Product Distribution and Revenue Management in Hospitality Industry

This article discusses revenue management and distribution channels in the hospitality industry. It covers the skills required for revenue managers, different distribution channels such as online travel agents and hotel websites, trends in tourism and hospitality, and current strategies used by Hilton Group. Effective communication with stakeholders is also emphasized. The subject is relevant to courses in hospitality management and tourism.

Running Head: PRODUCT DISTRIBUTION AND REVENUE MANAGEMENT 1
Product Distribution and Revenue management
Name:
Institution

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Table of Contents
Introduction......................................................................................................................................3
Distribution channels.......................................................................................................................3
Online travel Agents. (OTA).......................................................................................................4
The hotel Website........................................................................................................................4
Trends in tourism and hospitality that impact distribution and revenue management....................5
Improved technology...................................................................................................................5
Adopting sustainability and corporate social responsibility........................................................5
Overview of the current strategies...................................................................................................6
Stakeholder communication.........................................................................................................7
Conclusion.......................................................................................................................................7
References........................................................................................................................................9

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Introduction
Revenue or yield managers in the hotel and hospitality industry ensure that the assets of a
particular hotel are rented at the best prices because the hotel industry derives its profit from
capacity. The revenue managers are tasked with analyzing and monitoring the accounts
department of a hotel, creating financial projections and determining the eligibility of offering
discounts while keeping track of sales and reservation. Some of the skills of revenue managers
include relationship management, analytical skills and technology skills. Relationship
management are critical skills for maintaining a good rapport with both internal and external
stakeholders (Cetin, Demirciftci & Bilgihan, 2016). For example, the revenue manager at Hilton
hotel can create a good relationship with the sales team through providing mentoring programs
and guiding them on effective accounting skills (Debortoli, Müller & vom Brocke, 2014).
Additionally, the revenue manager also needs to prioritize the good relationship with IT partners
such as Online Travel Agents, to increase the number of customers (Ellinger, A & Ellinger, D,
2014). Analytical skills enables the manager to predict trends and opportunities in the hotel
industry. It enables them to understand data and make quick and informed decision such as
adjustment of the price. Following the advent of technology, revenue managers should also have
technology skills because many hotel functions such as reservations are made online (Ferguson,
Mark and Smith, 2016). The managers should also be able to interact with revenue management
software programs and also be able to pull data from online sources.
Distribution channels
Distribution channels in the hospitality industry refers to the different platforms or
methods that the consumer uses in booking for the hotel. A good distribution channel helps in
marketing of the hotel and improves sales by attracting more customers (Thakran & Verma,
2013). It is important for the hotels to diversify their distribution channels to reach a wider client

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base. Management of distribution channel, also known as channel management is an important
asset for revenue managers (Leung, Law, Van Hoof & Buhalis, 2013). In the contemporary era,
hotels receive more bookings on the online platform than from offline travel agents. The
following are notable distribution channels.
Online travel Agents. (OTA)
Some of the common OTAs in the hotels and hospitality industry are Expedia,
Booking.com, Priceline.com, and Orbitz.com. OTAs are increasingly being used due to the
exposure they generate, allowing the hotel to attract more clients. Additionally OTA is the most
common distribution channel in mobile phone users. According to PhocusWright, about 64
percent of hotels booking online came from OTAs (Law, Buhalis & Cobanoglu, 2014). The OTA
simply market the hotel in their website including such descriptions as ratings, location and the
price. The client therefore, has to choose the best hotel depending on his preference. The hotel
usually pays a commission of around 20 percent for the services to the OTAs (Stangl, Inversini
& Schegg, 2016). One way in which the hotel can benefit from the use of the online travel Agent
is by updating their portfolio and ensuring they give the right information to these agents.
The hotel Website
This is the most obvious and cost effective distribution channel at the disposal of hotels.
The cost of maintaining the website is relative low after paying the initial setup fees. The website
provides the hotel with a great platform to advertise the values of the brand while delivering the
marketing message that relate with the target audience. The website also creates a better
visibility of the hotel through effective search engine optimization (SEO) and regular refreshing
of the content (Bethapudi, 2013). Additionally, the website does not incur cost of commission as
in the OTAs. The benefits that is achieved from website booking is the reason why many hotels
offer incentives for direct booking.

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Trends in tourism and hospitality that impact distribution
and revenue management
The landscape in revenue management and distribution channels in hotel and tourism
industry is constantly changing. Technological change and consumer behavior have necessitated
this trends. Distribution and revenue management play a key role in facilitating the growth of the
hotel and tourism industry across the globe (Ryan, 2015). Some of the note worth trends include
Improved technology
The advent of technology has largely sparked the growth of the tourism and hospitality
industry. The increase use of internet by the consumers has given rise to Online Travel agents
and Global distribution channels. Additionally, most of the hotels have developed their own
websites that supports direct booking. A recent study has indicated that about 50 percent of
hotels plan to increase their online network in 2019 (Schuckert, Liu & Law, 2015). Such online
channels increase the visibility of the hotels across global market, consequently increasing the
guest traffic. The rise of the internet has not only smoothened the distribution networks but also
affected the revenue management. Increasingly, most of the hotels are using revenue
management software (RMS) solutions such as Atomize. This software set the optimal price
down per room type. The RMS solutions involves data analytics tools and reporting that
increases the efficiency of revenue manager in pulling data.
Adopting sustainability and corporate social responsibility
Corporate social responsibility is a global phenomenon that requires organization to take
responsibility of such actions as environmental conservation, alleviating the livelihood of the
community in which it operates and engaging in ethical operations practices. Sustainability has
increasingly become important in travel and hospitality industry, with the consumer becoming
more concerned with healthy living (Di Foggia & Lazzarotti, 2014). Most of the consumers

