Smaller players see value of teamwork in distribution
 
Smaller players see value of teamwork in distribution
14 OCTOBER 2019 7:49 AM

Recent developments in the distribution space, such as Marriott’s deal with Expedia, require small chains and third-party management companies to be nimbler and more focused.

LONDON—Third-party management firms, independents and small hotel chains are requiring every employee to understand the complex world of today’s distribution as they carve their niche in the industry and battle online travel agencies’ more sizable spend and reach, according to sources.

Speaking at the recent Hotel Distribution Event, on a panel titled “Sitting between brand and owner,” Margerie Suon, senior associate at Hamilton Hotel Partners, said everyone has to be involved in distribution, either through a general awareness or a more involved role.

“It is about managing your final income and navigating between owners and brands, and about having that wider visibility to the wider market where we operate without a brand,” Suon said.

Andreas Erben, founder and managing director of German hotel brand Gorgeous Smiling Hotels, said that even with the right location, property and size, decision-makers need to be engaged to make success happen.

That requires common sense in hiring and adopting technology, panelists said.

“Have the best expertise for every scenario, which will drive the best returns, and that is why over the last five to seven years we’ve seen the growth of the third-party management companies,” said Neetu Mistry, commercial director at Cycas Hospitality.

“Work with the tools you have and work together,” added Alex Mavridis, COO of Hotel Solutions Partnership.

More third-party management companies are handling sales and marketing themselves, panelists said, which is why brand names often are taken off the door.

“Third parties have shown hotel companies a lot of what those hotel companies were not doing.” Mistry said.

Of course, brands still provide marketing, she added.

“That’s brand-led, but if you’re unique and the farm down the road is special to your guests, well, that can be lost. With a third-party operator, though, you can get both,” she said.

Panelists said in some cases it can be difficult to see what value the brands provide.

“Fewer things are included in the base package, and the focus is on the brand. I heard one brand the other day say we are no longer an operator. Obviously, in many cases the assets have gone, which is why some chains need 55 (brands). They say, ‘that is good, and we will not need to do all the other bits,’” Mavridis said.

Challenges and strategies
Small might be nimble, but it often also is weaker.

Mistry said muscles can be flexed by understanding how much you have control of and how much you can manage.

“That arises from signing distribution that allows more reach, but that also can squeeze your inventory,” she said.

To get to the right point, start sensibly and slowly, panelists said.

“Have the strategy right from the start, and then stick at it. Get the basics right. Brands talk about getting the right guest, but I say whoever walks in the door is welcome,” Mavridis said.

Mistry added that “it isn’t one size fits all as regards the type of audience and guest.”

“We want to develop a toolkit of tactics and get the right segmentation mix. Segment the best channels and then perfect optimum onsite delivery,” she said.

Gorgeous Smiling Hotels’ Erben said in Germany things remain “a little bit more old school.”

“Ultimately we sell beds, sleep. Ask yourself how do customers see us? OTAs and meta(search) get too much commission in my view, so we started our loyalty (program in September). It’s expensive, but we do it for our loyal guests, those who stay 10 times, and this is more important than all this detailed thinking about Booking.com and the others,” Erben said.

“We have a more holistic approach, part of an overall frame for what we do,” he added.

OTAs and rogues
Despite all this flexibility, smaller hotel-industry players know they remain in a battle with third-party distribution entities.

Panelists said there are many rogue OTAs that buy cheaply from a wholesaler and sell at a margin.

“It is a consistent challenge. It will not disappear overnight, but Marriott International-Expedia has brought the conversation to the next level,” said Hamilton Hotel Partners’ Suon, referring to the recent deal between the two giants for exclusivity on wholesale and promotional online rates.

“For big operators with best-rate guarantees, yes, it’s a big issue for them,” said Cycas’ Mistry, who added that while overall hotels will benefit from the deal, the distribution landscape remains tricky in regions such as Asia.

“Technology has made the wholesaler model change, and rate parity has had an effect, too,” she said.

Erben said that in Germany the demise of former OTA giants such as HRS, which was subject to one of the first rate-parity court cases, has inevitably left more space for other and more powerful forces.

“Booking.com is on the march,” he said.

Suon said to also be wary of global distribution systems’ plays in the bleeding of direct bookings. According to her numbers, GDS in 2001 accounted for 16% of the market.

“Now it’s 12%, but in this age of larger pools of travelers and more ease of distribution that is still a major share. One of the challenges is that they remain a little opaque; why is it at every single conference OTAs are always a major subject but GDS is not. We ignore them as we do not see them,” she said.

Mistry added that she has “no doubt” practices are occurring that arguably are fraudulent. “Click-baiting is going down, but it still exists as a marketing hook,” she said.

Mavridis said Airbnb, which he no longer considers to be a disruptor, is also muscling in.

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