I attended the NYU International Hospitality Industry Investment Conference a few months ago. There was quite a lot of buzz in the hallways as deals were being made with an abundance of enthusiasm permeating the event.
It was great to see and stood in stark contrast to last year’s event where the opposite sentiment reigned supreme and banks’ wallets were the equivalent of a clenched fist. Jonathan Tisch, a true leader and icon of the industry and chairman of Loews Hotels, mentioned the important initiatives underway to stimulate more international travel to the U.S. and rightly commented that our lagging infrastructure poses a great threat to our future ability to attract more travelers. Hopefully, the government impasse will not prevent us from unblocking the one non-outsourceable product and leading export in the U.S.: tourism!
If we can fix the infrastructure, then booking travel will be more rampant among eager travelers. Cindy Estis Green of Kalibri Labs spoke about some very interesting back-channel activities that will greatly affect the hotel industry, as well. There is a remarkable battle taking place among online giants to disintermediate the online-travel agencies and become an even bigger player in the hotel/travel vertical. Let’s name the behemoths:
These new distribution channels will shift the major cost of hotel distribution from the OTAs and third-party resellers and show up in various searches and geo-targeted mobile algorithms.
In the short term, if Google and Apple launch their apps while OTAs still have popular traction among consumers, this will add to the hotel cost scheme because the hotels will experience both a cost for media and for the OTAs. Over time, the OTAs will become less and less important as people will go from search in Google or Apple to directly booking on brand.com or one that is supported by brand.com such as Roomkey.com.
Ironically, the much maligned Roomkey.com may become the white label back-end supplier for inventory to these players that will need an interface. I asked the question why the hotel industry does not just follow the lead of Southwest Airlines who refuses to allocate to the OTAs. If the industry pulled out, then wouldn’t it eviscerate the OTAs while at the same time allow the industry to take back its customers relationships and lowest rate functionalities? I know it is much more complicated than this, but it seems this latest battle of giants fighting over the hotel’s room inventory is reminiscent of the way the OTAs siphoned off billions of dollars in revenue and valuation.
In 2004, InterContinental Hotels Group cut its connection with Expedia, but no one else followed. Perhaps the overall understanding of OTAs’ impact was not fully known at that time. IHG reported no major negative consequences as a result of the disconnect, but they have re-engaged a partnership since that time. I also hear Expedia might be exiting the discount travel game in what one can only assume is a prescience about the future.
As someone who has been directly involved in various aspects of this industry for the past 25 years, it will be very interesting to see how this scenario plays out for domestic hoteliers and travel partners.
Gavin Landry is a 25-year veteran of the industry. He is a graduate of Cornell University’s School of Hotel and Restaurant Administration and Principal of Landry Hospitality Consulting Services, L.L.C.; a full-service hospitality consulting practice specializing in hotel development and existing hotel cost and revenue improvement programs. He is an Adjunct Professor at NYU’s Preston Robert Tisch Center for Hospitality, Tourism and Sports Management teaching graduate level courses on Tourism Policy Analysis, Tourism Planning, Tourism Product Development and Tourism Principles and Planning. LHCS offers a complimentary financial analysis for hotel properties that want to find new revenues and improve their operating income.
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