Independent Hotels Must Defend Their Inventory

A hotel’s inventory is its lifeblood. As the digital world becomes a more important part of the circulation of that inventory, dozens, even hundreds of technology solutions have been built to help hotels promote and sell their inventory.

There are two broad segments of companies that help hotels sell their inventory online:

  1. Firstly, there are technology providers that help hotels drive direct bookings. This is a highly competitive and highly fragmented industry, comprised mainly of small- to mid-sized companies and a few big players. This competition leads to innovation, competitive pricing and differentiated products, all of which benefit hoteliers. Technology companies in this sector range from internet booking engine providers to PMS systems, channel managers, digital marketing solutions, rate checker tools, data analysis tools and much more.
  1. The other major arena for driving online bookings is inhabited by online travel agencies (OTAs) and other third-party booking sites. OTAs have beenaggressively consolidating over the past few years, and at this point there are only 2 major players in the market: Expedia and Priceline. You can find a non-exhaustive list of OTAs here. While the massive size of these companies allows them to put enormous funding into research & development and marketing, it also allows them to take a highly privileged stance in their relationships with hotels. This can meanhigh commission rates, rate parity clauses and little room for hotels to negotiate.

Of course, all of these providers want their fair share for helping hotels sell rooms. However, there are some technology providers who would prefer to take control over the distribution process altogether – direct bookings and third-party bookings alike.

OTAs have begun acquiring and offering their own booking technologies to hotels, and they are marketing these aggressively. These systems include internet booking engines, rate comparison tools and even websites, all provided by the OTAs.

Priceline is selling this technology via BookingSuite, a company owned by Priceline that sells websites and booking engines for hotels, along with revenue management services.  BookingSuite is offering hotels a “free” site under the condition that all bookings through it will be charged a 10% commission.

Meanwhile, Expedia-owned Trivago has recently acquired Base7Booking, which is a cloud-based PMS system.

Why is this happening? What do these systems have to offer OTAs, who already make high margins through their usual products? Is it simply a new revenue stream (with lower profit margins), or are other motivations in play?

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