How does distribution impact a Resort? What strategies help with direct sales? Do we truly control distribution?
In this interview, we answer these and more questions.
What is changing in the Leisure Hotel Sector
— At TecnoHotel OnTour Tenerife, you took part in a panel talking about what is driving direct bookings. From your experience, what has truly changed to the point that today it is no longer enough to have a good website and a competitive price?
— In the hotel industry, times have evolved, particularly in revenue management and hotel marketing. We have moved away from volume-driven business models towards models focused on profitability and sales efficiency.
There is no doubt that technological progress has driven solutions that support strategies aimed at strengthening the direct channel and optimizing the bottom line. However, in my opinion, what has really changed is mindset, driven by learning. No matter how many technological solutions exist, if revenues are not managed proactively, results will be limited.
There is a significant difference between simply selling rooms at any cost and marketing strategically across channels optimizing the inventory. The hotel business has changed over time, and revenue management has grown leading the transformation and adding value. It has moved beyond the role of a simple inventory manager to become a key strategic function in revenue generation. All of this has pushed the industry towards more efficient strategies.
— At Revenue Resort you argue that holiday Resort properties cannot be analyzed in the same way as a business hotel. What differences are most decisive when designing a commercial and revenue strategy?
— Leisure hotels behave in a completely different way compared to city or corporate hotels. Their strategies must therefore be different, although it is true that urban hotels now also have an important leisure segment that has grown significantly in recent years.
Years ago, I had the opportunity to take part in the development of a Revenue Management System (RMS) for Starwood Hotels & Resorts in Boston. After months studying algorithms behavior across both models, we concluded that demand calculation algorithms designed for city hotels could not be applied to leisure resorts. The output generated when applying those algorithms to the resort model were entirely inaccurate, due to factors such as length of stay, booking lead time, or ancillary revenues.
Although at the time I was not fully aware of how significant the gap between both models was, the reality is that demand forecasting algorithms are radically different. In resorts we talk about “technical full”, where reaching 100% demand forecast accuracy is more complex than in a city hotel with short stays.
For that reason, the commercial and revenue strategy in resorts must be different, analyzing the booking curve over a longer time horizon, defining a demand calendar with different strategies, managing distribution carefully, and offering a portfolio of experiences and services that are far less relevant in urban hotels.
— How do factors such as more complex distribution, longer average stays or higher price sensitivity affect the strategy?
— As I pointed out in my latest article in TecnoHotel, using Maslow’s hierarchy of needs as a metaphor, distribution is the base of the pyramid and the essential starting point.
More important than average length of stay is price sensitivity and how it impacts demand. I often see RMS tools recommending price increases based on competitive sets, but in my view, what really matters is not so much the recommended increase itself, but the impact that increase will have on future demand. This variable is not always properly analyzed, despite being critical for decision-making. The RMS we developed incorporated algorithms that measured changes in pick-up after applying the new prices, compared them with previous behavior and with similar periods, and then quantified daily price sensitivity on a value scale. This data is essential for making value-adding decisions, however it is still insufficiently considered or provided by many RMS tools today.
Direct Sales, Integrated into the Business
— From a revenue perspective, what is the risk of analyzing direct sales as just another channel, without considering it in the overall distribution and profitability strategy?
— As I always say, pricing strategy must be clean. We need to assume that we effectively have a single online price per rate type, and that distribution partners apply different mark-ups and margins on top of those agreed prices, sometimes playing with them during certain moments. All of this creates, by default, a chaos across online channels.
Distribution has become increasingly complex, which is why I consistently advocate for simpler strategic models where the entire channel strategy is connected, rather than isolating direct sales. A pricing strategy that is not aligned with distribution will inevitably penalize opportunities due to inappropriate price positioning suffering from cannibalization.
— You have stressed that the starting point is not just price, but control of distribution. Why is this approach still so critical, especially in the leisure segment?
— I like to ask the following question: is it possible to increase a hotel’s average rate by reducing selling prices? This is something I often ask at the beginning of distribution training modules and MBA.
The answer is yes. We need to reduce the volume of net-rate bookings and increase direct sales. By performing a simple cost-per-channel analysis, the impact of our strategies becomes clear.
