The hotel industry continues to see revenues bleeding away to intermediaries – and now to “metamediaries” as well. Industry-wide revenues continue to increase, but commissions paid to distribution partners are growing twice as fast. Hoteliers must take steps to strategically regain control of their net revenues – and they must do it now.

You don’t have to be a professor of economics to realize the industry is nearing an inflection point. Industry-wide revenues continue to increase, but commissions paid to distribution partners are growing twice as fast. In some cases, customer acquisition costs are as high as 40%. If hotel owners can’t regain control of their bottom line, one of the most lucrative industries could join publishing, music and the airlines on the list of industries forever altered by the Internet.

Revenue management – a field that is vital to the success of any hotel—is no longer enough. A new revenue strategy is critical for hoteliers to survive and thrive in this new world of not just intermediaries, but now metamediaries that are taking a bigger cut of the action. This strategy must integrate revenue management and marketing and take advantage of all the tools and technology available.

Times have changed

When Marriott took a page from American Airlines’ yield management in the 1980s, the Internet barely existed. Expedia was still a decade from launching, Mark Zuckerberg was just a baby and Google was 20 years from changing the world.

Think about how customers booked hotels back then. Think about how it’s done today. How many bookings today are processed or touched by others? Even the most profitable customers visiting the hotel’s website to book are likely first visiting other sites, more than 10 by some accounts, and many of those are getting a piece of the pie. In the case of Facebook and Apple, it’s believable (check the patents), if not expected, that those sites will soon be even more involved in the hotel- booking process and taking more money from hoteliers.

Very little today constitutes a “direct booking,” and tomorrow, it will be even less. The Internet, cloud computing, open source software and mobile technology have changed the industry for good. The distribution and data science side of the business has become far more demanding, with new channels, social media and one-to-one marketing.

Yet many, if not most hoteliers today still use the same revenue management systems and strategy employed decades ago. Best-available-rate pricing is no longer acceptable when open and dynamic pricing is a viable option. Managing (and pricing) to meet budgets and mistaking inventory management for revenue management are costly mistakes that can’t be made with today’s thinning margins. If the right segments of customers aren’t first understood and defined, and then yielded independently, money is being left on the table. Why don’t most revenue management systems track customer behavior and take into account web-shopping data that could help get a clearer picture of price elasticity?