Hotels were warned they have to take greater control of their distribution or risk “coming a cropper” when the next economic downturn hits.
Charlie Osmond, co-founder and chief executive of hospitality technology provider Triptease, told the firm’s European Direct Booking Summit in Amsterdam this week:
“We are in an absolute war for who owns the customer,” he said. “It’s incumbent on us in the hotel industry to maximise the entire lifecycle of the guest. We believe hospitality starts online.”
Osmond said the value out of hotel bookings is being accrued not by the suppliers of product but by the dominant global OTAs.
He claimed a major global hotel chain will make around $3 per room night booked, while the likes of Expedia or booking.com make around $7.30.
“So the value is being accrued by the people who make the booking. It’s all coming upfront. This is why we are in a war for who owns the customer.”
Osmond warned that the recent run of positive economic figures will come to an end and the situation could then become worse as hotels become even more reliant on OTAs for occupancy.
He said his guess was in this situation OTA margins will not come down. “My guess is OTAs will keep their profits up as hotel will be desperate to keep occupancy up in difficult times.
“Hotels that are not taking control of their distribution are going to come a cropper.”
Osmond said it was vital for hotels to have access to their data. “If you have the data you can use it in so many different ways to win the race [for the customer].
“Data capture is so essential for so many things we are going to be doing in the future, whether that’s personalised pricing, bidding on people and running different ads.
“You need to have data from the guest in order to make better decisions.”
Osmond said the opportunity for hotels to make more from ancillary sales was enormous, citing the airline sector that has seen revenues rocker from $20 billion to $90 billion “in a few years”.
He said hotels must try to emulate the OTAs by being more focussed in their efforts to understand their audience and provide them with the service they are looking for.
But he said siloed departments and decision making and how hotels account for their costs of distribution is hampering their efforts.
Many hotels are happy to continue paying OTAs limitless commissions as long as they are filling rooms, but sales and marketing budgets to drive cheaper direct business are often restricted.
“When time get tough the first thing, no doubt, that will get cut is sales and marketing budgets,” Osmond said.”