While President Obama doesn’t expect another recession, the recent, rapid stock market decline has worried both investors and businesses. Fears of recession have gathered pace after JPMorgan lowered economic growth estimates for America, following a similar move by Morgan Stanley. Due to these concerns, the Baird/STR Hotel Stock Index comprised of 15 of the largest hotel companies publicly traded on a U.S. exchange, is down 22.5% for this month.

This has brought back the memories of the 2008-09 downturn, which affected almost all parts of the travel industry. There’s huge demand from companies to ensure employees are travelling with good reason and within pre-defined policy limits.

Travel Management Companies(TMCs) with technology supporting and helping companies to efficiently manage these demands will find it easier than others to tide over a downturn.

The last downturn has forced travel agents to analyze their technology needs and invest in new systems to improve efficiency. Even during these tough times, travel agents can take few steps to prove their value to customers -

A. Attract new clients

It might seem out-of-sync, but a downturn brings a churn in current business relationships. It is well-established from past research that travelling and doing business face to face is fundamental for growth. So, business travel itself may not see a big slowdown.

However, companies unhappy with current legacy systems to manage their business travel will look for efficient alternatives – which opens an opportunity for smarter players to grow their client base, by using scalable technology to offer better service at lower costs.

B. Cut costs – increase profitability

In many cases, companies are noticing that their costs of doing business are steadily rising. Add to this, the customer pressure for lower rates, and agents have a real, customer driven challenge on their hands – cut costs to survive.

Fortunately, advances in the technology available to support TMCs offers a potentially very effective solution. Agents should look at identifying the right technology partners, who can help them…

C. Get clients to spend more

If you have been losing business because your clients have cut travel budgets, it’s time to ask: Can you offer hotels with a wider choice on budget, while complying with the company’s travel policy?

“With a huge selection of 200,000 hotels worldwide from GDS and non-GDS channels on HotelHub, your customers can find a hotel to suit any budget,” says TCT CEO Jay Virdee about HotelHub, “HotelHub helps companies enforce travel policies across the organization, and helps control costs during downturn. TMCs can use technology in this way to maintain their revenue flow without adding costs.” Your booking system should help you grow business when your competition frets.

D. Add Value for your clients by better servicing their needs

Agents need to find new ways to improve their operational efficiency in current booking and service processes. Can you show value to your clients in lower costs to process bookings? Cloud-based SaaS solutions help reduce down-times, offer ease of anytime anywhere bookings, and quicker turnaround times.

Tough times don’t last, but smart companies who use smart technology certainly will…

Image courtesy: seekmee

As more bookings are coming through online channels, hotels are upgrading their technology strategy on how they approach their current and potential customers. Offering discounted rates and advertising is no longer seen as the way forward, because customer behavior is changing fast with the growing use of social media and mobile technology. Some developments seen over the recent years are…

Not particular about brand loyalty:
In their 2011 travel forecast TripAdvisor reported that, only 39% of travellers surveyed said they are faithful to one hotel brand, down from 59% a year ago. It is believed that this is due to customers being much more aware of options today than ever before. The last recession too has affected the business traveller behaviour with stricter policy compliance and budget limits. The luxury of 5 star stays were replaced with 4 star or even lower accommodation.

With no serious brand preference, things are at a stage where a good online deal from any decent hotel could change a purchase plan – putting a huge question-mark on hotel loyalty programs. With access to competing deals, the guests care less about brand loyalty and more about value-for-money. Hotels have to put extra efforts to understand their guest’s demands, and create a beneficial loyalty program to retain interest and repeat visits.

Finding the right hotel is getting easier:
For the past many years, search engines were the major gateway for finding hotels in any destination. But, things are changing with the emergence and quick spread of social networks, and the impact on the hospitality industry is huge. Hotel review aggregators like TripAdvisor make it easier for business travellers to select the right hotel, based on past guest’s experience and comments. With Facebook integration, it’s possible to find reviews from one’s friend-list, which is more valuable than those from strangers. “The conversion rate on direct referrals from traveler review sites to hotel supplier websites ranged from 4% to 6% in 2009, while conversion from Facebook to hotel websites was 8%.”- HotelNewsNow

Another new service called Room77 goes a step further, by helping users submit reviews of individual room in any hotel. With the growth of such services, selecting a hotel and even a specific room is getting easier for the traveller. This is reflected in Financial Times’ just released 2011 Travel Global Impact Study, which says ‘most commonly used booking channel was directly with the airline (40%) or hotel (46%)’.

