Hotel Distribution Focus Forces Sector Shift
Hotel companies were considering moving to a model where owners pay for business delivered, delegates at this year’s Hotel Distribution Event in London heard.
The shift puts the role of the global branded groups under ever-closer scrutiny, as the cost of distribution informed owners’ choices.
Peter O’Connor, professor of information systems, ESSEC Business School, said: “Do hotel companies know what they’re doing? Are they sleek professionals or are they about to drown in a sea of change? Hotels can’t carry on charging 12% of the top line. They need to evolve. They will put less emphasis on brand and more on the distribution. Two companies are looking at business delivered instead. “Hotels are working with a model which is going out of date.”
O’Connor pointed to over 700 brands in the hotel sector, which he described as a “problem” because “it’s becoming very difficult to identify them”, pointing to less than one third of people searching for a hotel search for a brand on Google and less than 1% of people on Expedia filtering by brand. He added: “You may be benefiting from lower OTA fees with a brand, but you have to factor the brand fees in as well.”
If you have a branded hotel you tend to have higher occupancy but lower ADR
Coming to the defence of the brands was James Wheatcroft, VP marketing, Northern Europe, Accor, who told the assembled: “The leverage of a bigger brands means that we can drive business. In an asset-light world our job is to drive volume and the role of loyalty is key.”
O’Connor was sceptical of loyalty programmes, commenting: “If you give people a 6% discount for joining their loyalty programme, of course they’re going to book direct, but instead of pulling back business from OTAs, it’s cannibalising the direct bookings which weren’t online.” He added: “As you do more transactions, they are learning more about you. It’s that interaction with the customer which makes reward programmes more interesting.”
Providing nuance to the brands were the third-party operators, with Neetu Mistry, commercial director, Cycas Hospitality, commenting: “When the brand provide the marketing services, it’s brand led. But if you’re a unique hotel where the farm down the road is a USP, that’s lost. With a third-party operator, you can get the reach and coverage as well as the selling point.”