September 2022, Virtual
September 29 2022, Virtual
Now in its 27th year, the Business Travel Awards
Martin Cowen finds out why hotel-booking technology for corporate travel still lags behind the airline sector...
As the airline industry shifts its business model towards menu pricing and ancillary services, other parts of the travel industry are under pressure to rethink their strategy. The IT infrastructure behind airlines, which is driving the change, is a multi-billion-dollar business – as is airline technology itself.
The elephant in the room, when it comes to technology, is hotels. The hotel industry is more fragmented than air, and the technology behind it reflects that. Buyers’ needs, from their hotel suppliers, are changing, too, when compared with air, and with that comes more technological issues.
Regional differences within the hotel sector at the property level are also more pronounced than in air. Global connectivity demands are another complicating factor.Buyers, with finance directors breathing down their necks, are at the heart of this complexity. “The hotel sector generally doesn’t have the level of maturity of air when it comes to dealing with what corporates want,” says Margaret Birse, director, global travel services for Serco. And “what corporates want” is now more than just the room. The C-suite talks about this in terms of “content” – the cost of amenities such as wifi, parking, food and beverage, and in-room facilities is as much a part of hotel content as the room rate.
Niklas Andréen has recently been appointed to the newly created position of group vice president, hospitality and partner marketing, at Travelport. “Hotel content is a much wider issue than air,” he says. “We created the role because we need to truly understand hotels – they are a different phenomenon from air.” He suggested that hotel IT lagged behind air because “GDSs [global distribution systems] were created for airlines, with hotels squeezed in later on”. He adds that hotels were a more complicated product than seats.
But despite this complexity, smaller tech-enabled businesses have emerged. Venture-capital-backed management buy-outs (MBOs) are rare these days, and were dropping off the radar in July 2008, when Phoenix Equity Partners backed a £38 million MBO of hotels and meetings specialist Expotel. Two-and-a-half years down the line, Expotel is a ‘Top Five’ player in the UK, helped along by two acquisitions – LateMeetings.com last year and Venues Event Management last month.
For Expotel CEO Ian Burnley, technology is important, but only as a means to an end. “Technology delivers efficiency savings in terms of the delivery of a booking, but there is still a cost incurred in the conversion of availability into a booked room,” he says, adding that LateMeetings.com addressed that efficiency gap by trying to make it as simple as possible to book basic meetings and all facilities online. “Technology can streamline the process as LateMeetings.com shows, but you still need to look at the operational cost savings of the hotel and meeting product,” Burnley says. “Technology efficiencies are on the margins compared with the costs of room rates, food and drink, and extras.”
Meetings, conferences and events are more difficult to justify to the bean counters these days. Jérôme Destors, director of hotel IT for Amadeus, expresses a medium-term concern. “The technology for booking meeting rooms is developing, but then so are the alternatives,” he warns. “In a few years’ time, the meetings, conference and events part of the hospitality business will have changed significantly.”Destors has just helped Amadeus launch one of its ‘thought leadership’ white papers, Hotels 2020: Beyond Segmentation, which talks about hotel technology in terms of “augmented reality, responsive guest environments and robots”, based around guests demanding more personalisation.
The current state of play, as Destors sees it, is more familiar and direct. “Today, technology is playing a key part in helping hotel owners to adapt to new business models – the one inherited from the low-cost carriers,” he says. By this he means the menu-pricing, ancillary service-based model.
“Airlines are evolving, and all the technology is being adapted to provide ‘merchandising interfaces’ rather than just ‘booking engines’,” he says. “There is an opportunity for the hotelier to do the same. They can preserve a core room rate and make their margins through services and amenities.”
Travelport's Andréen believes the margins that still exist in the hotel business, compared with air, warrant the IT investment. His bosses are confident, too, even thinking there is sufficient revenue for the hotels to justify advertising on the GDSs. His VP brief also includes partner marketing. “Hotels might be more insightful into how to use the GDSs as a marketing channel,” he suggests.
Some aspects of this shift in how the hotel business operates are welcome news, particularly at Serco. Birse’s frustration at the inadequacies, as she sees it, of the sector’s overall IT capability comes from the money chain. “The financial model of the hotel industry makes it very messy to start with,” she says. “Commissions and room rates are where the problems start – there are the rates set by the chain themselves, but with the hotel booking agents working on commission everything is skewed.”
Another buyer frustrated at the way the meetings sector works is Samantha Van Leeuwen, PricewaterhouseCoopers’ head of hotels and venues. This comes despite her widely acknowledged role in helping PwC save millions on its meeting budget over the past decade. Her key focus – meetings of around 25 people – would seem exactly the type of product that technology should be able to handle. “There is a direct connect for small meetings with some hotels, but it’s quite limited,” she says. “You can book a room for 25 people, with tea and biscuits and a projector. Direct connect can reduce overheads for meetings of this size, but anything more sophisticated gets problematic. Most of the meetings are booked over the phone.”
