hotel keyboard
662 days ago
 

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”.

The panel, moderated by Kalibri Labs’ Cindy Estis Green and Open Travel Alliance CEO Valyn Perini, featured some key industry figures:

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

About the Writer :: Glenn Gruber

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

 

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  1. Open Travel Exchange seeks to wrap up distribution for small hotels and hostels | GT Trends, We're Going Places

    [...] addition, if you agree that the hotel distribution landscape is due for a shake-up then there are already a few players, albeit with slightly different angles, grappling for [...]

     
  2. Tim Gunstone

    Glenn, Hoteliers are selling their rooms via Air BnB. That makes it a distribution channel.

     
    • Stan

      Do you think Airbnb and Wimdu or Homeaway will become the new Expedia and Booking.com’s of this world and if so do you believe they will only move to new type of accommodations (hotels, resorts, etc.), but also to flights and may be even packaging? Curious to know what your opinions are on the future next steps !!!!

       
      • Steve Reynolds

        Stan – there is potential for new entrants to capture share from the big boys but it will be difficult for new entrants to make a major dent in the market share for the larger logo’s (Priceline, Hotels.com, etc.) without having access to significant amounts of capital for sales and marketing/Google, inventory/rates/content/services that are somewhat unique, and/or the support from the hotel community in general. If all those things happen (which many of them have), new entrants (such as HomeAway and Wimdu) have the potential to replace a major distributor (if they aren’t acquired first).

         
  3. Des changements pour la distribution en ligne dans l’hôtellerie ? Pas vraiment… « Blog Hôtellerie Tourisme Pro

    [...] vous invite à consulter un article en anglais sur le site http://www.tnooz.com intitulé : “What is new in hotel distribution? Not a lot actually”. par Glenn [...]

     
  4. Masha Polshinskaya

    re-Wyndham Hotel Group’s VP of ecommerce, Gareth Gaston:
    He said that over the past year and a half, they haveinvested over $150 million in new technologies and thoroughly built up the company’s e-Commerce team.
    For the Accor group, e-commerce now accounts for 26% of total turnover, and that figure is growing by around 25% per year.
    I asked these two leading hotel groups for an insight into current top-level e-commerce and distribution strategies. Look forward to your comments:
    http://www.cleverdis-pdfdownloads.com/flipbooks/HOTEL_WW/2012/june/

     
  5. Ryan C Haynes -

    True there was little new here this year, but I found conversations had moved on from last year and it is about solving the existing problems, not creating new ones. I think we will start to see hotels kick back and not try to move at the same speed as innovative companies (who are making money from them anyway), but hotels will be putting more pressure on themselves to start to make their money back.

     
  6. Tim Gunstone

    Whilst the legalities are still being worked out the likes of Wimdu and AirBnb are offering a very viable alternative to Hotels and growing their market share.

    Ignoring that is a bit silly.

    It could be argued that the way the Air bnb hosts engage with their guests to build trust could be the key.

    I know several small hoteliers that now use the system as a cheaper way to engage with and sell their product.

     
    • Glenn Gruber

      Tim, I never said anything about ignoring AirBnb, Wimdu or any others. I’m actually staying in a Homeaway apartment in Barcelona as I type this. But while these types of alternatives are surely something that hoteliers need to be concerned about, it’s not actually hotel distribution. It is hotel competition. The real question in this regard is whether or not hotels can match the new value equation that many consumers are searching for. So on that point I agree with you.

       
      • Matt Zito

        Glenn, nice article and thanks for sharing. I own a vacation home on the coast of Maine and rent the home on both AirBNB and Homeaway. I believe shortly that hotels will be distributing via AirBNB. This is obviously in the pipeline for AirBNB and its next phase.

         
  7. Velit Dundar

    The hotel distribution landscape has been stagnant over the last decade. However this does not mean that it will not change or will continue with the same phase. We are seeing a lot of players in the travel landscape disappearing or losing significant market share over night as a result of not keeping up with the changes. Let not forget new entrances to the market place.

    Consumers prefer OTAs because they can get best prices, more tailored information based on their searches and higher visibility across multiple sources. Hoteliers failed keep up with the changes in the consumers’ search behaviours, development in the search technologies and maintaining consistency across channels from a pricing as well as inventory standpoints.

    For example, over the last 12 months we witnessed a major uplift in the mobile searches. Today nearly 20% of all searches occur via mobile devices and tablets –for some of our hotel clients it goes up to 30%. This is a major shift in the market dynamics. The question is what the hoteliers are doing about it? Are they ready for such a massive change? How they will adapt?

