From “on-line” to China- hotel distribution déjà vu
There are already tons of editorials, research, market studies, and opinions about the relations between hotels and online travel agents, very often called “the battle for direct bookings.” The problem has been analyzed from many different perspectives, and even if the final theses are sometimes inconsistent, the whole industry agrees that no hotelier is winning this “competition”.
To better understand the background, let’s go back to the mid-’90s when most of the big OTA’s were starting their quest for the share of the online travel market. If we were to ask hoteliers who were already “operational’ in those days, not many could confirm that a hotel website was customary. By “website” I do not mean the sites from those days even remotely resemble modern ones. Back then the typical site was nothing more than a static landing page under a hotel’s domain. At the beginning of the 2000s, the first providers of booking engines entered the market – a sign that the hospitality industry was looking fervently at direct distribution. At a time when booking.nl was already on the market for ten years, offering a customer friendly business model based on commissions, hoteliers began catching up with OTAs. In comparison to the merchant system, this was a dream for most of the hoteliers who could pay a percentage of the selling price, AFTER the business was delivered.
Despite that fact, more and more technology companies were entering hotel industry offering their reservation engines, at the same time educating the market.
This process is still “on” as hoteliers do not ask anymore if they should have the booking engine, but which booking engine will work best for them.
As Martin Soler puts it, “direct revenue has unfortunately become a way to get attention in the hotel marketing world. The problem with such buzzwords being used and abused is that in the long run they sound like conspiracy theories. All one needs to do it say the words and suddenly they are no longer credible. There is inherent value in retaining control and a fair share of direct bookings. The most recent debate if hotels should obsess about direct or not is splitting hairs. Hoteliers should obsess about having a healthy distribution mix. That means a fair share of direct, OTAs, and other channels.”
Healthy distribution mix – a concept forgotten by many, and while I could understand that independent hoteliers, with limited resources, staff and know-how could miss the point, it’s interesting to see, how painful this mistake was (is) for big players.
A few years back we saw the attempts of almost all big hotel companies to shift the pattern from 3rd party channels to direct. We all have heard all those brave declarations about massive investments in technology and marketing to “win back” the control. Moreover, we also see that not many of them were successful. It’s a very sensitive topic, as one of the most significant values hotel owners are paying for to hotel brands is the distribution.
“A few decades ago brands were the power of distribution. Branded hotels had an incredible distribution advantage over non-branded hotels. Branding a hotel was like plugging into a power line. Distribution systems were hardly known. Today things are quite different, travelers are more aware of distributors (the pipes) than the brands,” adds Soler.
Why is it so important to deal directly with the customer/ guest? For sure because of the costs, which are rising without any control from the suppliers’ side. Moreover, data, big data about guests’ habits, expectations, behaviors- anything that happens before and during the booking process, which ends with the reservation.
Are all the faults on the side of the OTA’s who “misuse” their power over hoteliers? Could hoteliers do anything better? When OTA brings the new customer to the hotel and charges the commission, I see it as a fair deal, as most probably a hotelier would not be able to acquire new guest for the same amount. However, if the customer already knows the hotel, likes the brand but still, books through the OTA (generating commission cost) who’s fault is it?
Coming back to the present times – Artificial Intelligence becomes a commodity, chatbots are taking our reservations and we check-in with face recognition solutions. The tourism industry is booming thanks to the healthy global economy, fueled by Chinese travelers, who are more and more eager to travel the world and spend their yuan. However, when talking to hoteliers about the development of the Chinese market, I feel like 15-20 years ago, while discussing the importance of online presence for hotels.
Most of the inventory of European hotels sold to China is based on traditional B2B agreements with travel agents – so primarily offline. Those rooms are later on loaded to Chinese reservation portals and marketplaces, but they are already out of the control of the hotelier. Everything a hotelier can see at this point is the reservation with the name of the guest, very often even without direct contact data – either phone or email.
The situation with the Chinese market is even more complicated, as simple placement on the Chinese OTA needs a lot of effort and patience, mainly due to, lack of local support and the language barrier. On top of this hoteliers also face the connectivity issue, as not all Channel managers/ PMS’s support Chinese channels.
Take heed, the situation is not so hopeless. Elijah Whaley, CMO of influencers marketing agency PARKLU, explains “we are finally starting to see an increase in long-term commitments between (hotel) brands and social media influencers. Long-term sponsorship relationships allow brands to become more synonymous with an influencer in the eyes of followers. Brands that negotiate long-term contracts often use influencers for promotion and as content creators for branded channels.”
“Ultimately, it’s about finding novel ways to connect with customers while staying top of mind with quality social content.”
Most hoteliers still give away low pricing, brand, and guest relations. Even when there is coming to a group of Chinese travelers, they come and go without proper interaction with the hotel, either offline or online.
Building a brand in China is even more difficult due to the language barrier, separated the digital ecosystem, and entirely different applications.
Complexity and level of complication make the whole attempt more expensive. However, do hoteliers want to give up the entire brand to third parties, like we used to see some time ago and then fight back? One would say, that Chinese market is currently just a few percents of their business- sure, but take into consideration the fact that it’s only 5-7% of Chinese who own the passport and just a fraction of it comes to Europe. What is the situation going to be, when the passport is held by 40% of the population (as in case of Americans) or 76% (like Britons) and they will like to travel to Europe more? Based on the UNWTO research, by 2030 China will account for almost a quarter of international tourism. What then? Is your hotel ready to forfeit 25% of the business and give it out to third parties…again? Alternatively, should you instead learn the lesson and at least try to find out what are the chances to build your brand in China? What are the possibilities? How much could it cost? What tools are available on the market? And so on.
One of the ways to answer all these questions is participation in industry events, and the next opportunity comes in January when the conference “Marketing to China” takes place in Prague. Why is it worth to go there?
- learning the newest trends
- networking with the industry
- workshops& training about available technologies
- listening about the successful case studies
- getting new qualifications.
Whom are the speakers you will meet there:
- Ashley Galina Dudarenok
- Matthew Brennan
- Elijah Whaley
- Joseph Leveque
- Jan Smejkal
- Michael Norris
plus the representatives of the agencies, which successfully marketed to China brands such as Hilton, Nike, Starbucks, Disneyland, City of Paris, Leading Hotels of the World, Air Canada and many more.