It wasn’t too long ago when most of the hotel bookings were made through HBAs (Hotel Booking Agencies), TMCs (Travel Management Companies) and direct to hotels.

Published: 28 Jun 2011

It wasn’t too long ago when most of the hotel bookings were made through HBAs (Hotel Booking Agencies), TMCs (Travel Management Companies) and direct to hotels.

As a technology product, the GDS system is and has been the pre-eminent choice of technology to deliver these such bookings. The other favourable way to book accommodation was for an agency to call a hotel or walk-in.

Then technology suddenly evolved and the front running providers of online technology for leisure travellers excelled in this area and gained gigantic market shares from leisure travel.

OTAs (Online Travel Agencies) were growing like mushrooms in warm rain. Hotel-inventory and content was routed and re-routed so that hoteliers lost sight of what distribution channels there were and how many middle-men were involved in the process. Everyone provides those much needed bookings, so closing a channel is not the attractive thought either. Every single one wants last room availability and best rate. In contrary, rate parity clauses are common in the industry which means that in general, all distributors have the same rates available and perceived savings, and the money-back-guarantees are there to attract those leisure travellers to think that they are getting a really good deal exclusive to the leisure website.

How this works is that basically everyone gets the same selling rate from the hotel. However the distribution cost for the hotel can vary significantly.

Processes are not transparent and lack of automation makes it difficult to measure the true value of the channel.
With a room that is distributed the wrong way, 60 percent of the selling price goes to distributors and in many cases the contract promises ‘last room’ for the fixed price, eliminating hotels to yield their prices based on demand. Thus the distributor does it for them and keeps the margin.

Hotels are getting smarter, technology is getting smarter and the much required transparency starts to reach the hotel booking industry.

The number of times hotels will cut out the most expensive distribution partners and vice versa is yet to be seen but natural development will take care of the problem.

Hotels cannot afford extremely high distribution costs on top of the premises, services and the actual product that requires on-going investment.

(This article was posted on Hotelzon’s blog, contributed by Jani Kaskinen, CEO, Hotelzon International).