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prefer organic foods and are attracted to those hotels that practice health and sustainability.
Sustainability impacts on revenue in that some hotels are using cost effective methods such as
solar energy. This reduces the operation cost of paying for power. Additionally, with climate
change becoming a global concern, hotels that practice sustainability attract more clients. The
distribution channels of such hotels grow and due to the high influx of global searches, their
search engine is optimized creating more global visibility.
Overview of the current strategies
Hilton group is a flagship brand and one of the largest hotel brand in the world with its
operations in Australia. Hilton hotel in Australia targets corporate employees and travelers all
around the world. In its segmentation strategy, Hilton Group segments its services based on
unique ambience and experience by including various services in its product mix such as gym,
spa, and hygiene factors. The hotel group uses premium pricing strategy to accrue high profit
margins. Additionally, the hotel group uses differentiation strategy to gain a competitive edge
through training and development of staff. In pricing Hilton groups uses premium strategy. In
promotion, Hilton group provides exclusive membership to the clients. In the distribution
strategy, the hotel uses the strategy of franchising. This reduces the operation cost as Hilton does
not have to pay overhead expenses in the franchised properties. In the marketing analysis, the
hotel group has over the years experienced tremendous growth in leadership, employee
motivation, teamwork operation objectives and customer management. The brand has well over
310,000 rooms in its pipeline and gained the reputation of the fastest growing brand in the
hospitality industry (Xu & Li, 2013). In the marketing strategy, Hilton group targets consumer in
the middle and senior aged professionals.

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Stakeholder communication
One of the way of influencing the attitude of the stakeholders is through effective
communication. Shareholders are important group that have invested their capital in the Hilton
hotel. I would communicate with them through reporting. Through reporting, I would show them
the trends in revenue collection and analysis of data such as consumer booking (Scheer, et al.,
2014). Reporting can enable the shareholders to have an outline of how the hotel is performing
and give their inputs on areas that need improvement. Additionally, reporting will give an insight
to the shareholders on the strategies am adopting in revenue management.
Another key stakeholder group in the Hilton hotel are the customers. I would
communicate with them through public relations and marketing. I would broadcast such
information as the improvement of service, sustainability practices and bonuses or drop in prices.
Some of the strategies I will communicate to the customers include our distribution strategy and
customer management strategy. Public relations will also enable me to address rumors and
miscommunication regarding the hotel. I would use communication channels such as social
media, the internet and media to pass critical information to the customers. I understand that
effective communication will enable me to reach the consumers in a timely manner regarding
sensitive information, it is far easier to create a good impression rather than fix a tarnished
reputation. Marketing communication will also enable me to advertise the hotel to new consumer
group thus attracting new clientele.
Conclusion
Revenue management is an important function of the Hilton hotel. It facilitates the
acquisition of profit and collection of finances that facilitates the day to day running of the hotel.
A good revenue managers has to have critical skills of relationship management, data analysis

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and technology in his line of work. Relationship management is not only concerned with
managing the internal aspects of the organization such as the employees, but it also facilitates
connectivity with external shareholders and the community as a whole. The distribution channel
in the hotel industry places the hotels in a position whereby customers can book for reservations
and services of the hotel. Distribution channels are important to the hotels because they bring the
consumers to the hotels resulting to revenue growth. Online distribution channels have taken
over from the traditional means due to the increase use of smartphones and the dispersion of
internet services. Common online distribution channels include Online Travel Agents and Global
Distribution Channels. Additionally, a hotel can cut on the cost of commission imposed by this
third parties channels through establishing its own website as a distribution channel. This attracts
direct booking of the customers and the hotel can include specifications and important promotion
messages in their website. Communication is also essential in creating a good rapport with the
stakeholders. Communication enables regular review of the stakeholders and address issues that
may arise within the organisation. A good stakeholder communication needs the revenue
manager to understand the culture of the stakeholders.

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References
Bethapudi, A. (2013). The role of ICT in tourism industry. Journal of Applied Economics and
Business, 1(4), 67-79.
Cetin, G., Demirciftci, T., & Bilgihan, A. (2016). Meeting revenue management challenges:
Knowledge, skills and abilities. International Journal of Hospitality Management, 57,
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Debortoli, S., Müller, O., & vom Brocke, J. (2014). Comparing business intelligence and big
data skills. Business & Information Systems Engineering, 6(5), 289-300.
Di Foggia, G., & Lazzarotti, V. (2014). Assessing the link between revenue management and
performance: insights from the Italian tourism industry. Measuring Business
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Ellinger, A. E., & Ellinger, A. D. (2014). Leveraging human resource development expertise to
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Law, R., Buhalis, D., & Cobanoglu, C. (2014). Progress on information and communication
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Hospitality Management, 26(5), 727-750.

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Leung, D., Law, R., Van Hoof, H., & Buhalis, D. (2013). Social media in tourism and
hospitality: A literature review. Journal of travel & tourism marketing, 30(1-2), 3-22.
Ryan, C. (2015). Trends in hospitality management research: a personal reflection. International
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Xu, K., & Li, W. (2013). An ethical stakeholder approach to crisis communication: A case study
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