    I do expect major changes in the hotel distribution within the next 5 years. In order for the hoteliers to benefit they need to make sure they innovate as much as OTAs, invest more in their direct channel and maintain consistency across all channels. Hoteliers also should look at the bigger picture and pay attention to the attribution across channels. This is the only way a hotelier can take their direct revenue to a new level and reduce reliance on OTAs.

     
  8. Tim Gunstone

    I would say 0 to10,000,000 room nights in 5 years by a new distribution model is significant http://www.airbnb.co.uk/info/ten_million

     
    • Glenn Gruber

      Tim, AirBnb is an alternative to hotels, not hotel distribution. And many might suggest that at least a significant portion of the inventory they do provide is being offered by owners illegally relative to local laws and leases.

       
  9. Martin

    Some comments…

    a. About GHX model, if you’re making the customer pay all you need to do is reduce the price by that amount (or maybe a little more) and you’ve got an edge on all other OTAs. Then who pays the fee is really a minor issue. And suddenly you’re cheaper than OTAs for users, and more profit than OTAs for Hotels. The real question with these sites isn’t their financial model but how they will advertise and get customers to use their service.

    b. Hotels negotiate with OTAs? Chains do but independent hotels don’t. But it’s a great idea. Imagine being able to negotiate the terms, such as no brandjacking, no alotments or even the commission. Imagine it would be a partnership relation. Expedia learned the hard way that to keep the hotels they need to get on the hotel’s side and work with them. After loosing lots of customers to Booking they’re finally getting some back.

    c. Hotels need OTAs and OTAs need hotels. There is no war, the problem isn’t that OTAs exist. The problem is internal in hotels when they are selling 70% through OTAs they need to rework their distribution strategy. But I don’t think anyone can picture a world without OTAs.

     
  10. Jeff

    I think bigger news is how the vacation rental industry is taking some bites out of the hotel market. HomeAway leading the charge, but more and more people are considering a rental property versus a hotel….in many destinations.

     
  11. Erin

    Steve, really? The hotel industry is kind of stuck from a distribution standpoint until hotel cos and OTAs can un-knot their relationship. Right now, it seems like a race to the bottom and that’s not particularly interesting.

    The real action is in other travel industries, like tours and activities, and even airlines, where airlines and GDS’ are actively trying to re-create their business models and relationships.

     
    • Eric Thomas

      I would have to agree with this statement, it seems that everyone is trying to improve upon a distribution model based solely on price, and that is a downward spiral. There is no justification from any distributor that will make a client pay 50 cents more for the same room available anywhere else for less. The reason Ryanairs traffic is up, is because they already established themselves as a price leader in the air sector, and the psyche of the buyer is convinced that pricing is cheaper.

      The traffic is already captured.

      Walmart does this by carefully placing cheap prices at the entrance of their stores, and price other products accordingly giving the appearance of cheaper prices overall.

      The OTA’s will always have the opportunity to either mimic or improve upon pricing as long as they can capture traffic due to air sales. Most people search for air first then add hotel and attractions to their vacations.

       
  12. Steve Reynolds

    While I somewhat agree with Glen that hotel distribution has slowed over the past year or so, I do believe that there is significant innovation relative to other markets. If you compare hotel to airline or car distribution, the segment is far more innovative with the appearance of new entrants on a regular basis. Innovation is somewhat relative and I’d much rather be in the hotel space than in just about any other segment in travel. Its where the action is.

     
  13. Oz Har Adir

    Two things I’m missing here:
    1. The elephant in the room that is Booking.com is never mentioned. Booking is doing to travel what Apple does to technology, but the media/speakers are able to ignore that most of the time.
    2. Room Key’s traffic can be put into different perspective if we consider that Ryanairhotels.com, launched 3 months later, already has double the traffic: http://trends.google.com/websites?q=roomkey.com%2C+ryanairhotels.com&geo=all&date=all&sort=0

     
    • Martin

      Booking.com should send some speakers out, try to get an official statement from them. They refuse all comments. But comparing them to Apple… that’s a bit much. Booking is advertising on hotel’s names and capturing all the hotel’s direct traffic as their main marketing strategy. That’s also known as cannibalizing the market. Apple actually improved products to make them better and increased the market size.

       
    • Glenn Gruber

      Oz, Booking.com (who i used to book my room in Granada this week) was not included in the article simply because they were not on the panel, as Martin surmised. The article was supposed to be less about specific companies and more about general trends. Those who I spoke to at the show were included.

       
 
 

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