Book your stay from anywhere anytime:
Over the past years, the ease of mobile travel research and booking has changed the consumer behavior. Hotels are being booked on tablets and other mobile devices, while travellers are in airports or transit, resulting in narrowing booking window between the booking and arrival date.

eMarketer expects mobile channel to attract 24.6 million travel researchers and 11.8 million bookers in 2011.

Hotels having mobile optimized websites are encashing this opportunity. Mobile apps have made it quick and easy allowing business travelers to check a flight’s status, book hotel and check-in while still on the road. HotelHub‘s soon-to-launch mobile app would enable a business traveller to book hotels worldwide from any connected mobile device – within the budget/limits set in company’s travel policy – all handled seamlessly at the back-end.

Demand better service and get it:
Many hotels, including early-mover Hyatt, have been using their Twitter as an online concierge or customer support channel successfully, with dedicated staff manning their accounts round-the-clock. Their focus on service – and not promotions – using social media seems to have paid off, from their huge follower counts. This service focus also is part of the larger reputation management strategy, as travellers are becoming very vocal about their experience – mostly negative – at hotels. The viral nature of social reviews can damage reputation built over years. So, hotels are leaving no stone unturned to meet their guest demands.

Hotels that have moved to social and mobile channels have seen benefits with better engaged customers and higher conversions. According to the latest ‘L2 Digital IQ Index’ report, social media is a significant traffic source for 78% of travel sites. The hotelier and guest are more tech savvy now than ever before. With the fast changing social media and mobile technology, the traveller behavior would continue to evolve.

In March 2011, the US Department of Justice finally decided to OK the $700 million Google-ITA deal in favor of Google. The question on everyone’s mind is how would Google’s travel game-plan affect the travel industry. Every new feature addition from Google since then is getting wide attention. The new rate displays on Google’s hotel search results is one such feature which is expected to affect many travel industry segments.

For close to a year now, Google has been quietly experimenting ‘Hotel Price Ads’ that displays ads with hotel price for hotel searches inside Google Maps. In some markets this has already gone live. We have found three variants of this new ad format being tested currently…

A. Local Seven-Pack: for a query like “new york hotels”, the rates don’t display directly in the Seven-pack, which is the top 7 hotel results taken from Google Places. The user needs to click either the Place link or the Map to see the rate display on search results as seen below.

B. Google Maps results: for the same query ‘new york hotels’ the Google Maps search result now displays the hotel rates from multiple OTAs.

Here’s how the map displays Google price ads…

C. Place Page For a Hotel: The Google Place page for specific hotel too displays the hotel rates from multiple OTAs.

So what does this mean for the various parties involved?

Online Travel Agents(OTAs):
Though they have to pay for it using AdWords, OTAs currently get better visibility (above the hotel’s direct link) on Google’s rate display. The click on rates takes the user directly to the booking confirmation page on the OTA site, which should be a driver of conversions. Google has indicated it will open the service up to a wider range of advertisers

Hotels:
Google’s current rate display leaves hotel link at the bottom of all other options, and most times the direct rates aren’t displayed. This could be because the hotel’s direct rate feed isn’t integrated into Google at this moment. But this acts as almost an inducement for users to book with OTAs because they may not take the extra trouble of going manually and finding rates on direct hotel site.

Hotel loses anywhere between 10-30% in commission for the booking which comes in though OTAs. For the same hotel displayed above, we found the rates on direct site were at par with OTA rates as seen below…

So effectively the hotels aren’t going to see any advantage with this rate display unless they integrate their direct rate feed into Google while also ensuring their direct rates are lower than OTA sites competing there. There is a serious risk to their margin unless they act on this.

Business Travelers:
The business traveler benefits here, as the search result displays rates across multiple OTAs, making comparison and decision making easier than before. However, this would be limited to an individual booking.

The larger companies and Travel management Companies too would be using hotel booking systems (such as HotelHub) which can already pull best rates from multiple GDS and non-GDS channels. So, this might not be of much interest to them.

All said and done, business travel is still small compared to the much larger leisure pie. Google knows when this new rate display functionality comes out of the experimental stage and becomes available to all users worldwide, competition among OTAs & hotels to increase visibility will dramatically increase and the click rates they can charge will increase exponentially. In short, Google makes money irrespective of whether this would affect the profitability of OTAs and hotels.

During the past month, the travel industry has been buzzing with news on airline-OTA direct connect spats, lawsuits and even deals. The issues at the heart of all this buzz and news revolve around distribution strategy and the battle to control and optimize the return delivered by competing channels to market. There are many parallels for the hotel industry.

