In the picture

With Expotel re-focusing as a travel management company, Mark Frary examines the future of hotel booking agencies

THE CONCEPT OF THE specialist hotel booking agency (HBA) has been with us for a shade under 40 years, ever since Expotel set up shop in 1972.

The company went on to become the biggest HBA in the sector. However, the company has now followed the example of pop star Prince a few years back and is now styling itself as The TMC Formerly Known as an HBA.

As part of this refocus, Buying Business Travel recently included the company in its annual '50 Leading TMCs' supplement (May/June), where it ranked at number eight. That said, the company still does a substantial proportion of its business in the hotels sector: the company reported in its submission to the supplement that 60 per cent of its transactions were related to hotels.

The company underlined this move with the announcement at the beginning of June of the departure of chief executive Ian Burnley. Richard Lovell, taking on the executive chairman's role on Burnley's departure, said: "The business is evolving from an HBA into a strong TMC and we have exciting plans to consolidate this position." Does this move sound the death-knell for the HBA sector?

ONE-STOP SHOP?

With Expotel's change of status, many are asking whether there is a future for the specialist HBA. As you would expect, many in the sector say that reports of their demise are somewhat premature.

Juliet Price, chair of the Hotel Booking Agents Association (HBAA) and head of marketing and business intelligence at Hotelzon, says HBAs still offer a "best-of-breed approach".

"We have historic supplier relationships and, as HBAs, we offer more personal added value services compared to TMCs," she says. "We offer a wider choice of venues and have more personal knowledge of them."

She cites things such as not charging for reporting, issue resolution or for proactive account management among the benefits. Trevor Elswood, managing director of BSI - itself recently acquired by Capita - says there is still "significant clear water between the general TMC and the specialist HBA". He says: "HBAs are as relevant as they were many years ago, although both they and TMCs have evolved."

Zibrant's managing director of sales, Fay Sharpe, says: "Some companies think they want to go to one point of service, but there are also instances where clients have gone full circle to a one-stop shop and then gone back to all-separate. If the spend is smaller, there is sometimes a belief that a TMC can do the job best, but it really depends on the client's requirements."

Antony Elliott, head of sales for HRS, says: "TMCs are seeing revenue streams diminish and are trying to diversify and prop themselves up. A number have tried to grow their middle market business but have now decided to pull out, realising they cannot complete in that marketplace. It is a challenge for TMCs to keep up with technology."

Adam Woods, head of procurement at Hotelscene, says: "The benefit of the HBA has been the flexibility and versatility of how we can manage a client's business. Larger organisations are less able to be as flexible. We tailor the service we are offering to the client's needs and, if that means that we integrate with a TMC who might handle the flight element, then that is fine."

Access to the widest range of hotel content is often cited as one of the main attractions of using an HBA rather than a TMC. HBAs have spent years developing access to a huge range of properties, something that the GDS-focused TMCs have found hard to match.

TMCs are catching up, in part because of a recognition of sources of content other than the GDS, but just having access is not enough, according to some. BSI's Trevor Elswood says: "One of the key USPs of an HBA is the ability to manage complex business rules and serve up the right hotel at the right price to the right person. Other people are getting hold of the content but if they don't know how to serve it up, that is still going to be the issue."

Conference Care managing director, Chris Peacock, says: "What is amazing is the amount of time it has taken for TMCs to get into this area. At the moment, I don't feel the necessary expertise exists inside TMCs. The TMC model is that it is very process driven and the expertise and knowledge of the venue market is not there currently."

Des Mclaughlin, managing director at meetings and events specialists Grass Roots, agrees. "I couldn't name you a TMC, other than in the pharmaceutical sector, which really does meetings very well. I don't think they can learn it - it's not their culture," he says.

The HBAA's executive director, Peter Ducker, says there is a cycle in progress: "A few years ago, there was plenty of talk of one-stop shopping and single sourcing from a TMC, and as a reaction to that, some HBAs got into partnering with TMCs."

BSI works closely with BCD Travel and Gray Dawes, for example, and Hotelzon is also known for its collaborative relationships. Hotelzon's Price says: "We have created a niche whereby we supply our tools to TMCs and other HBAs, and that works for us."

