As hotels increase their reliance on online channels, will there be room to grow for wholesalers and retailers?
From left: Sean Seah, Norbert Vas and Paul Leung
HOTELS across Asia are experiencing a spurt in bookings through brand websites, OTA and GDSs, all of which are fast eclipsing conventional distribution channels in importance.
Hong Kong’s The Peninsula Hotels director of marketing, Sherona Lau, said: “Compared to five years ago, we’ve seen a 100 per cent jump in online bookings through various sources, including our own website and OTAs.”
Aston International Indonesia vice president sales and marketing, Norbert Vas, said room production from Aston’s website had doubled in the last two years, and now accounts for around 20 per cent of the group’s business.
At Hong Kong-listed Kosmopolito Hotels International, over 30 per cent of total business is currently booked electronically, mostly through OTAs, said senior vice president sales and marketing, Philip Schaetz.
He said: “We have a group-wide agreement with Sabre SynXis, and we are going to revamp our entire website presence with stronger emphasis on organic search, complemented by our active and strategic pay-per-click campaigns with the goal of increasing traffic to our website and booking conversion.” The company recently appointed a corporate director of distribution to drive these efforts.
In India, almost 28 per cent of Marriott’s total revenue in 2011 was also from electronic/online distribution channels.
“Initiatives to explore newer points of sale and working with newer partners on real-time inventory and price management systems have been key areas of our efforts,” said John Woolley, area director of sales and marketing, Marriott International.
It’s a similar story at The Leela Palaces, Hotels and Resorts, which gets a third of its bookings from electronic/online sources. Some 20 per cent originates from the GDS, seven to eight per cent from OTAs, and five per cent from the group’s website.
Shifting powers of negotiation
Aston’s Vas added: “Years ago we would contract more than 200 per cent of a hotel’s inventory into allotments, but we don’t do that anymore.”
He went as far to say that chains “did not even need the GDS anymore”, explaining that with brand websites and OTAs, the playing field has been levelled even for smaller, independent hotels.
Santika Indonesia Hotels & Resorts corporate director of e-commerce, Andy Khen, said: “Hotels have more bargaining power now. With so many middlemen, and such tight competition among them, hotels are at an advantage when it comes to negotiating rates and allotments.
“Hotels have started to focus on their online distribution because of advantages including low cost, full control on rates and allotments and a wider market. And of course, online distribution works 24 hours, seven days a week.”
Malaysia’s Swiss-Garden International Hotels, Resorts & Inns, too, noted that traditional room allotments had given way to real-time inventory management.
“Room allotments will invariably require an auto-release clause. As with the extranet, it is based on real-time availability. We also offer free sell to wholesalers and (travel consultants) whenever necessary,” said Kem Siew, general manager-sales and marketing.
Philippine-based Afro Asian World Events president, Angel Bognot, observed that contracts were more temporal now. “The business is more wait and see…depending on the conditions, contracted rates for wholesalers do change and rates differ from what are being offered to OTAs.”
A positive sign is that a growing number of wholesalers have started to use technology to their advantage, said hoteliers.
“They have direct access to real-time availability from suppliers at a contracted percentage off best available rates which they distribute through their partner network. This is truly a win-win situation for all parties: the wholesaler, supplier and end consumer,” said Kosmopolito’s Schaetz.
“In the past, it was the hotel coming to a travel (consultant) for contracting. Today, it is the other way around.”
Corporate director of e-commerce
Santika Indonesia Hotels & Resorts
Money to be made
Unlike air seats, hoteliers interviewed said they were continuing to pay out commissions for rooms, with OTAs cashing out at the higher end of the scale.
“Over the years, commissions have increased from minimum 10 per cent to maximum 25 per cent,” said Vandana Dutta, director-business development, The Claridges New Delhi.
Swiss-Garden International’s Siew concurred: “Commissions have increased but they are in line with production.”
Kosmopolito’s Schaetz explained: “We are happy to pay commissions to travel partners who are able to assist us with our marketing initiatives into segments we are not able to capture through our own sales and distribution networks.”
Said Subhash Goyal, president, Indian Association of Tour Operators: “Even though travel portals and websites have become stronger and are witnessing an increase in number of bookings, travel (consultants) cannot be ignored. Their role is as important as earlier. That’s why hotels have maintained minimum 10 per cent commission to travel (consultants).”
However, he urged travel retailers to become tech savvy, in order not to “lose business”.
Wholesalers need to enhance their extranet to be in line with current trends, said Swiss-Garden International’s Siew.
Peninsula’s Lau pointed out that distribution partners needed to make more effort in upgrading their services. “We would like to see greater opportunities for upselling among key players. The industry is still defined by price-point sensitivity, and we see an opportunity as the market matures.”
“Distribution channels need to generate good amount of business regularly through different promotions, packages, etc, in order to remain competitive,” added The Claridges’ Dutta.
Tauzia Hotel Management corporate director of sales and marketing, Antoine Villette, said while brick-and-mortar channels would “still have the market of those who prefer people-to-people contact”, they would have to explore other means of distribution or risk “disappearing”.
Aston’s Vas foresees that “more and more retailers and wholesalers will either start their own OTAs or become niche operators”.
Holiday World Tours Hong Kong, managing director, Paul Leung agreed. “People are booking online and hotels are going directly to guests through their websites…We should diversify and specialise in other services or products that others don’t have.
The good news
While hotels continue to pursue aggressive online strategies, many are not putting their eggs in one basket.
In fact, in emerging markets such as India and the Philippines, the market is still bright for traditional players. There are also certain destinations where travellers want all-in package convenience.
Harsha Devraj, general manager-operations, The Orchid Mumbai, said: “As compared to the rest of the world, bookings via websites are significantly lower in India. The number of inventory available to the wholesalers/tour operators has increased due to the fact that they offer a wide array of packages to FITs and groups, whether to the domestic or inbound market.”
HSAI Raintree, which manages hotels and resorts across the Philippines, also has a varying strategy for its different properties depending on target market. “For example, our resort property will allocate more rooms to wholesalers rather than our city hotel,” said Carmela Bocanegra, group director of sales and marketing.
“Families and corporate clients still need a complete service, and we’ve learned how to be more creative and more ‘out of the box’ in order to survive,” said Afro Asian World Events’ Bognot.
Bundling a different combination of services according to a client’s needs makes all the difference, added Raymond Tee, president of Horizon Tours and Travel Philippines.
Kosmopolito’s Schaetz said: “We should not denounce the importance of traditional wholesale models, which continue to cater to a particular market audience from which we continue to benefit.
“In an ideal world, we would love every consumer to book through our website. However, we all know that this is far from reality and therefore we should have a healthy mix of channels of distribution.”
Hong Kong-based Langham Hospitality Group, vice president for e-business, loyalty and partner marketing, Sean Seah, was optimistic that travel consultants would still be an important part of the distribution mix as long as they “continued to deliver value to customers and stay innovative in their selling strategies”.
This article was first published in TTG Asia, June 29, 2012 issue, on page 10. To read more, please view our digital edition or click here to subscribe.