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.

Travelers are increasingly relying on mobile devices and apps to plan and travel around the world. As faster and smarter phones are being rolled out, the booking tools are going mobile too but on a slower pace. The number of mobile bookings in the travel space has accelerated from $20 million in 2008 to over $200 million in 2010. (eyefortravel, May 2011)

Businesses travelers are demanding the same level of convenience and functionality from their mobile devices as on their desktops. A recent survey by Sabre in August2011 reported that two-thirds of travelers want to search and book hotels on a mobile device.

Hotels are increasingly going mobile
According to TripAdvisor’s latest ‘Accommodation Owners Survey’, 84% of respondents feel it is important to offer a program that allows travelers to book their inventory using mobile devices. There are many technology providers today who offer mobile booking capability as part of their package or as an upgrade.

Mobile hotel booking tools are becoming commonplace across websites and social media channels like Facebook. This quick and easy accessibility is leading more and more users towards self-booking of hotels and flights. Larger hotels have already started seeing the behavioral changes due to mobile accessibility. The bookings through mobile channels are growing fast, however lead times to arrival is getting shorter.

With both the ‘consumers’ and the supply-side of the market increasingly adopting mobile booking technology, there are some potentially significant implications for TMCs, presenting both risks and opportunities.

Travelers demand better mobile technology experience
Rather than relying upon their TMCs’ systems to check options and availability of flights and hotels, travelers are simply pushing buttons on their smart phones to achieve this. This is a trend that is not going to go away.Traditional paper tickets and formal travel documents have already largely given way to digital boarding passes and mobile itineraries, and mobile booking technology is just an extension to this trend.

This demand for convenience and accessibility has the potential to seriously impact upon the traditional relationship between the business traveler, the corporate Travel Manager and their TMC partner.

TMCs need to look at embracing this mobile technology and harnessing it to strengthen their relationships with the their corporate clients otherwise they risk being increasingly marginalized.

Policy compliant booking processes are key irrespective of screen-size
Corporate travel managers demands for efficient booking technology to support them will not change – irrespective of screen size. They are still focused on their key objectives of improving travel policy compliance and improved security for travelers during business trips.

TMCs need to demand that their technology partners can deliver the sort of mobile booking technology solutions that their customers are demanding of them. A number of travel technology vendors today already provide a useful and unbiased display of travel options on a single screen, by gathering their data from the various GDS and non-GDS channels. Search results can be ordered by preferred hotels or chain, star category, and budgets.

By accumulating this data from multiple sites, the user benefits from a wider range of options to suit their budget and requirement. With some technology solutions, search results can already be tailored to reflect a customer’s travel policy and budget. This makes hotel reservation process much easier and faster with least manual intervention. This highly efficient and compliant solution now also needs to be available via mobile technology.

Some of the newer technology tools on the market also offer the ability to track business travelers in case of emergencies, natural disasters like earthquakes or ash clouds – offering a much needed control in times of crisis. These same features are slowly but surely moving onto mobile to benefit business travelers.

Mobile technology isn’t a panacea – it is no replacement for personal service
But what happens when the traveler is unfamiliar with the destination, or when a trip involves complex itinerary? In such cases, mobile or online booking services become less helpful, and the traveler can benefit from the use of a good travel agent and the ‘human touch’ comes into the picture. Travel agents are able to provide valuable information by tapping a wide range of resources not readily available online. The knowledge and experience seasoned travel agents command appeals to travelers who value service over price.

There’s no doubt that with the evolution of travel technology, self-bookings via mobile are going to grow further. However, business travel with all it’s complexities will always value the ‘human touch’ of travel agents as they do today. Smart TMCs would benefit by adopting the changing technology to improve their offerings, customer support and strengthen loyalty in these challenging times.

It appears that speculation surrounding the future shape & role of the traditional GDS within the business travel sector continues on an almost daily basis. Most recently this speculation has been fuelled by the news that American Airlines (AA) are apparently attempting to persuade travel agencies to use direct connects, bypassing the traditional GDS route. The airline wants to cut costs and get closer to customers by tailoring offers, which they feel isn’t possible with existing GDS technology.

But industry experts believe that AA is just the first airline, and there are others including Delta Airlines, ready to announce their own direct connect plans.

When and if other airlines follow this path, the main GDS providers could soon see millions wiped off their revenues and consequently their stock market valuations. The irony here of course is that the GDS technology was originally created for airlines! However, the perception is that the GDS providers have been slow to respond to changing market conditions and it wasn’t until the recent recession shook the market, that they thought of lowering their reliance on air revenues. Now it seems that they are seriously looking at other segments to continue their growth and spread their risk.

It appears at the moment, that hotels seem the best bet, and several of the main GDS providers are working hard to develop their business model to maximise the opportunity presented by hotels.

The reasons for this move to hotels are clear – market forces! According to The Pegasus View Oct 2010, hotel reservations are growing at a healthy pace of +20.7% year-over-year. The growth in ADR at +6.5%, combined with a growing ‘length of stay’ has contributed to the +32.3% revenue growth for the month.

Corporate travel drives a major share on the GDS, and the growth points towards a recovery. Pegasus’ Forward Looking GDS booking forecast for November till March 2011 also paint a picture of growth. Net reservation would grow to 34% y-o-y by March 2011, while ADR is expected to grow by 14% for the same period. This would all lead to net revenue growth of 62%.

Several major GDS providers have introduced their new technology offering for hotels this year. Amadeus’s recently introduced Hotel Platform, Travelport’s new mobile booking solution, and Sabre’s Red platform slated for launch in Q2 of 2011, are all geared to increase hotel participation.

Corporate travel demand is expected to be stronger in the next 6 months, and that has the potential to significantly drive forward the hotel numbers for the GDS providers – if they can succeed in their strategic drive toward Hotels. Further current efforts by GDS to grow the hotel count on their systems would help them grow these numbers further and provide an increasing buffer against the seemingly inexorable rise of online Hotel Reservation Systems.

Now, if only the economy remains stable across US & Europe!

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HotelHub is a web-based hotel booking platform designed to provide a seamless, end-to-end technology solution for booking hotels for business related travel.

Developed by Travel Centric Technology, the HotelHub system utilises inventory and rates from multiple channels – including GDS, alternative distribution channels and direct connects – to provide a market-leading level of rich hotel content and functionality to its users. It also simplifies the process of booking hotels manually where online transactions are not possible.

With over 200,000 hotels already within the system, a number growing on a daily basis, HotelHub offers a complete solution for booking hotels anywhere in the World. Put simply, HotelHub allows you to book any hotel, anywhere, at anytime.

HotelHub offers the perfect solution for Travel Management Companies (TMCs) who wish to improve their hotel proposition whilst retaining control over their GDS hotel transactions.

The system is also ideal for Corporate Travel Managers, or for travelers who are self-booking with TMC support.

Find out more about the benefits of HotelHub for your organisation by exploring our website.

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