Jon West is the UK and Ireland boss of German hotel portal HRS. He talks to Martin Ferguson about the shifting landscape of hotel distribution and travel technology.
BBT: HRS downsized its senior team in the UK last year. Is the UK still a priority market for its German owners?
JW: Absolutely. The UK is a big priority - London itself is one of the core destinations around the world. But we did not downsize - we took on 18 new staff in the last 12 months and we have new heads of department in sales and marketing. In fact, we have a similar number of people now as we did at the end of last year.
BBT: In 2007 and 2008, HRS surveys predicted the demise of the travel management company (TMC) and the rise of the hotel booking agency (HBA). Do you agree, although it was before your tenure, that this forecast was flawed?
JW: I don't think it was flawed, just misdirected. And I think the TMCs have got a rightful place in the distribution channel. The key thing is that they are travel management companies, and that should not be confused with providing a travel management service. There is no reason why a TMC cannot offer a self-service solution rather than being wholly reliant on assisted services. I think the comment was all about traditional TMCs using assisted services [when they were] in fact using self-service applications, but not necessarily prepared to pass them on to their clients. But I think that has changed and TMCs are prepared to use so-called self-booking tools and self-service solutions for their clients. I believe the comments made by my predecessors were on the basis of the difference between self-service and assisted service and, if you leave TMCs in the category of assisted service, then one would assume that they would have been disintermediated. But, of course, that is not the case. They have as much right to deliver self-service solutions as anyone else.
BBT: Do you think the dividing line between traditional TMCs and HBAs has become blurred, given that both arrange transport and meetings in addition to accommodation?
JW: I think that while the traditional HBAs rely on assisted service, by its nature, assisted service is linked with charging fees to a client. If you relate those, there is definitely a blur between the two. That's why I wouldn't categorise HRS as an HBA. The A stands for 'agency'. An agency denotes that you've got staff, and if you're a self-service provider such as HRS then you don't have staff. In the same way, the M in TMC denotes 'management', because you are trying to manage a service. I think the best description of HRS is that we are a hotel portal, so we are an online self-service application that allows all sorts of channels to book hotels in real-time, and with the user experience that promotes advocacy and adoption, and all that can be within a corporate travel policy.
BBT: One of the HBAs principal USPs is that their hotel inventory is superior to that of the global distribution system (GDS). Do you ever see GDS dominance being challenged?
JW: I think the GDS needs to adapt if it wants to continue to be a major part of the distribution for hotels, because at the end of the day it is an application reliant on hotels wanting to distribute their inventory. If you look to see how many channels there are to choose from, many have a much lower distribution cost. That's why we have focused 25 per cent of our 500-strong team on contracting. We look after 250,000 hotels worldwide and all of those hotels choose to distribute through HRS. We even have IHG, Marriott and Accor choosing a CSR [corporate social responsibility] direct-connect with HRS. The GDS is much smaller and less rich in content. We work hard to make sure we have every hotel in two languages, seven photos from the property and accurate descriptions. It's about the richness of the content. You could say HRS is closer to being a GDS than an HBA. And I wouldn't rule out one day the GDS looking to take HRS content to enrich its offering.
BBT: Are distribution channels for global corporates too fragmented?
JW: No. I think there is confusion here - what's important is that the corporate is able to use all channels and select all the content they require. In the past, the corporate chose a service provider and it told them what channels and content they'd be using. Over the past two years we have set HRS up so that corporates can access our content any way they want. We have the potential to provide content into the GDS, we have an open API [application programming interface] which allows third parties access to distribute our content, we run mobile applications and corporate websites, and we have a call centre. We are integrated into TMCs, online booking engines and comparison websites. And if the corporate wants the content through those channels to be their negotiated rates and preferred hotels, then we can do that at the point of source.
BBT: Public sector cuts are likely to decimate the number of hotel nights booked by government workers and civil servants. Would you agree that the Con-Lib coalition is making a grave mistake by cutting back so ferociously?
JW: No. It's often the case we are obliged to pay our fathers' bills. We have a responsibility within this society to ensure we create a world that is right for our children, even if we have to pay a penalty. The opportunity, in relation to the travel industry, is if you take a self-service attitude and cut out waste, you could make enough savings to maintain the volume of hotels you are currently booking just by using alternative channels.
BBT: Is there potential for consolidation in the HBA world?
JW: Yes, but not for the massive cottage industry of one-man bands that exists, particularly for the booking of meetings and events - it will happen on the basis of acquiring clients and reducing overheads between combined organisations, giving a more efficient service that cuts costs of distribution and, therefore, offering a more economic service to the corporate.
BBT: You have a background in web development and technology. How does the corporate travel sector compare to other industries in terms of its technological maturity?
JW: It is immature, but I don't think it's the fault of the travel industry. The GDS came before the internet, and that was what the industry was built around - and the TMCs built their services around the GDSs. It made for much easier distribution of content and acquisition of tickets. Other industries have been much more willing to exploit multiple channels and to ensure there is a single source of content that can be distributed across multiple channels. The travel industry is still enterprise-centric, and the people who have adapted to technology much faster are customer-centric and have allowed customers to access the same content through multiple channels. They have allowed the individual customers to make a choice how they access content, even though it is the same in different channels. In the last year I've seen a huge shift in corporate thinking towards being customer-centric in terms of technology. There isn't such a thing as catching up in technology, because you can enter in real-time.
BBT: What is the biggest challenge facing your business in 2011?
JW: Managing growth - we are growing at a fantastic rate. I think it's the distribution of our open API through multiple channels that we must manage most closely. We opened a new API channel about four months ago - the organisation was nowhere near the UK and it has now distributed that content through a UK provider and, without me doing anything, we have gained about £500,000 of business per month.
- Jon West is HRS director in the UK and Ireland. He was previously marketing director at IS Solutions, where he spent 13 years working on internet strategies for Eurostar, Forte, Granada, Sony, Toyota, Visa and Woolwich. In 1996 he was instrumental in the launch of thomascook.com.