Things got a bit testy Wednesday during my panel at the Hotel Data Conference.
I was nearing the end of “The price is right? Maybe: A candid discussion about revenue management,” when a member of the audience raised his hand for what I naturally assumed would be a question. The response was much closer to a diatribe.
“I’m so frustrated,” the man began, before delving into an impassioned rant about online travel agencies destroying the hotel industry. His biggest complaint, among many, was that the likes of Expedia are charging too high of margins. There aren’t any profits left over for owners like himself, and at the current pace, there won’t be any profits left for the industry in general.
(I’m summarizing here. His actual comments lasted closer to five minutes. I was anxiously watching the clock.)
This isn’t the first time I’ve heard this viewpoint. The sentiment’s been expressed by countless owners and sources throughout my years of reporting on the hotel industry.
And while many are correct in that OTAs charge too high of margins—Randy Smith, STR’s co-founder, said as much during a session later in the day—the viewpoint that they’re single-handedly responsible for every ill of the industry is as frustratingly misguided as it is downright false.
Three quick points on the subject:
1) First, let’s keep it in context. The OTAs are but a mere fragment of the overall landscape of the hotel industry. There are other factors at play here—macroeconomic uncertainty, supply and demand, shifting traveler habits—that contribute to operating environment. To place all blame on a single distribution channel is scapegoating at its finest.
2) Even if you limit your scope to the distribution landscape itself, OTAs still are not the dominant player. As past research has shown, these third-party intermediaries account for only 10.7% of total demand to the U.S. hotel industry.
It’s something we talk about a lot during our everyday reporting at HotelNewsNow.com: OTAs contribute only 10% of demand, and yet it seems like they take up 90% of the spotlight—a phenomenon fueled by the ill-informed mindset on display during my panel.
3) This point is the most important: No one—not a single hotelier, brand or management company—is required to give a single room to Expedia, Priceline or any other OTA. Ultimately, that decision is up to you. Remember that.
Of course, I’m not a full-service hotelier in a secondary market struggling to hit 50% occupancy, so it’s easy for me to type that. But the point remains: OTAs are but a single tool in your distribution belt. Use it wisely and only after assessing the most profitable mix for your particular property.
I tried to emphasize this point during my panel, and I’d say the vast majority of attendees responded favorably, nodding their heads in agreement.
Which led to the natural follow-up question: “Given the importance of ascertaining that right mix of business driven across multiple, emerging channels, are revenue managers now required to be experts in distribution?”
My panel, led by Greg Cross at Hyatt Hotels Corporation and Brian Berry at Host Hotels & Resorts, said emphatically, “yes.”
Most of you know this and have been diving into the field head on for some time now. For those of you still trying to find your bearings, on Thursday we just launched our Technology Impact Report, which, among other topics, will delve deeper into the nitty gritty of distribution best practices. The goal (and tagline) is to drive hotel demand through digital innovation.
Subscribers to our free Daily Update newsletter received the first copy of the Impact Report yesterday. For those of you who are interested, simply log in to your free HotelNewsNow.com user account, go to the newsletter preference tab and click the Technology Impact Report to sign up. The newsletter goes out the first Thursday of each month. We hope you find it as insightful as we had intended it to be.
And now on to the usual goodies …
Stat of the week
53 cents: Difference in inflation-adjusted real ADR in 1987 ($52.32) and inflation-adjusted real ADR in 2011 ($51.79) for the U.S. hotel industry. It was a somewhat sobering statistic shared by Randy Smith during a breakout session at the Hotel Data Conference. For all the industry’s advances and struggles, we’ve made virtually zero notable progress in our ability to push rate.
Quote of the week
“Companies out there have plenty of cash. There’s tons of cash floating around. There’s billions of dollars with a lot of the companies out there. They’re not spending it, so private investment is shrinking. … Those are issues that really concern us. Without further private investment … that’s why we’re concerned about where demand goes from this point.”
—Randy Smith, co-founder of STR, talking about a potential leveling off of demand during a breakout session at the Hotel Data Conference.
As you can tell from this quote and the stat above, Randy had a lot of fascinating insights during the breakout, many of which came from never-before-seen slides and bits of data. I plan to cover them all in an article slated for Monday.
Comment of the week
“It's also a perfect device to collect feedback from your guests, or other activities during stay. Was missing this in the article.”
—Commenter “Olery” pointing out another benefit of dedicated tablet booking platforms for hotels.
Email Patrick Mayock or find him on Twitter.
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