In view of the turbulent ups and downs in the US & European economy, business travel buyers are increasingly looking at newer opportunities to cut travel costs. Our own internal bookings report for HotelHub shows almost flat growth in GDS hotel bookings in 2011, while non-GDS bookings grew at a much faster pace. We first noticed this growing share of non-GDS hotel bookings in mid-2011 and the full year data confirms this trend. While this is strictly based on bookings passing through HotelHub, we believe that this represents a wider, emerging trend.
What is driving this trend for increased bookings through non-GDS hotels? Looking at what is happening in the market, we have identified the following factors:
Business travel slowdown imminent
Last week GBTA forecast that business travel spend would increase 4.6 percent in 2012, but that growth is expected to be slower than past year – with a 0.8 percent decline in person-trips. Last week also saw a report that U.S. travel agency air transactions processed through ARC in December decreased 4.6% year over year – the 11th consecutive month of declining volume.
Rate negotiation process is getting increasingly tougher
As hotels try hard to remain profitable in a slow economy and with declining market demand, they have toughened the rate negotiations with buyers. Initial reports indicate rate increases in most markets. This is forcing corporate travel buyers to look at alternative strategies to generate savings from their travel programs. Some are consolidating hotel use to fewer properties, so that the volumes can be used for negotiating lower rates. Others are looking at benefiting from negotiating off-cycle (like Citi does by running their program from April to March).
Demand for wider range of rates to aid policy compliance
With negotiations getting tougher, corporates must still focused on their key objectives of improving travel policy compliance and security for travelers during business trips. They are finding a better value proposition in using hotel aggregators. The real-time availability of rates and inventory from GDS and non-GDS channels helps corporates access to wider rate options, without compromising on amenities.
Hotel aggregation offers key value proposition
Aggregating GDS and non-GDS hotels from multiple channels to a single interface, helps Travel Managers and TMCs save lot of time and cost in servicing booking requests. The latest versions of HotelHub already displays policy compliant hotel search results customised for individual traveller profile, which offers a major advantage in corporate hotel reservation process. The technology behind this has undergone major refinement over past few years due to better connectivity and common standards adoption across the industry.
The limited hotel/rate choice traditionally on a GDS and largely exclusively used by TMCs, has capped the share of business travel hotel bookings that channel could attract. Buyers are moving to other options offering wider choice. The moves by GDS firms to aggregate non-GDS content is an indication that they are realizing the gap and are attempting to do something about it. But TMC and corporate buyers as well as the economic and resulting business travel slowdown will probably continue to change the way GDSs are addressing these business models in the future.