Distribution channels are one of the components of the marketing mix (Marketing Mix or 4Ps), corresponding to P: Place. Because of this alignment with P: Place, many people who translate into English literally tend to interpret P: Place as “Location”. Therefore, when asked about marketing strategies related to P: Place, the answers often revolve around the physical location of the property. For instance, if asked about the P: Place of the Grand Hyatt Erawan Hotel, residents of Bangkok would confidently respond that it is located at the Ratchaprasong intersection, or near the Erawan Shrine, a popular site for worshippers seeking blessings.

However, the answers regarding P: Place mentioned above are not accurate according to marketing concepts. The responses actually refer to the property's location, which in English corresponds to the term “Location”. Location is not a marketing strategy related to P: Place at all. The correct meaning of P: Place in the marketing mix refers to distribution channels, or in English, Distribution Channel. Simply put, it concerns how a business ensures that its products and services reach consumers. This means that customers can be located anywhere, and they should be able to book a room without having to physically go to the hotel. Thus, we find that P: Place or distribution channels help create convenience for customers.

The term OTA stands for Online Travel Agency, which is an online travel agent. OTAs do not have physical storefronts but use computer systems as distribution channels and engage in extensive marketing. They serve as intermediaries in the hotel business.

In the hotel business, regardless of the product, there are two main distribution channels for hotel room bookings, detailed as follows:

1. Direct Channel is where hotels sell directly to customers (in reality, customers contact the hotel). The methods for booking directly may include: 1. calling the hotel to book directly, or 2. booking through the hotel’s website. The advantage of this direct channel is that hotels do not have to pay commissions to anyone and can control the market, such as maintaining consistent room rates and service levels.

However, the direct channel has its drawbacks, as the product cannot be widely distributed. The website may not be user-friendly, requiring extensive information from guests, and it may take considerable time for customers to successfully complete their bookings.

2. Indirect Channel is where hotels do not sell directly to customers but rely on intermediaries to assist in selling rooms. In the current era, the intermediaries are Online Travel Agencies (OTAs). The advantage here is that hotels have intermediaries to help sell rooms, making it easier for customers to access them. Intermediaries often engage in extensive and continuous marketing efforts, along with various promotions that encourage quick bookings, such as special offers. The most effective strategies often involve enticing language, such as 'change your mind', 'free cancellation', 'last room available', or 'exclusive discounts for you as a customer'.

Regarding room rates, they can vary widely (typically, hotels offer the same commission rate to each OTA to avoid Rate Not Parity – selling the same type of room with the same offer at the same price across all online channels). Each OTA may offer different prices to customers, often lower than direct bookings due to various reasons, such as hotel policies not allowing lower rates than third parties or promotional campaigns by the OTA itself, especially if the hotel is popular. Almost every OTA has a Customer Relationship Management (CRM) system, offering discounts to regular customers or providing partial refunds after their stay for future bookings.

However, the downside of using OTAs is that it creates a disconnect in building customer relationships for hotels, as customer data resides with the intermediary. Additionally, customers must understand that their bookings are subject to the terms of the OTA, not the hotel directly. Therefore, if a customer wishes to change their booking, they must do so directly with the OTA, not the hotel, which often adheres to strict booking conditions. Importantly, customers should not be overly excited by the enticing language used by OTAs; it is advisable to read thoroughly and check all clickable links to ensure they understand everything. While OTAs cannot deceive customers outright, they are not obligated to disclose all truths. Furthermore, each OTA may display different pricing; for instance, one major OTA might show prices excluding service charges and VAT, while another similar OTA might include everything in their displayed price.

There was a case where a customer booked a suite through an OTA, which stated that cancellations could be made before check-in. The customer attempted to cancel around 2 AM on the day of check-in, but the system would not allow it, leading to a phone call with the OTA, resulting in a dispute in English where neither party was willing to concede. Eventually, the OTA said they would consult with the property. The customer waited until morning and called the hotel’s reservation department, explaining the situation, and the hotel confirmed they had not received payment and had no issue with the cancellation. Afterward, the customer communicated with the OTA via email, but initially, the OTA refused to comply. The customer insisted, stating they had spoken with the hotel, which agreed to the cancellation. The next day, the OTA emailed back, agreeing to issue a voucher for future bookings, but the customer insisted on a refund to their credit card. Eventually, the OTA agreed to refund the credit card within 45-60 days, but after 60 days, the refund had not been processed. The customer decided to wait until they needed to book the hotel again, this time opting for a direct booking. Since it was a suite booking, the reservation department inquired about special requests during the stay, and the customer requested assistance in following up on the refund from the OTA, referencing the original booking number. The hotel promised to assist immediately, and the next day, the refund was processed back to the credit card.

From the above, it is clear that issues arise from intermediaries, making it difficult for hotels to control the market and service levels, particularly for customers genuinely seeking to book suites, who represent the higher-end clientele of the hotel (with room rates approximately six times higher than the lowest room type).

However, from a marketing perspective, hotel businesses (especially in the context of the COVID-19 pandemic) cannot rely solely on marketing intermediaries, as this would make it increasingly difficult for hotels to attract customers. Hotels must find ways to continue selling rooms through OTAs while ensuring that their high-end customers receive the care and service that meets the hotel’s standards. Ultimately, the solution found by hotels is that if they book suites through the mentioned OTAs, the result is that the suites are always fully booked (though there are still various enticing messages). However, if booked through Direct Booking or other OTAs, the suites are available, indicating that hotels have adjusted their room sales allocation strategies through OTAs, which is one way to address issues with intermediaries.

Nevertheless, the distribution channel strategies for hotel room bookings still depend on the type of hotel and target customer group. Additionally, the hotel business has a highly variable pricing structure that can change rapidly, which the author will explain in the next article.

References

Dickman, S. (1996). Tourism: An Introductory Text, 2nd ed., Australia: Hodder Education.