BERLIN—For all its complexity, the distribution game comes down to one simple factor: value. If a channel doesn’t offer value, then hoteliers shouldn’t use that channel to yield inventory, concluded a panel comprising a diverse array of representatives in the field.
Andrew Rubinacci, the lone hotel voice speaking Wednesday morning during a general session at the International Hotel Investment Forum, said online-travel agencies have proved to add such value, despite their bad rap in the hotel industry.
As VP of distribution and intermediary sales for InterContinental Hotels Group, Rubinacci said he’s always careful to evaluate each channel with which the chain partners. And OTAs such as Expedia have proved to be viable distribution platforms, he said.
The key, said Cyril Ranque, senior VP of global lodging for Expedia, is for hoteliers to view each third-party distributor as an individual piece in the overall pie. One OTA does not a good channel mix make, he said, adding “OTAs bring great complementary business.”
One channel that doesn’t offer any value, whether complementary or core, is Groupon, Rubinacci said. The service, which offers highly discounted products only after a certain number of consumers have committed to purchasing, drives deep discounts with high margins. Even worse, studies have shown that Groupon and its peers do not attract repeat business, Rubinacci said.
Ait Voncke, managing director of Groupon Travel France, however, countered with three distinct value propositions.
First, he said Groupon provides an enormous communication channel. In France alone, the service reaches 12 million subscribers. Second, Voncke said Groupon provides an outlet to previous untapped market segments. A hotelier in France, for example could target mid-tier travelers in Germany with a tailored offering. And third, Groupon is an upsell channel that sells experiences, not just rooms.
If nothing else, Groupon captures end-to-end information on its subscribers that allows hoteliers to understand and target potential guests like never before.
Such “data mining,” or the collection of online user patterns and purchase histories, has come under criticism of late as an invasive business practice that violates the trust of consumers. But Nigel Huddleston, industry head of Google U.K.’s travel division said the search-engine giant is very clear about what they track and allows users to suspend the service.
Not that data mining is a bad thing, he clarified.
“We’re using that information … to help benefit the user and for those of us trying to sell hotel rooms,” he said. Right now the average consumer visits 23 websites before making an online booking. Google travel hopes to refine that process to help travelers find what they’re looking for earlier in the search process. An extension of that aim? Help hoteliers increase online conversions, he said.
One of the most striking trends in the distribution space is the prevalence of last-minute bookings, the panelists agreed. As case in point, Ranque said 70% of mobile bookings made on Hotels.com happen on the same day.
That’s a disturbing trend for hoteliers, IHG’s Rubinacci said, especially if hoteliers use discounts as a means to unload room inventory on the day of arrival.
“Discounting anything is really cheap marketing. It’s not a good way to increase your brand value to increase your profitability,” he said.
But Ranque was quick to clarify that “last minute” and “discounting” are not synonymous. OTAs offer a platform for hoteliers to market their product. Issues of pricing and discounting are completely hoteliers’ calls.
But to ignore the trend would be misguided, he said.
“Customers book when they really want,” Ranque said. “… It’s just being realistic about what consumers do.”
Google is using that same understanding to develop its Hotel Finder application, which allows consumers to shop rooms based on price and geography. When asked whether the platform gives an unfair advantage to OTAs and major chains, Huddleston admitted the launch was decidedly skewed in that direction. Google needed a large investment from a limited number of players to get Hotel Finder off the ground, he said.
Since then, the company is focused on expanding the service to smaller and regional players so the service becomes as comprehensive as possible, Huddleston said.
RoomKey.com a waste of space?
Panel moderator Peter O’Connor, professor at the Essec Business School, didn’t mince words when asking Rubinacci about RoomKey.com, a hotel search engine launched and supplied by the world’s biggest hotel chains.
“Is it a waste of space?” he asked.
“It’s another opportunity to attract customers,” Rubinacci said. IHG can’t meet every traveler’s needs, so the company along with five other chains launched RoomKey.com in an attempt to provide a greater level of choice to consumers.
“It’s just another piece of the distribution puzzle,” he said.
The fact that RoomKey.com leads users to book property direct was a smart and appropriate play, Huddleston said, adding he was interested to see whether the platform will find lasting success.
Expedia’s Ranque, for one, was unconvinced.
“We know it’s very hard through Internet marketing to generate demand,” he said, adding the tasking requires tremendous knowledge and even more marketing dollars. “… We wish them good luck, but we know it’s hard.”