Ducker adds: "Recently there have been companies splitting out their business, particularly on the meetings and events side with an HBA."

REMUNERATION

HBAs have long worked on a commission-based business model, with hotels paying 10 to 15 per cent directly to the agent. The fragmented nature of the hotel sector in Europe, in particular - with lots of independently owned properties - means that this is unlikely to change any time soon.

Grass Roots' Mclaughlin believes commission is fundamentally built into the HBA model. "If I was client, I wouldn't want to move on to net rates," he says.

Despite that, some larger clients are using management fees. However, these tend to be based on commission and clients are rebated anything above an agreed level of management fee. Zibrant's Sharpe says that when companies start to manage their meetings more strategically, they often do not know how much volume there is in the business.

"Going to a fee model in this case can be very disadvantageous to the client and they might be paying for something they haven't got," she says. HBAA chair Price suggests management fees "are not as widespread as some HBAs would like their clients to believe".

She says: "I believe that the industry is very much fixed on a commission pricing model and I don't see an end in sight to that. At the moment, the corporate customer still supports that pricing model as they don't have to create a budget to pay for hotel booking, and they like the income stream that a rebate can provide."

INNOVATION

Specialist HBAs argue that one of their key advantages over the traditional TMC is specialist hotel booking technology.

BSI's Elswood says: "Those HBAs that have made the investment in technology and positioned themselves as hotel specialists have become complementary to the TMC world. Those HBAs are the ones that are prospering, while others are shrinking because they are struggling to gain the scale."

HRS's Elliott is particularly proud of the company's application programming interface (API), a neutral pipeline of hotel content that can be connected to any point of sale: "It lets companies choose how they want to receive their content and work alongside the TMC of their choice."

HRS has also developed native applications for various smartphone devices: "Because they are native, they are quicker, smarter and more efficient. Travellers and travel managers get negotiated rates and policy control through that channel."

Hotelscene has been further developing its management information reporting suite tool, and the company's head of procurement, Adam Woods, says this provides a comprehensive analysis of more or less every single element of what a client's business is doing. "It has everything you would expect about how much business is booked on a contracted rate, but it really delves into the performance of a client's business and particular hotels."

One thing the tool has already picked up, says Woods, is the variable definition of room category by hoteliers. "A hotel might say they have 200 standard rooms one day but yesterday it was 150," he says.

Grass Roots, meanwhile, is developing technology to control spend with third party suppliers around an event. "Procurement departments have a good handle on how much they are spending in hotels: transient information from the TMC and the conference agent show them meeting spend. What is not good is the information on ancillary costs, which can be 50 per cent of overall event spend," claims Des Mclaughlin.

The HBAA's Ducker says that another new technology trend is that a lot of HBAA members are looking at managing clients' internal meetings space. "Often companies have great space for meetings within their offices and they are looking to manage that as efficiently as possible," he says.

LOOKING AHEAD

Next year is set to be an interesting one for the HBAs, with London hosting the Olympic Games.

The London Organising Committee of the Olympic and Paralympic Games (LOCOG) has asked hoteliers to block-book large proportions of their rooms for the duration of the Games, meaning space in the capital could be at a premium.

Hotelzon's Price says: "We are starting to see business coming back. We are cautiously optimistic but I don't think we are going to have a storming year in 2011 and I think it will be difficult next year as well.

The Queen's Diamond Jubilee and the Olympics will create a buoyancy in the market, but whether it results in increased meetings business and people travelling to different parts of the UK remains to be seen."

Hotelscene's Woods adds: "2012 has been on the agenda for the last three or four years. We are holding fire. We are aware that Premier Inn has stepped out of the LOCOG deal. With regard to our existing clients and their demand, it is August - typically a quiet month. The logical approach would be not to schedule many meetings and minimise the amount of activity."

Conference Care managing director Peacock says: "London has been the golden goose for the past couple of years. It will be interesting to see what happens after the Olympics. There is going to be more supply and availability and I think it will be an interesting end to 2012."