The starting point is to consider pricing across channels and optimize it during periods of strong demand, breaking parity after closing channels, without cannibalization risk. With an orderly distribution structure and a strategic, direct-channel-focused pricing approach, we improve the bottom line.
Revenue management, in its true sense, must start with correct contracting to ensure a real inventory control. Cannibalization begins with disordered distribution, offering different conditions to certain accounts, and when contracting with bed banks, control is quickly lost.
The goal is not to shift overnight, but to commercialize in an orderly way. Personally, I like to analyze specific past dates to measure the impact of distribution and pricing actions. In relatively short periods within a single month, we can be talking about thousands of euros. That reality is a strong motivator to keep working towards objectives.
— In hotels where ancillary revenue such as food and beverage or other services plays a major role, what additional value does direct sales bring?
— Direct sales allow us to connect with the guest before arrival, something that intermediary sales generally do not offer, opening up a world of opportunities.
We must remember that we are not just selling rooms, especially in leisure hotels, where we truly sell experiences, or, as I often say, memories and moments to collect throughout life. With guest data, we can offer tailored experiences before arrival and drive incremental ancillary revenue, which is essential to increase GOP performance.
Total revenue strategies around ancillary income, upselling, cross-selling, spa and wellness treatments, or unique dining experiences are extremely important. Increasing the direct channel therefore helps anticipating and growing ancillary revenue prior to arrival, while still complementing on-property initiatives.
We must fully leverage our opportunities before, during, and after the stay, ensuring that the guests keep the unique experiences in their memories.
What Truly Improves Results
— Revenue Resort focuses on metrics such as business mix, GOP, pace and pick-up, and account analysis. Which indicators should hoteliers monitor today to know whether their strategy is truly improving the business?
— The primary indicator to assess business performance is absolutely the pace, which provides a starting point to understand current performance through daily and weekly analysis.
Chronologically, I would say we must first analyze accounts and retain only those that add value, stopping agreements that damage results. Second, establish balanced channel pricing once distribution is organized. Third, review booking pace and analyze which segments are driving pick-up, differentiating by channel. Then set objectives aimed at achieving the ideal business mix through segmentation strategies, and finally analyze results.
In simple terms, this is the base for an optimization cycle that maximizes GOP. Nothing here is new, it is not about reinventing the wheel, but about working every day to optimize results without losing control.
— When a new tool or formula appears to improve conversion, what questions should be asked to determine whether it truly adds value or merely masks results?
— Fortunately, we have clear indicators to assess whether a new tool is delivering real benefits. First, we must understand cost per channel, the opportunity cost of direct sales versus net-rate bookings, and calculate cost ratios by channel from total sales.
If those indicators improve after applying the tool, then we are moving in the right direction. What we cannot do is implement changes without measuring results.
Additionally, when we incorporate ROI analysis for online marketing investments for Google, metasearch, and other campaigns, we can determine whether value is truly being created.
Effective traffic and conversion strategies reduce the cost per direct booking. Given that room revenue contributes more to GOP, executing this efficiently has a direct impact on profitability.
— Is direct sales sometimes celebrated too enthusiastically without reviewing costs, cannibalization, or real profitability impact?
— Absolutely. Direct sales also carry fixed and variable costs, regardless of booking volume, such as the booking engine, website development and maintenance, integrations, and staff.
Moreover, direct sales have their own Damocles sword: if not properly optimized, they can be more expensive than intermediary sales. Unfortunately, I have encountered this scenario in some small, independent hotels overly reliant on external distribution and OTAs. Nothing comes for free; everything requires proper management.
— In the leisure segment, can group business impact revenues if contribution and displacement are not properly analyzed?
— This is a critical analysis because not always a group is a good business. It may sound contradictory that sometimes a group is simply not profitable unless it pays significantly more than individual guests.
In leisure hotels, a group staying two or three nights can displace individual bookings staying for a week, and if rooms are used as single, ancillary revenue is also negatively affected due to lower occupancy per room compared to leisure transient bookings.
