Distribution Strategy Update: Important Updates and Actions for Hotels
We have had a full first quarter on many fronts, including one of our key priorities – our company-wide Distribution Strategy – which works to maintain a healthy balance of direct and indirect booking channels.
Marriott considers third-party intermediary channels to be valuable partners to grow RevPAR, increase brand preference and expand globally. However, “digital disruption” in distribution channels is changing the landscape. More customers are using intermediaries, which impacts our costs and weakens our ability to maintain a direct relationship with many customers. Owners and franchisees are under increasing margin pressure and have made it clear that rising channel costs are a top concern; the current cost model and trends are not sustainable. Our target customers – Next Gen travelers – prefer online travel agencies (OTAs) over direct channels two-to-one today, and the digital “superpowers” are all trying to own these travelers. Our approach to Distribution is focused on addressing these trends.
We have made significant progress this year, including meeting with leadership teams around the world to ensure each continent is aligned with our strategy and plans. The most recent meeting of the Distribution Strategy Advisory Committee (DSAC), based in North America, brought the owner and franchise perspective to the table.
Two key priorities have been at the forefront of these discussions: 1) give customers a reason to book directly with Marriott channels (i.e., marriott.com, mobile, voice and property); and 2) partner with intermediary channels to access new customers and drive loyalty.
Following is an overview of the latest action items we have been taking, and other updates. We will continue to provide you updates on key elements of our strategy and how it impacts your hotels.
ACTION ITEMS FOR HOTELS (to be communicated to hotels via the April 13 Weekly Update)
Wholesale Segment Strategy: Establish and Enforce Rate Integrity
Hotels should take steps to ensure that third-party channels do not offer lower rates than our direct channels, including completing a Look No Further® Best Rate Guarantee training and following guidelines for wholesale contracts.
Over the past several years, disruption has occurred in the hotel industry as the offline, static rate, packaged (hotel + car + flight) product has evolved to more of an online and room-only model. As a result of wholesalers distributing static package rates online, consumers are often able to find these lower rates through third-party channels, challenging the integrity of our Look No Further program. Centralized control and management of inventory using dynamic rates and technology is critical to addressing distribution control. Hotels can support our efforts to establish and enforce rate integrity by:
- Viewing the Look No Further training video that provides more information about the importance and implications of this brand standard, and passing the required Awareness Certification exam by May 8. Both wholesalers and approved OTAs are sources of Look No Further violations that need to be addressed.
- Following guidelines for wholesale contracts, including using contract templates for all local wholesale agreements and terminating agreements with wholesalers that violate our standards or contract terms.
- Opting in to new dynamic wholesale rate programs designed to segment and align compensation with each wholesaler’s target customers and distribution model(s).
INFORMATIONAL ITEMS
Group Segment Strategy
Recent trends in the Group segment have led to changes in how meetings are planned and sourced. Many corporate meeting budgets were cut during the economic downturn, leading to meeting planning teams being outsourced, shorter and smaller meetings, and the continued growth of group intermediaries. These trends have resulted in a steady increase in commission costs, as group intermediaries push aggressively into smaller meetings that have been traditionally less intermediated segments. Marriott is pursuing a number of strategies to address these and related challenges.
Book Direct Strategies
Marriott is providing a differentiated experience on our direct channels with key initiatives that appeal to customer preferences. One example is offering free Wi-Fi in our full service hotels to Marriott Rewards members who book on our direct channels. These types of benefits will help to address the challenges in the changing distribution landscape. Marriott will be launching a targeted marketing campaign in the coming months to raise awareness of the growing number of benefits when booking through our direct channels.
We are also working on creating direct relationships with customers who book through intermediaries by motivating them to enroll in Marriott Rewards and book future stays directly on Marriott channels. We recently completed customer acquisition Proofs of Concept (POCs) in all continents, and initial results demonstrated success in enrolling new Marriott Rewards members. This year, our focus is on leveraging the learnings from the POCs to solidify our approach and prepare for a system-wide rollout. Your support and property pull-through will be critical to our success.
Additional Distribution Strategy Communications
February 18: Travel Leaders Group – Update on Agreement Status