Hotels give up a chunk of their revenue to third party intermediaries to drive bookings. These online travel agencies and search engines retain up to 30 percent of the price of the room. Hotels could recapture that revenue by beefing up their own websites to accommodate more complex bookings, and offer goodies for customers who book directly. Oliver Wyman partners Scot Hornick and Jonathan Keane, in their report The Next Great Battle Over Hotel Distribution, came up with seven strategies hotels can use to take back direct bookings:
1. Improve the management of multi‑attribute inventory. The complexity of inventory management increases dramatically as customers are allowed to choose more specific room attributes. As hotels begin to offer customers more choices, hoteliers need powerful, but easy-to-use, inventory management systems.
2. Develop branded rate products. A mainstay of airlines for several years, branded fare products differentiate between more- and less-price-sensitive customers. For example, Air Canada offers Tango, Tango Plus, and Latitude fares. Each of these economy fares offers a different combination of refund status or changeability, mileage accrual, seat selection, and priority handling benefits. Hotels need the analogous ability to offer multiple room-rate products that are easy to understand and differentiate.
3. Master the art of multi-person, multi‑payment, multi-segment bookings. Customers travel in more flexible ways. Think, for example, of business travelers with several trip segments, a tour group with several people to a room, or a large family requiring adjoining rooms with multiple bedding types. Hotel companies must transition to a new reservation concept designed to offer many products to many guests.
4. Enable smooth management of advanced content. Hotels need to generate and publish rich digital content, such as videos of rooms and floor plans, and local information, such as restaurant recommendations. Otherwise, online third-party providers, so-called metamediaries, will fill the void. Travel search engine Hipmunk already allows customers to search hotels based on factors such as nightlife concentration. Hotel search engine Room 77 allows customers to evaluate floor plans and views from specific hotel rooms.
5. Improve pricing and inventory management of ancillary products and packages. Most hotels lack the systems to dynamically price ancillary products and packaged travel, and cannot turn a profit on those products. In addition, hotels lack systems to guarantee the availability of ancillary products.
6. Embrace globalization. As hotel companies become increasingly global, the ability to intelligently support multiple languages and multiple payment types (credit cards, gift cards, vouchers, loyalty points, layaway, etc.), both individually and in combination, is critical.
7. Support high-volume shopping and caching. As online travel agents and metamediaries become more sophisticated and popular, the demand to check rates and availability on hotel reservation systems will continue to increase. Hotels must handle these requests efficiently by streamlining direct connects and supporting caching protocols.
Hotels are losing the battle to internet-savvy intermediaries who skim billions in room-rate margins. To claw back, hotels must switch from a wholesale to a retail mindset. The resulting new products could streamline hotel management and improve operational efficiency—and profit.
Scot Hornick (firstname.lastname@example.org) and Jonathan Keane (email@example.com) are partners at Oliver Wyman serving transportation and travel companies around the globe. Read the full report here: http://www.oliverwyman.com/the-next-great-battle-over-hotel-distribution.htm.