This week hotel groups IHG and Choice announced incentives for those who opted to book their hotel stays directly. In one stroke two of the world's largest hotel companies adopted the strategy aimed at reducing distribution costs and gaining traveller data already underway at Hilton, Marriott and Hyatt.
Suppliers are sending out strong messages that they aim to cut distribution costs but unlike the airline sector, where no traditional carrier has followed the Lufthansa Group strategy of introducing a distribution cost charge (DCC) for anyone who books using a GDS, the hotel industry is close to achieving critical mass.
Marriott, Hilton and IHG are the three largest hotel groups in the world and between them have more than 2.5 million rooms. The addition of Choice put the number in excess of 3 million. Hyatt does not have the same mass but it is a significant player in the hotel market.
IHG's announcement came only shortly after Hyatt's and with Choice following very quickly momentum is growing. Although each chain's offering varies in some details, the basic proposition is broadly similar — loyalty programme members can book some rooms in some classes on some nights in some regions at a discounted rate so long as they book through the chain's website, app or directly by phone.
These rates are also available if the loyalty member is booked via a specified agent, travel management company or corporate, ie only those that are commercial partners.
Corporates might very well use properties in all these hotel groups but would be unlikely to have a corporate deal with all. By the same token, TMCs may book the hotels its clients' want but those bookings probably represent far fewer room nights than the high volumes done with those with whom they have preferred partnership agreements. Preferred partnership cost hotel companies money, lots of money, so they are available only to TMCs that can deliver an agreed high volume of bookings or market share. TMCs would consequently be unlikely to have preferred partnerships with all the large chains.
Hotel companies are becoming more selective of which intermediaries they use because of cost and benefit. The OTAs take a large commission. Preferred partnership with a TMC may cost a lot but it does guarantee a volume of corporate business and corporate business tends to bring in much more revenue over and above the room rate and therefore a higher TRevPAR than that of leisure visitors. After all, business travellers usually network at the hotel bar, order room service and pay for WiFi when it's not included or part of the corporate deal.
Most corporate travellers are members of loyalty programmes so the TMC can deliver more benefit to its clients by booking these rates. However, it is unlikely to be able to do so for all properties on the corporate hotel programme that offer discounts for direct booking.
Perhaps asking TMCs to identify preferred partners should be on every TMC RFP.
- Business Travel iQ is hosting a webinar on RFPs on Friday, 20 May.
You can register for this webinar here