Van Leeuwen says that technology does enable cost savings through efficiencies, but “there is no requirement in terms of the IT” when it comes to a venue getting preferred supplier status with PwC. It is the usual suspects of rate, location and facilities. She also points out that even in the US, where the scale of meetings is greater, “there usually isn’t an IT requirement within an RFP [request for proposal] for meetings”.
Many hotel chains need leisure guests as well as corporate, adding yet another layer of complexity to the hotel IT issue. “For TMCs and buyers, it is all about efficiency,” Travelport’s Andréen says. “Content is seen in terms of the overall efficiency of a booking, from the rate itself to the way in which bill-back and refunds work. Leisure agents need different content from the same property.”
The booking path chosen by business travellers and their TMCs is vital in maintaining IT-based efficiencies. In Birse’s ideal world, there would be a system in place which removed any choice from the traveller or hotel booking agent – all products and prices having been vetted in advance. “We’re analysing very closely the bookings made outside our programme. Leakage is a cost that IT can help reduce,” she says.
Hotel distribution is another area where the technology needs to catch up and keep up. Today’s twentysomething Twittering Facebookers are tomorrow’s middle-management. “The social networking culture will be so ingrained that they will be perfectly comfortable booking through the company intranet,” Destors says. “But at Amadeus we expect smartphones will be the most used device for flight, rail and hotel bookings, so hotels have to start factoring in mobile to any technology plans they have.” He adds that this age group of travellers would expect their hotel experience to be personalisable – if such a word exists – at the point of booking.
Using a mobile phone to book a hotel room is only just gaining traction in the leisure sector – an iPhone app for booking a meeting room still seems some way off. Hotel IT is the responsibility of the supplier, not the agent or buyer, Van Leeuwen insists. However, the industry is playing catch-up in terms of technology, so the return on investment is proving harder to achieve. “Hotels have only just started to run robust reservations systems to give us the MI [management information] we require,” Van Leeuwen says. “Even the big chains such as Marriott and IHG have found this challenging.”
The competitive advantage that a big IT budget gives the chains over smaller independent hotels is not as acute as one would imagine. Expotel’s Burnley suggests that the hotel and meetings market in the UK is so competitive that the chains compete with each other. “I don’t feel that technology gives the big chains an advantage over the independents,” he says. “It’s very competitive because no single chain can get enough rooms to be able to influence the market strongly enough.”
An overnight stay is part and parcel of the business travel industry and, despite the complex and fragmented nature of the hotel industry, it ticks along quite nicely. But with every company looking at every cost, hotels’ time will come. The business will not go away, but chains, agents and properties should think about what the corporate buyers want and whether their IT is delivering it.
Social workingCorporates buy travel in a different way to tour operators, but there is some sharing of supply and customers with the leisure sector. The buzz around social media is an example of how this crossover is coming into play.
So corporate buyers should be aware of some new research, which suggests that they should pay more attention to what their colleagues in the leisure sector are up to in respect to social media.
World Travel Market polled more than 1,000 buyers in September, and found that 40 per cent felt social media will be a big opportunity for them over the next five years. But when the same researchers asked 1,000 British holidaymakers about social media, only one in three said they had bothered with it when they'd planned their summer 2010 getaways.Next year is likely to be about the same. Oddly, 60 per cent of the buyers said that social media had been a positive influence over the past 12 months.
So with only one in three using social media for their leisure travel, why should corporates try to use social media within their policy? Because the research also found that of the one-in-three who did use social media, the majority changed their mind as a result.
Social media use is perhaps not as widespread as the hype would suggest, but the evidence now exists that it does have a quantifiable impact on the people who use it.
Google’s proposed $700 million takeover of airline software business ITA still hasn’t been cleared, with the Department of Justice continuing to analyse the proposed plan. In the US, the anti-Google lobby is stepping up its efforts to spike the deal.
Google’s observation at the time was that ITA wasn’t big enough in Europe for a European review. It appears on this issue that Google is right, but European regulators have always been interested in the competitive implications of Google’s search dominance, and might use the ITA/Google tie-up as evidence of what Google might be able to do.
The FairSearch.org coalition, a group of businesses supporting consumer choice online, is leading the protests in the US, arguing in a letter to Congress that: “This combination threatens to enable Google to dominate online flight and travel search, which can reduce the quality of travel information available to consumers, increase advertising costs, and result in higher air fares.”
The relationship between the global search giant and the business travel world is less obvious than its massive role in changing the distribution and marketing of leisure travel. But if Google’s mission statement really is “to organise the world’s information”, it must be asked how significant the impact might be on the corporate and TMC models.
Sabre and Egencia, indirectly via Expedia, are part of FairSearch.org. If Google gets better at organising the world’s travel information, then maybe some big corporates and TMCs might have wished they’d paid more attention to the proposed ITA takeover.
This article was first published in ABTN's sister title Buying Business Travel, the award-winning magazine for company travel & meetings buyers and arrangers.
To receive your free subscription, click the logo