While hotel suppliers have an obvious interest in minimizing their distribution costs, they need the wider reach of hotel aggregators to grow their business. The question for hotel suppliers is whether or not this reliance upon content aggregators is a short-to-medium term need that can be eventually reduced by building their direct booking channel or is it a permanent, effective and strategic part of their distribution strategy?

It is apparent that historically most hotels have not invested enough time and money into growing booking share from their direct channels and many hotel suppliers within the industry lack the online marketing expertise and financial resources required to significantly grow their direct bookings.

This is reflected in TravelClick’s booking data, which shows that the share of bookings on brand (hotel) sites is declining when compared to those on merchant sites as seen in the table below…

Driving these trends is the ability of these content aggregator websites to service the needs of the hotel buyer more effectively than the direct booking channel. This is particularly the case with business travel where content aggregation provides a number of significant advantages over stand-alone, direct websites.

While hotel aggregators are at an advantage with their technology and customer reach, they do offer benefits for both hotels and business travellers alike. Here’s how…

Benefits for the Business Traveller:

The technology used by a ‘typical’ hotel content aggregator collects, sorts, standardizes and presents the rates and inventory information in real-time from various channels into a single interface to help simplify the booking process. This used to be a complex process, but with the adoption of common technology standards/API, availability of better hardware, cloud computing and faster online connectivity at cheaper costs, hotel aggregation technology has improved significantly.

A hotel content aggregator, such as HotelHub from Travel Centric Technology, boasts an interface that meets all the needs of today’s business travel buyer presenting rates and inventory seamlessly from numerous GDS and non-GDS channels in a single display.

Content aggregators simplify the frequently complex business requirements from TMCs and their customers for the end user, the person booking business travel. The search results offer a wider range of options, are easier to compare and select, while respecting customer travel policies.

Travel managers and TMCs are increasingly turning to integrated hotel solutions like HotelHub, which enables them to enhance their service for their business travel clients. Travelport also provides a Universal API to aggregate content from multiple partners.

The Benefits for Hotel suppliers:

With the effects of recession still lingering on in most parts of USA & Europe, hotels are uing every possible tactic to stay profitable. Most have clearly that understood online is the next growth area, and have invested in professional websites and booking engines.

Selling rooms directly from your own website is a good start, however, the next level of growth can only be achieved if you secure effective distribution of your content to ensure it reaches the maximum available audience. If your booking engine can communicate with a universal API hosted by a hotel aggregator this is a very good start.

Although customer reach is the main goal the efficiency savings are also considerable. For example, inventory and rates need to be updated only once, and the system would automatically spread it across all channels you have authorized. Most aggregators offer seamless integration for your content to show up on their sites.

An alternative, longer-term option for hotels is to start investing today to build traffic and user-engagement on their direct channels – hotel website, and social media channels like Facebook, Twitter – which over time would help reduce dependence on OTAs and other costlier channels. The revenue management basics also point in this direction – hotels need to analyze their current sources of booking and the related costs. Then, work on maintaining or growing booking share from more cost-efficient channels to grow profits. However, the investment required will be significant and whilst this might work to attract leisure travellers, for business travel the need for intermediaries remains clear.

Aggregators do still need to work hard to add value for hotel content suppliers in particular by: providing a simple API interface; by allowing them to upload rich media content and by providing effective marketing solutions to promote their assets. Content aggregators should play a key strategic role in any hotel suppliers distribution strategy and be viewed as an essential channel partner rather than a competitor for margin.

What Business Travelers Want:

The business travel booking process is complex and time-consuming, and it is logical that business travel managers would embrace any channel that makes it easier for them to find the right hotel at the right price worldwide. This is much preferable to trawling through endless direct hotel websites to find rates and inventory availability and then trying to figure out which ones comply with business policies.

Direct connects are good when they help shave off that extra distribution cost, but just won’t help when the client wants to compare multiple options and choose the best option, while remaining within travel policy guidelines. In particular issues of travel policy compliance and crisis management implication mean that companies increasingly have a legal obligation to track the whereabouts of their business travellers – a situation made substantially more difficult when using multiple direct bookings.

Delta airlines signing the direct connect deal with Farelogix, shows that also airlines ultimately need an aggregator, to have a wider customer reach. The situation with hotels is no different – though the significance of direct connects may increase over time, content aggregators will continue to be a critical component of any effective distribution strategy.