New strings and attachments

Surviving on your own has always been and will always be difficult, but being an Independent hotel has never been as easy as it is today. Before the rise of technology and technological companies, only hotels that belonged to big multinational hotel chains were sure of survival in the uniquely seasonal hospitality industry.

Hotels belonging to multinational chains benefitted from their distribution network, brand awareness and technological solutions. Independent hotels on the other hand relied heavily on third parties such as agencies for customers, but suffered from the lack of individual reach. This caused several independent hotels to merge with bigger players in order to survive. In the recent years companies serving independent hotels and small chains have flourished and given them more power and chance of survival in the market. Some of these companies started out as small tech companies and grew into powerful OTA’s and others started out as rivals but saw an business opportunity by using their know how’s in order help the smaller players in the market such as

Expedia Group, Inc., and TripAdvisor are some of the biggest players that levelled out the odds between independent hotels and chains. As these companies keep on developing and stepping into new businesses they continue to change the game as we know it.

The world travel platform Expedia, which debuted as in 1996 has continued to empower people around the world and change the travel industry. As they grow and the world changes they discover new business opportunities and in September 2016 the world travel platform of online travel brands stepped in to a new business, as they officially launched Rev+. A revenue management tool designed to provide hotel partners with smart, actionable data and insights, aiming to help hotels to manage their properties and rates.

TripAdvisor, founded in 2000 with the mission to help travelers around the world plan and book the perfect trip, has not only swore to their mission but also stepped into new businesses. In 2015 TripAdvisor transitioned into a booking site, making the hotels visible also bookable. Due to a difficult transition from metasearch channel to booking channel the platform emphasised on partnerships and navigated consumers to book via their partners.

The reach that comes with collaborating with these companies, which provides hotels higher occupancy rates, comes with a cost. A commision cost, which is so high that competitors are helping each other in order to decrease the bargaining power of OTAs. In June 2015, Accor opened their online bookings site for independent hotels to load their inventory, a very bold move of the hotel chain, which are also relying on OTAs in order to sell their rooms.
It is no secret that direct bookings and loyal customers will increase profit but close to no hotel is able to only use their own channels in order to reach their revenue targets, and Accor hotels are no different. This is caused by the fact that many customers are not interested in being loyal to a company and prefer convenience and price. Making business such as Expedia group, and TripAdvisor very important for hotels.

From direct bookings to business analysis

The strategy behind was to offer the chosen hotels a platform with lower commissions than OTA’s, in an effort to reduce OTAs’ bargaining power and encourage more direct bookings. Traditionally direct bookings were the fastest and the most famous way for hotels to increase profit but as the industry develops new and more efficient ways have been created. Where Hotels that have invested in analysing and understanding its distribution system, the market trends and potential and historical data, are the ones that have been able to significantly cut cost and increase profits.

In addition companies specialised in Revenue Management have in the recent years been booming through their quest to help hotels. Revenue Management Systems (RMS) were created in order to help hotels to maximise their revenue potential. RMS companies target distinct hotels, depending on the complexity and price of their system. Some offer solutions for large hotels with sophisticated revenue strategies and extensive know-how on how to use complex Revenue management systems. Others offer solutions for hotels that are just starting to work on developing a Revenue strategy and need a simple, user-friendly system.

Most of these systems are not specifically recommending prices to those segment that buy in volumes, which tend to be discounted aggressively, such as rooms sold to the segment “Group”. What most of them are doing is using the market trends and opportunities and the hotels historical data to create pick-up and forecast reports, as well as recommend prices in order to maximise revenue coming from the segments, which buy in relatively low volumes but that generate a high contribution margins. The combination of the reporting that these systems can do and the dynamic pricing recommendation they can give are helping hotels to take advantage of the real opportunities that sellers in all companies across industries have been struggling with, namely finding ways to connect products sold in high volume at low price and products sold at low volume at high price.

To conclude

The world is changing and it is only collaboration ahead. The hospitality industry is getting more dynamic and technological everyday and hotels need to embrace the changes in order to compete. Tools created to help are out there so do not fall into the trap of being too busy to notice that the world is changing around you, as that might just be the reason for your downfall.

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Pedro Velhinho

Pedro Velhinho

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