How Hotels Can Take Advantage of Hospitality’s Continued Consolidation

Consolidation puzzle

The hotel industry consolidation of the past few years might have made dominant players even bigger, but that doesn’t mean it’s anywhere close to reaching an end. As Expedia and Booking Holdings continue their massive buying sprees and brands respond with their own wave of mergers and acquisitions, hoteliers are probably wondering how to tip the scales back toward their favor.

The answer remains the same: Hotels can thrive if they know exactly who their customers are and what the ideal experience is to those guests.

Granted, in any competition, it’s critical to track new challenges, and right now there are many facing hospitality.

Advertisement

The online travel agency duopoly is quickly becoming a three-headed monster for multinational brands with the emergence of Ctrip. The Marriott-Starwood deal was the biggest domino to fall so far, but the industry can expect to see more M&A activity, the latest being Pebblebrook Hotel Trust’s acquisition of LaSalle Hotel Properties.

Consolidation has spread to the hotel technology space more recently. However, many hoteliers look at news of Amadeus buying TravelClick or RateGain purchasing DHISCO with some skepticism. When the OTAs grew through acquisition, it gave them leverage over hotels that they’re more than happy to wield.

So, what is important for hoteliers to remember as competitors, vendors, and distributors achieve greater economies of scale all around them? First, consolidation without integration doesn’t help anybody. Integrations among hospitality companies can be extremely difficult. Furthermore, massive size can lead to a severe lack of flexibility, which gives smaller companies and independents an advantage to press.

This is where consolidation in the hotel technology space helps unbranded properties and smaller companies. Clear winners will start to emerge in this shakeout for systems that optimize everything from property and revenue management to staff communication and operations. No one property has to build its own solution to handle it all. The more these vendors integrate with each other, the better able any property will be to build a tech stack with “best of breed” components.

Finally, the last part of navigating the latest wave of industry consolidation is completely up to the hotel and its strategy for e-commerce.

Direct bookings will continue to grow in importance, especially as the number of distributors shrinks to only a handful of conglomerates. The large hotel companies of the world have the scale to negotiate more favorable commissions from OTAs, but they still seek to maximize direct business with marketing campaigns.

Using OTAs, metasearch platforms and paid-search giants like Google will continue to make sense, as their marketing scale can’t be beat for reaching new guests and filling need periods. But every on-property stay is an opportunity for a hotel to provide an unforgettable experience to motivate a return visit—with the most competitive loyalty rate available on the hotel’s website, of course.

Providing the instant gratification of a personalized rate empowers hotels to beat back not only the OTAs but also a commoditized points-for-free-nights loyalty program.

The biggest lodging companies and OTAs are getting bigger, but they’re no match for a property with the right technology and a focused strategy for using its customer data to craft the ideal pricing structure, guest experience, and marketing program.

 

About the Author
Patrick Bosworth is co-founder and CEO of Duetto, hospitality’s revenue strategy platform, based in San Francisco.