Hoteliers Seek Footholds in Changing Digital Landscape

At the Revenue Strategy Summit last week in New York City, hoteliers, brand representatives, and technology folks gathered to address the high cost of guest acquisition along with other hot revenue management topics. In the opening session, Mark Lomanno, partner at Kalibri Labs, told the audience that hotels have the highest cost of customer acquisition in the travel space, averaging 15-25 percent per guest. This number is significantly higher than what airlines and car rental companies spend to get their customers.

Some of this can be resolved by taking back control of distribution, as Minaz Abji, EVP of asset management at Host Hotels, said when he suggested emulating the airlines approach, though he and the rest of the panel stressed that direct booking was the only thing airlines did that was worth adopting. “When you make a reservation for an airline you pay up front,” he said. “They get the money right away. And when you want to make a cancellation or change, you pay a change fee or cancellation fee.”

Jeffrey Katz, managing partner at KA Holdings and founding CEO of Orbitz, framed the distribution issue in terms of travel industry gatekeepers during the summit’s keynote address. According to Katz, examples of gatekeepers vary from Amazon in the book publishing space to Apple in the mobile app space. These so-called metamediaries are becoming very powerful and changing how hotels will do business in the next decade.


“Today, a large percentage of traffic to online retailers is controlled by Google,” Katz said. “It took the company about 10 years to get there, and it’s had a huge impact on the landscape.” He noted that companies like Google would likely take 10 to 20 years to get the travel space right, but when it did, it would be a significant gatekeeper that will drive customer acquisition costs even higher. “Don’t kid yourself that Google doesn’t understand travel—it invented and is operating driverless cars.” From HotelFinder to Waze to AdWords to Android, he said, Google is set to become a huge intermediary between your visibility and your voice to the customer of tomorrow.

Over the next five to 10 years, entities like the GDSs and OTAs are going to be benign resources to the industry, and your resources are going to need to shift to address the new gatekeepers, said Katz. “If only companies like Priceline act on this, then it won’t be good for the constituents of the hotel industry,” he added, picking up on a point made by Bob Post, founder of Pconsulting and former TravelClick CEO, during an earlier session. Post said hotel brands should be concerned about Priceline’s acquisition of Hotel Ninjas, a small cloud PMS provider based in Barcelona, Spain. Once the capabilities of Hotel Ninja are integrated with the digital marketing acumen of Buuteeq, another Priceline acquisition, the online travel company will have the ability to handle a hotel’s property management, channel and rate management, and CRM needs.

Katz pointed to how the industry is being held back by archaic systems and competing interests, and returned to a problem that was recognized during the opening session. “The biggest challenge is we’re not creative enough,” said Ash Kapur, VP of hospitality revenue management and distribution for Starwood Capital Group, during that session. “The way consumers are shopping and buying is changing, and we’re looking outside our industry for creativity.”