Fundamental changes to the digital landscape are giving rise to a new breed of travel distribution competitor. Here’s how hoteliers can combat them.
Hotel distribution companies face fundamental disruption as the industry shifts online, digital distribution rapidly evolves—particularly mobile device penetration—and new competitors seek to grab a share of the hotel industry’s margins.
We have been writing about the distribution landscape and challenges facing hotel companies for many years, and believe the next wave of challenges is imminent. The stakes are high and rising for hotels to get their digital distribution right.
How can a hotel company cope? By disrupting itself first and under more favorable terms than a new digital competitor would if in a position of strength.
Hotel companies should honestly assess their strengths and weaknesses to inform their future distribution strategies. In areas of weakness, where differentiation isn’t going to be easy to achieve, hoteliers should form partnerships to defend margins. Where a hotel is strong because of customer relationships, data or capabilities, the company might explore kingmaker opportunities with partners across the distribution landscape.
In mature markets such as the United States and Western Europe, online travel penetration, according to Phocuswright, is around 50%. Outside those regions, online travel penetration is around 20% to 30% but is shifting rapidly, with average growth rates in the last five years as high as 18%.
Third-party online intermediaries deliver almost a quarter of all U.S. roomnights, according to an Oliver Wyman analysis, and each 1% shift from direct channels to commissionable intermediaries (such as online travel agents) will cost the hotel industry about $400 million.
Digital distribution is evolving quickly, with Internet penetration, smartphone subscriptions and social-network use projected to grow dramatically in the next decade.
An Oliver Wyman analysis shows the majority of Internet users are in developing countries, where annual penetration growth of 10% to 20% is expected to continue. Mobile data traffic will increase more than tenfold in the next four years.
One quarter of the global population already belongs to one or more social networks. There are 1.4 connected devices per person today, and that number is expected to reach 6.5 within five years.
A new breed
These fundamental changes to the digital landscape are giving rise to a new breed of travel distribution competitor.
As hoteliers contend with their traditional competitors, new players are seeking roles at the top of the distribution funnel and along the entire customer journey.
These include search and social media companies, such as Google and Facebook; device makers such as Apple, Google and Microsoft; emerging OTA-light models such as TripAdvisor’s Instant Booking product; and large-scale new entrants such as Amazon.
These new players will succeed for three reasons.
Read the full article at: Hotel News Now