February 13, 2013

Hotels - can we reach a 0% commission for hotels?

The last 5 years in the Gulf have brought a massive domination of Online Hotel Distribution players (Expedia.com, Booking.com, Lastminute.com, HRS, Agoda, Priceline...) over all types of hotels.

Those distribution players have setup their rules without worrying about the satisfaction and profitability for the hotels. Results hoteliers are totally dependent to those distribution channels, and don't really know how to do different.

The situation is becoming even worse with online players such as Expedia, TUI or GTA that consolidate / lock the market by buying all the smaller (Expedia + Hotels.com + Hotwire, Venere, while TUI with Laterooms.com + Hotelbeds + Hotelopia...).

Let's face it the traditional online travel agencies giant, have manipulated the hoteliers with their 15-25% commission per room night, because they hijacked the hotel brands (silly 4-5 pages hotel contract), and spent money on Search Engine Optimization, CRM, and Traffic Analyst, at a time where no one knew what "keywords" and "analytics" meant; healthy business models that brought billions of dollars, but erode the profitability of so many hotels, because it is not the hotel who own the client, but the client is loyal to its distribution online travel agencies.

When I see some General Managers that are happy to cut a check on USD 100,000 on a monthly basis for an O.T.A, I think something is wrong. On short term it might bring cash flow, but on a long run your clients is like the O.T.A brand, and your hotel become secondary choice.

Last year, I saw some positive news with the emerging new trends on online distribution with launch of GHX Treovi, roomkey and room77.

The "Direct Connect" Hotel Version
Technology providers such as Availpro, I-Hotelier, Synxis, Fastbooking, ResNet propose to offer booking engines turnkey where hotelier can integrate in their websites. In addition other meta-engines open their programs to independent hoteliers (Trip Advisor business listing, link to official websites of the hotel...). This is very promising for independent hoteliers and cleanses the market by offering an anlternative or additional online distribution agencies.

Thus the online platform Roomkey is a new marketplace that s born through the joint venture of six hotels chains (Choice Hotels International, Hilton Worldwide, Hyatt International, Intercontinental Hotels Group, Marriott International and Wyndham Hotel). This model is not new, attempt were made in 2002 (Travelweb). However the context seems to be more promising those days  and the site is good leverage to negotiate with online agencies.

Models without Commission
In the new platform, that emerge we can talk about Treovi and Global Hotel Exchange. Both starts ups have similar approach, as they offer marketplaces without commission or fees. Finally some websites that are positioned to the hoteliers side. There are no commissions, and it is the end user who will pay the fees.

GHX bill the customer USD 2.99 per booking. The amount is relative small and the practice is doing well in North America as the booking fee is well practice. In the early days of Expedia, Expedia use to charge a booking fee too.

Treovi is much more avant guarde and rely on the big data, customization and additional sales to support his model.

Other websites with niche target market
Room 77, which recently saw Expedia gaining a percentage of their shares, is a site that allows travelers to choose the location of his room in the hotel. Its implementation is brand new and require technological developments and it looking to be awesome when well established.

This new entrant will put a lot of pressure on existing infrastructure and will lead to great improvements, and might just be a new direction for yield management.

To ensure that those new entrants are working well, they need support of smart hoteliers, who are tired paying huge amounts of commissions to online travel agencies, that contribute to affect their brand experience.


RSVP Hospitality Team

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