Why Hotels Should Stick With Independent Technology Suppliers
In the past few years, large online travel agencies like Booking.com and Expedia have developed free revenue technology tools for hotels to use. These tools (including revenue management, online reputation management, and more) solve a significant issue for hotels. Namely, how to develop and execute advanced revenue strategies without spending lots of money on the necessary technology.
However, we would argue that hotels are better off sticking with independent technology suppliers, not tied to any one distribution channel.
Providing these tools allows OTA’s to occupy a clear, unique and advantageous position in the hotelier’s mind. They are being used to re-shape the OTA’s market position by solving hotel’s pain points, in the same way any business strives to solve problems for their target markets.
The recent ‘book direct’ movement among many independent hoteliers, who have been chafing at high commission fees and a lack of negotiating power, has caused some occasional tension with OTA’s. These tools are a way for OTA’s to rebuild good faith with their hotel partners – unfortunately, they also come with a few catches.
Tech Lags Open the Door
It’s no secret there’s a tech lag in many hotels, particularly in independent hotels. They might not have the budget or desire to immediately upgrade systems, even as they seek to develop more sophisticated revenue strategies.
As an example, a Phocuswright & Siteminder report from 2016 quote revenue management system usage at only 10% in the USA and just 6% in Europe (article here). That is shockingly low, considering the massive benefits and returns of a revenue management system.
Getting financing for revenue software is one of the items which can be toughest to get across the line. It’s much easier to justify why the carpets need to be replaced now, but the time and financial investment for software can often be put off when it’s deemed a department is operating “just fine” without it.
Now, imagine that software that would give you back hours every week, improve your bottom line and skyrocket your hotel revenue is being offered for free. It’s difficult to turn that kind of opportunity down.
That’s exactly what OTA’s are offering – so why say no? The reasons to refuse are more compelling than you might think.
What’s On Offer?
Here’s a quick round up of some of the latest tools from Expedia:
- Rev+ (currently USA & Canada only, global rollout planned): Revenue management data and insights, helps you optimise revenue from Expedia
- Value Ad: Add-on items for bookings – creates opportunity for additional revenue for Expedia bookings
- Central Conversations: allow direct communication with a client, focused on relationship building
- Guest Review Insights (reviews in English only): focuses on online reputation management, one of the biggest influencers in decision making
A look at the landing page for Expedia’s Rev+ tool
And there’s more to come! Expedia adheres to a ‘Test & Learn Philosophy’, and they keep it core to all they do – they’re even ‘testing’ their new office space.
Expedia’s stated end game is to “democratize the data” and create a competitive advantage for hotels lacking the budget to support leading revenue-management software. The strategy is particularly geared toward smaller, local properties seeking more B2B opportunities.
On the surface, it appears that Expedia have solved some core software issues and at no cost. However, with a marketing spend of $4.3 billion in 2016 alone, Expedia have a sizable vested interest in the success – and the data – of their partner properties.
What’s the Catch?
It looks like Expedia are solving a problem for hotels – what’s the catch?
Firstly, all of this commits the hotel partner more closely to Expedia. Hotels become more dependent on the OTA, not just in the traditional sense as a source of accommodation revenue, but for software that they badly need and otherwise may not have access to due to resource limitations.
This means that, if a hotel wished to dissolve their partnership with Expedia for any reason, they’d risk losing all their revenue and guest management software along with the Expedia distribution channel. Hotels must keep control of their own inventory.
Secondly, the data is related specifically to Expedia bookings, when really hotels should invest in software that encompasses bookings or reviews from all channels. It may serve your Expedia analysis well, but the data could look quite different for other channels.
A guest review tool, for example, should be able to aggregate and analyse reviews and social sentinment across the web, not just on one channel.
A caveat: The central conversations tool and value add tool are beneficial to hoteliers – since they only apply to bookings from the Expedia platform, you don’t risk losing much data if you decide to step away from Expedia. For example, a value add tool will be useful for individual bookings, and you aren’t necessarily hurting yourself by using a tool that only works on one platform. Additionally, the central conversations tool may give you the chance to capture guest loyalty. However, it would of course be better if you had an equivalent tool that functioned across every online platform.
Hotels need to be clear on the pitfalls of committing so heavily to an OTA supplier to gain insights they do need.
Hotels must invest in their properties, and not just in the physical product. They must be realistic and aware that the quality they get out relates directly to the quality they put in.
Hotels are quick to say that their focus is to grow direct bookings, but don’t always invest and work hard enough for it. Think about it: you can’t spend €5 million on a hotel refurbishment and then only €5 thousand on revenue & marketing activity.
In the end, you get what you pay for.
Expedia have a highly valuable resource with their global hotel partner panel, which has close to 5,800 clients signed on. They appear to serve the engine driving much of Expedia’s innovation for their approximately 300,000 partners. (article here)
Positioning themselves firmly as hotel ‘partner’ with a friendly proactive approach sounds and looks good, but it’s important to remember that this is part of a clever rebrand to distance themselves from how hotels perceive OTA’s right now.
Going back to market positioning, Expedia are simply applying the same gusto to their B2B market position that they have traditionally done for B2C relations.
Happy Technology Alternatives
Happily, it’s not Expedia’s way or the highway. There are great, independent revenue technology solutions out there, with no ties to channels that compete with your direct website for bookings. We’d advocate sticking with independent suppliers when it comes to your technology providers.
Hotels, as we mentioned above, should invest in technology that focuses on bookings or reviews from all channels. Technology from a distribution channel is heavily tied to that channel.
If your goal is to drive direct bookings, focus on your metasearch presence, or even to drive bookings through an OTA other than Expedia, there’s only so much these tools can offer you.
In simple terms, it’s the right software but the wrong supplier.
A few of our favourite revenue technology solutions are IDeaS and I-Rates for revenue management system, For-Sight for building guest relationships, and ReviewPro and Revinate for review optimisation.
Do your own research to find out which independent tools suit your hotel’s needs and budget best.
Invest and believe in your own property and its brand with the same gusto as the OTA’s do in theirs. Focus on what is the best for the long-term success of your property, and not on putting a temporary band aid over issues that needs a robust solution instead of a quick, free fix.
Justify the real investment needed in your property by showing the long-term cost and time savings.
Learn from experience! Being too closely reliant on a third-party supplier puts you in a vulnerable positon. Instead, turn to robust software from independent suppliers. You’ll be able to optimise your revenue strategy to focus on the channels you want to focus on.