Hotel CEOs: Get tough on OTAs
06 MARCH 2014 10:18 AM
Hoteliers must claw back the ground they lost to online travel agencies, according to a panel of global CEOs during the International Hotel Investment Forum.
BERLIN—Hoteliers, led by the biggest brands, must get tough on online travel agencies, according to a panel of CEOs during the 17th International Hotel Investment Forum in Berlin.
Sébastien Bazin, who was named chairman and CEO of Accor last August, was the most vocal. Buoyed by his recent decision to split the company into two business units, he said Accor is now able to regain ground from the OTAs.
“Reclaiming that space is about measurement, risk and pricing that service. OTAs are a great innovation, but if you are big enough, and Accor is, you have to control your destinations,” Bazin said during a general session titled “The world according to the global CEOs.”
Accor, he added, opens an Ibis hotel every three days and a new Accor hotel of any brand every two days.
“Six (hotel companies) control 70% of the market, but none has really been active in the last decade. Did we do anything about TripAdvisor? No. Did we do anything about the rise of OTAs? No.
Michael Glennie, president and COO of FRHI Hotels & Resorts, which plans to increase its portfolio by 50% in the next four to six years, said that while on the whole the industry welcomes OTA business, it must be more efficient in driving bookings through its own channels.
“The OTAs merely say, ‘more’ (and) fool you if you cannot convert customers into return customers,” he added.
Club Méditerranée, an all-inclusive vacation provider with one brand, is different to the other panelists’ companies, said its chairman and CEO Henri Giscard d’Estaing. The group is in the business of creating destinations, and he said 60% of customers come to the company directly.
The company is involved in a Chinese bid to be ruled upon in the French courts in the next month.
More concern on the panel came from a fear that major brands are losing customer control and loyalty, especially among younger travelers.
“It is important to differentiate revenue management and social media to extract market share, especially as demand will not see a huge rise,” said Jim Abrahamson, president and CEO of Interstate Hotels & Resorts, who added that the boutique space would remain the market’s hottest segment.
Bazin said the leisure industry had much to learn from the mobile phone and telecommunications industry, especially the way it used capital to not only defend what it had but also to expand—that is, defense investment and offense investment.
“They effectively made strategic partnerships,” he added, before asking out loud whether the hotel industry should be doing more of that itself.
“To compete effectively, we have to make more (of that type of) bet. But make that bet! Even if it might be the wrong one,” Bazin said.
Hoteliers should focus on their mobile channels as well, even in the luxury segment, Glennie said.
“Facilitating customers’ website experiences is where we’re spending money. But how do we prioritize, and who’s going to invest in that?” he asked.
Investors and customers
Controlling destinies and securing growth will derive from being accountable, reorganizing, partnering with the right investors and innovating, the panelists said.
“We were conducting two businesses that required different skill sets and different measurement criteria. That complicated things such as distribution. My thinking was, why give these opportunities to other people when we can do it ourselves?” Bazin said of Accor’s split into separate ownership and operations business units.
“The process will take two to three years, and it is important to be transparent. All the numbers will be available. The numbers for what is now the (ownership and investment) side of the business were pretty bad. We knew that,” Bazin said.
“Concentrate on finding investors the right brands, ones with positive revenue per available room and little need for capital expenditure,” Abrahamson said. “As far as the customer is concerned, success will come from service and personalization.”
“Why should we leave (all the success) to Blackstone, Colony Capital and Starwood Capital? I’m a true believer that Accor can fix it. In Accor, there will be no new leases until we have figured what we have done wrongly or rightly. This, of course, will limit us in some markets such as Germany,” Bazin said.
“Two-thirds of our operating profit comes from Asia, with more than 100,000 guests from China, who spend 20% more in rate than the sector’s average,” Giscard D’Estaing said. “The Chinese are now traveling farther than Southeast Asia, and they like all-inclusive. They were simply traveling, but now they are (vacationing).”