Most calculation systems I know only analyze displacement during the group dates themselves, without considering the impact on surrounding days. For this reason, I created my own group simulator, incorporating additional variables beyond just rooms and nights such as day-of-week effects driven by flights, historical data, pace trends, forecasted demand, food and beverage impact, displacement outside group dates, and ancillary revenue expected.
Any hotel can perform this exercise to determine total contribution with and without the group. This allows us to calculate the strategic or break-even price per room required to compensate the displacement, if any.
I believe it is a common mistake to analyze groups in a standardized way. Every group is different and must be evaluated individually to avoid incorrect decisions.
The Specific Nature of Resorts
— From your experience, what are the most common mistakes Resorts make when defining their market positioning versus competition?
— The most common mistake is focusing too much on competitors without considering the internal indicators and objectives. When we have control of our business, strategy should be guided by our own data, not by competitors.
In resorts, special attention must be paid to distribution, as not all rates are connected. Raising prices simply to follow competitors without addressing disconnected channels results in lost positioning and reduced direct-channel traffic. I always say, it is better to keep an eye on competitors, but do not follow them blindly.
A key metric for measuring success here is RevPAR change, visible in certain reports. With clear strategy, we should see RevPAR growth exceeding the competitive set, or, in times of lower demand, a smaller negative impact. Most elements are transparent and measurable, although there are external factors that can always influence outcomes.
— What role do forecasting and pace analysis today, considering faster demand changes and strong price comparisons by guests?
— Their role is absolutely critical. We must anticipate future changes in pace, take action accordingly, and continuously monitor indicators looking for opportunities.
The value of revenue management is to bring proactivity, leading decision-making in weekly revenue meetings. There is always a reason behind changes, and every demand shift must be analyzed.
Price comparison is a natural behavior, everyone does it. Studies show that over 70% of customers compare prices on metasearch sites before booking. This makes the channels pricing strategy critical to avoid cannibalization and to drive traffic into the direct channel.
I have seen hotels investing in metasearch campaigns being more expensive than other channels. It is basically paying money to show potential customers that their direct channel is not the cheapest. That is a serious damage for the Best Rate Guarantee program and internal segment.
— Revenue Resort also emphasizes reviews, social media, and social change. To what extent have these elements moved beyond reputation to become true business variables?
— There is no doubt that online reputation is essential for market positioning and for sustain price increases, aligned with delivered value.
Everything revolves around guest expectations. Higher expectations increase willingness to pay and reduce price sensitivity. The product’s value begins with the image that a hotel projects on social media.
Although more than 30% of guests are repeat customers, the rest are willing to pay more when expectations are higher.
Practical Vision and the Future
— Which commercial or distribution decision do Resort hotels most often postpone, despite having an immediate impact on profitability?
— The key decision is to decisively stop contracting with accounts that genuinely are not adding value and actively cannibalizing the direct channel.
Convincing commercial teams is not always easy, but online channels are already flooded with multiple prices for the same product. At some point, more contracts no longer mean more sales, just more complexity.
I experienced this years ago when we stopped contracting certain accounts despite commercial pressure. After months of detailed analysis, we implemented the changes and achieved significant ADR growth, well above contracted levels. We were simply selling through the right channels, without cannibalization, thanks to proper distribution control. The strategy proved so successful that it was later rolled out across more than 1,100 Starwood Hotels & Resorts properties.
Another practice that should be avoided is offering different conditions, which further disrupts complex distribution impacting the global pricing strategy.
— And if a hotel wants to achieve a real change in the next six months, what priority should no longer be postponed?
— In addition to what we have discussed, I would highlight adding real value to loyalty programs, with clear member-only rate strategies that are non-public rates available in channels.
Secondly, hotels should implement a front-desk action plan to promote direct-channel benefits on arrival, especially to guests who booked through other channels.
Looking ahead, artificial intelligence will play a leading role in transforming hotel distribution. We have discussed how comparing prices on metasearch platforms like Trivago, Kayak, TripAdvisor, or Google is common practice. With AI, consumers are increasingly directed straight to the best price, without the need to manually compare options. For this reason, having an orderly distribution structure and clean, accurate pricing across channels is more important than ever.
We do not fight or demonize distribution. We need to look for the optimal balance that maximizes hotel profitability.