What is new in hotel distribution? Not a lot actually
After three and a half days of wandering around the annual HITEC event in the US, I will argue there is not much going on in hotel distribution. Honestly.
Not that there weren’t any conversations. I was particularly excited for the Hotel Distribution Super Session, entitled “Examining all sides of the hotel distribution debate”.
- John Davis III, CEO of Room Key
- Traci Mercer, vice president of market management with Expedia
- David Pavelko, head of industry at Google Travel.
- Andrew Rubinacci, vice president of distribution and intermediary sales with InterContinental Hotels Group
- Trip Schneck, managing partner with District Hospitality Partners
However, in general there was more re-covering of already covered ground, with most of the panelists hewing to previously stated company positions:
- hotels want more direct business to enhance margins
- OTAs think they still provide a strong value proposition alongside the hotels direct channel
- and Google just wants to provide consumers “choice”, and earn advertising revenue from all the players involved
New Pegasus CEO David Milili probably had the most honest assessment of the distribution landscape:
“Hotels have not been consistent with their distribution strategy. When economy is good they don’t want to work with the OTAs, but when it turns the other way they run back to the OTA to fill the rooms.
“The hotels that I’ve seen with the most successful channel strategies are the ones who are consistent with their approach during good and bad times.”
Millili adds that the OTA/hotel relationship is:
“…like a marriage. You have to have give and take and there will be good times and bad. Hotels may complain about the OTA margins, but they sign a contract they read terms, they negotiate with the OTAs.
“If they want to change it they can change it. Nobody’s forcing the do anything. It’s on them”.
In his opinion not much has changed dramatically over the last ten years. Hotels have always used different outlets to help drive business. And you can’t deny that people do look to OTAs when they plan and shop and they may also check the brand site as well.
As much consternation as there is on the subject, Millili adds:
“I don’t believe it will be true that things will be dramatically different in 5 years.”
But a few interesting points were made by the panelists and others I spoke to during the course of the show.
On the emergence of new players
Google’s Pavelko, while sidestepping the question of whether they are unfairly preferencing the positioning of their own product in search results, noted that social and mobile will result in new intermediaries popping, providing innovation into the sector.
I’m sure he sees GHF is one of those innovations, though he remained cagey on whether GHF will morph into a full fledged OTA any time soon.
On whether any of these new players or the hotels’ plans to drive more direct bookings will push the legacy OTAs into extinction, Schneck was not biting.
He felt that while many have tried, no one has achieved the scale of the legacy OTAs and was skeptical that companies like RoomKey or others will find a different result. Schneck felt that even where some companies are introducing innovations into the sector, the advantages will be short lived.
Schenck felt that companies like HotelTonight (which he felt received a ridiculous $150 million pre-money valuation on its round) and Hipmunk are great, but that unless those innovations are proprietary or patentable, it’s very easy for the legacy OTAs to copy it.
Hence the future favors the legacy OTAs.
In considering some of the other entrants like GHX and Treovi, which are trying to solve the hotel concerns about the so-called “OTA Tax”, Millili, Pegasus Solutions’ new CEO noted in reference to Trovia that “If you don’t know how you’re going to make money you’re not going to be in business very long”.
Millili was similarly skeptical of GHX’s plan to charge the customer:
“If you’re charging the consumer for booking, you better be ready for a social media backlash. Consumers don’t want to pay for booking. And they’ll let you know it and all their friends.”
On RoomKey there was some general agreement that it has a chance for success, especially since it is driving somewhat significant traffic with virtually no marketing cost.
Both IHG’s Rubinacci and Wyndham Hotel Group’s VP of ecommerce, Gareth Gaston (in a separate interview), called Room Key a “piece of the puzzle” in the distribution landscape.
Millili felt that Roomkey “could be more valuable than Kayak because they are giving one rate from the hotel instead of multiple iterations of the same property at the same cost from different OTAs”, making it simpler for the consumer.
Not that there aren’t flaws in Room Key’s model, but all agreed it’s early days and too early to draw any definitive conclusions.
Impact of mobile on hotel distribution
Throughout the event, many noted that mobile is having a major impact on travel and hotel reservations and the stats on the propensity of same day bookings via the mobile channel were brought up frequently.
While much is made of the day-of booking propensity of mobile, Pegasus noted that the booking window for leisure travel is actually growing, per the latest Pegasus View report.
Of course much of what happens at an individual hotel depends a lot upon the type of property and the local market dynamics.
Expedia’s Mercer noted that they have apps in 85 countries for Hotels.com and cover more languages, currencies than any other hotel chain.
This is clearly something that smaller hotel chains and independants can’t do and is part of the value Expedia hopes to provide to its customers.
She added that perhaps the large chains have the potential to marshal the resources to do it, it’s very hard to do, and proven out that few have even come close.
Meanwhile, a very interesting snippet from Wyndham’s Gaston: the company is focusing its mobile strategy on curating content to people who are on the road, as much of the business was already from so-called “drive-up” customers.
So while everyone else is focusing on stats regarding day of bookings, Wyndham is measuring the broader impact of mobile.
For every booking on the mobile site, the chain is seeing seven bookings resulting from click to call from either their app or mobile web site.
Kudos to them for remembering that the phone is still a phone and designing the app to make it easy for mobile to be tightly integrated into the call center operations and not simply rely on mobile as a self-service channel.
Correlating Wyndham’s experience, Pegasus noted an increase in voice bookings and attributed it in part to mobile. This of course has created a bit of a scramble for some hotels that call volumes up, who may have reduced their call center size.
Pegasus’ Millili noted that one in five mobile bookings through the system are coming from the iPad.
So, lots of talk around how hotel distribution is being influenced by mobile, the entry of some interesting new players, and the emergence of the same-day booking model…
But anything fundamentally going to blow the socks of the existing distribution landscape? Not just yet.
NB: Hotel keyboard image via Shutterstock.
Glenn Gruber is a contributing Node to Tnooz and senior mobility strategist at Propelics, an enterprise mobile strategy firm.
Previously Glenn was AVP travel technologies at Ness Technologies, responsible for developing the company’s strategy and solutions for the travel industry.
Prior to Ness he held leadership roles at Symphony Services, Kyocera and Israeli startups Power Paper Ltd and Golden Screens Interactive Technologies.
He also writes a personal blog, Software Industry Insights.