Sharing-economy impact small compared to OTAs
 
Sharing-economy impact small compared to OTAs
20 OCTOBER 2015 7:44 AM
Executives at the recent HICAP event said the sharing economy cannot be ignored. That does not mean hoteliers should shift focus away from OTAs and metasearch platforms, however.
HONG KONG—The sharing economy is a force to be reckoned with, but its impact is still less than that of online travel agencies, according to hotel executives.
 
The disruptive influences of each were discussed during the “View from the top” panel at last week’s Hotel Investment Conference Asia Pacific. 
 
Moderator Paul Alik Macpherson, executive VP of global business and real estate development for Kerzner International, said Airbnb is gaining momentum, with its revenues of $900 million expected to grow 10 times by 2020.
 
“They’re an extremely serious competitor,” said Michael Issenberg, chairman and CEO for AccorHotels Asia/Pacific. “We have 300 hotels in greater Paris. There’s no question they’re having big impact there.
 
“It is real supply coming into the (global hotel) market,” he added. “That is going to be competition for us. There’s no doubt.”
 
The biggest impact is on the economy sector, Issenberg said, but that will change sooner rather than later.
 
Gerald Lawless, president and group CEO for Jumeirah Group, said the Dubai Department of Tourism is taking steps to require Airbnb hosts to register their units. That aligns with the goals of the emirate’s hotel industry.
 
“They’re here to stay,” Lawless said. “We better see how we can compete with them effectively and embrace them.”
 
Jennifer Cronin, president-designate for Hong Kong-based Marco Polo Hotels, said there is a way to look at the Airbnb issue in a positive light.
 
“Accepting that this is here to stay … it brought a new market that wasn’t necessarily traveling as much as before,” she said. “It’s aimed more at the economy traveler, but once they’re used to traveling, we should aim our product at get them to start using our product.”
 
None of the panelists said their companies have any near-term plans to enter the sharing-economy space.
OTAs, metasearch still more disruptive
The effect of the sharing economy is small compared to the impact of online travel agencies and metasearch websites, the executives said.
 
“To me this is the single biggest issue facing the industry,” Issenberg said. “The power that OTAs and metasearch have created is extraordinary.”
 
Lawless said he wonders if the relationship has to be combative, especially because hotel companies have signed deals with OTAs and commission rates have dropped—some significantly and some not nearly enough.
 
That means hoteliers must be nimble with their business plans to compete with the pressures of third-party online distribution channels.
 
“There’s a case to be made of, ‘What if we work with them?’” Lawless said, adding that it could be less expensive to use a third-party system instead of your own.
 
“If the whole business model is changing, why do we keep such large sales forces?” Cronin added. “Maybe we don’t need to do that anymore.”
 
The reality is that OTAs remain just one piece of the distribution puzzle for hotels, speakers said.
 
“It’s also about maximizing each distribution channel with the best yield,” Cronin said. “It also comes back to your revenue management people and how agile and how reactive they are or proactive in making their decisions.”
 
A question from the audience about AccorHotels’ recent addition of independent hotels to its branded website distribution platform led Issenberg to say that it’s independents that are getting hit hardest by OTA commission rates.  
 
“We need to create competition, and the marketplace we create is creating that competition,” Issenberg said. “In reality (AccorHotels’ platform) is a curated OTA. The first port of call is we respect the hotels we are engaged with in terms of territorial constraints. It drives more overall traffic to our websites. We won’t sit back and be passive. We work actively with OTAs and are actively focused on driving additional business directly to our hotels.”

 

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