is also a focus on domestic leisure travel. However, Booking.com is still the dominating distribution channel in most markets.
Research from D-EDGE based on 3900+ hotel clients shows a decline over time for Booking and Expedia and a significant growth of website direct in the distribution mix for hotels. The research includes part of 2021 and shows an increase in booking value which indicates a higher willingness to pay for accommodation.
Google's latest travel data suggests that 30 % of the volume of business travel may never return. The reasons are a mix of sustainability, cost savings, and work-life balance. In addition, a shift in the total segment mix for hotels from business to leisure will also impact the distribution channel mix.
The pandemic has impacted the distribution mix during the pandemic. A permanent change is also likely when travel normalizes.
The commercial manager needs to keep track of the trends that impact the segment mix and the distribution channel mix to keep the bookings coming in and track distribution costs. In addition, hotels need to revise their distribution strategy based on the changing consumer travel behavior.

The shift in segment mix

Segments tend to shift from business, meetings, and group travel towards individual leisure. This change has a significant impact on the commercial work in hotels. Instead of the easy-to-handle business reservations, hotels need to deal with individual requests, including numerous questions. Meetings and groups where a sale results in many room nights, hotels need to sell one room at a time. The reservations team might need more people to be able to handle all individual guests.

The shift in distribution channel mix

The shift in segments will impact the distribution channel mix. The GDS channel will most likely decrease with less business travel. In-house sales for meetings and groups will start to recover and therefore needs well-trained sales agents to win the business in brutal competition with other hotels. Even if OTAs have struggled during the pandemic, they will recover once leisure travel starts to come back. Hotels have an opportunity to keep the increased share of direct bookings if they continue to provide better information, service, and offerings when consumers book direct.

Control the customer acquisition cost

Finally, hotels need to keep an eye on the customer acquisition cost. A shift in segments and distribution channels will most likely impact the cost of acquiring the guests. Hotels should have complete visibility of the cost before the pandemic, during the pandemic and have a plan for keeping the customer acquisition cost at a reasonable level after the pandemic. The worst case is that hotels will be surprised by an increasing cost post-pandemic. A better way is to focus on how to control the cost before it is too late.