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Losing Control

When the internet came along, most people in the travel industry were quick to jump on the notion that the web would allow service providers such as hotels and airlines to sell direct (and therefore cheaper) to the consumer and thereby cut out the middle man. Like all theories; they are just that – theories and the reality has become slightly different.

Whilst airlines have had partial – and only partial success with this theory – hotels have failed miserably. Rather than hotels reaching out to their clients directly, what in fact occurred was the rise and continued rise of Online Travel Agents (OTA) and wholesalers. The situation now being that there are stack of OTA’s trying to sell us the hotel rooms which are provided to them by a small number of wholesales who contract with the hotels and who are getting rather powerful. So powerful in fact, that the hotels cannot now do without them in order to ensure that their rooms are distributed through all the various selling platforms. That means that the hotels are now often paying more commission than pre – internet times to the wholesalers and the OTA’s. In short, the hotels have lost control of their own sales.

Not only is this a dangerous situation for hotels, it can be disastrous. A similar situation occurred post 9/11 when hotels gave control of their sales to anyone who promised them business and the online players did just that by offering the public hotel rooms at crazy prices, with the net result that the hotels couldn’t get their required room rates back to the level they needed to simply break even for many years. At that point one would have though the lesson had been learned; obviously not.

The best way hotels can combat this dilemma is to drive business into themselves via their own booking channels and via their own loyalty schemes. Thus the push by hotel staff to give us all a hotel frequent stay card or loyalty card call them what you may. Of course, having a hotels loyalty card doesn’t mean you have to book via the hotels own web site, but the tendency is to do so. Hotels can then, if they wish, choose which rates and which bookings made where are eligible for loyalty bonuses etc. rather like the airlines do.

 

Mark Thomas

Managing Director

HRG Bulgaria