Disruption, loyalty play major roles in distribution
Disruption, loyalty play major roles in distribution
16 JULY 2018 9:10 AM

Innovation created by disruptors often leads to better distribution options for hoteliers as they strive to provide loyal guests with experiences and services that convince them to book rooms on brand.com channels, according to a panel revenue specialists.

WASHINGTON—The ever-changing hotel distribution landscape continues to regularly alter the way revenue specialists think—and that’s not going to change any time soon, according to panelists on the “Reordering the hospitality universe” session at last week’s Revenue Strategy Summit.

“The core issues of distribution, acquisition costs, where we put things on the shelf … all that stuff stays the same,” said moderator Andrew Rubinacci, president of AMR Hospitality Consulting and former SVP of distribution and revenue-management strategy for InterContinental Hotels Group. “It’s the players that change.”

Ash Kapur, SVP and chief revenue officer of hospitality for Starwood Capital Group, welcomes the so-called “disruptors” that continue to emerge in the hotel space. It’s a positive because they create more distribution options for hotels, he said.

“I can now pick and choose who I want to work with from an online distribution standpoint,” Kapur said.

The emerging platforms often show hotel companies consumer patterns that eventually force them to make big decisions, he said.

“We are living in a generation that we love marketplaces,” Kapur said. “Hotels have to decide very quickly: Either they become a collection of brands that mean something or they become massive marketplaces.”

Rubinacci said the situation that’s developed in the hotel industry can be described as stay brands vs. booking brands—and booking brands such as Expedia and Booking.com have in many cases gained the upper hand against traditional brick-and-mortar brands.

“You’ve got to start competing on the booking brand … there’s so much value to be gained from it,” Rubinacci said.

“At the end of the day, a disruptor is really an innovator,” said Alexander Pyhan, VP of distribution-OTA, meta and wholesale for Marriott International. “When you use the example of Uber, they have addressed a consumer need before the consumer even knew they had it. That’s why Uber is very successful.”

Brian Berry (left) of Cvent, said true disruptors in the lodging space introduced new business models that require technology to exist. Also pictured is Alexander Pyhan of Marriott International. (Photo: Jeff Higley)

Brian Berry, SVP of sales and data analytics for Cvent who spent 26 years working for hotel companies, agreed.

“The true disruptors in the space—the Ubers and Airbnbs—are truly disruptive because they introduced new business models that require the technology to exist,” Berry said.

Disruption in the industry will take many forms, the speakers said. There will be more consolidation in the hotel industry with big companies joining forces to compete with a marketplace mentality, according to Kapur.

“The winners in this space will be ones who can be attached to a marketplace and also give the consumer something more than a loyalty program ... a reason to stay with them,” he said.

The link to loyalty
Loyalty programs, however, are often the driving force behind distribution and all that goes with it, according to speakers. Kapur said the hotel industry must figure out the best path for its loyalty programs to be most meaningful to distribution and revenue generation.

“The key game becomes building that loyalty,” he said. “To me, loyalty goes (beyond being) a simple gold, silver, platinum. We end up following an (airline) industry that is now making profits, but traditionally we have a followed an industry that has been known for bankruptcies.

“Loyalty is not about tiers or layers. Loyalty is about knowing your guests.”

That knowledge means understanding their needs and delivering great experiences, he added.

“Hotel companies have to move away from this concept about channel, channel, channel,” Kapur said. “Irrespective of where that guest is coming from, you have the ability to own the experience. ... The conversation has to be about I’m going to pick my five core strengths, my five pillars, and I will do a damn good job every time I can deliver on one of those five things … and you will win that guest irrespective of how the guest (books).”

Pyhan said the situation boils down to appealing to consumers at the relationship level.

“Who owns the customer relationship? That’s a weird term because no one owns the customer from that perspective,” Pyhan said. “It comes down to whether or not it’s relevant for the customer to have a relationship with a certain hotel or a certain brand.”

The digital explosion of the past 20 years has changed the landscape forever, but hoteliers shouldn’t forget their roots, the panelists said.

Hotel executives need to understand that just because it’s a digital world, traditional businesses can still be successful, according to Berry.

“Not every digital company is the same—there are some that have gone through a transformation and succeeded,” he said, adding that three of the five top online retailers in 2017 were brick-and-mortar retailers (Costco, Wal-Mart and Macy’s; Amazon and Apple were the other two).

The fact mega-sized tech companies are involved—or are rumored to be getting involved—in the hotel distribution space has forced hoteliers to recalibrate their approaches, Pyhan said.

“Obviously, we at Marriott are concerned about these tech giants getting into the space,” he said. “But in the last few years, we have learned to think about them differently.”

Pyhan pointed to Marriott’s joint venture with Alibaba in 2017, which was designed to “leverage somebody else’s ecosystem with our ecosystem” in a market in which Marriott wants to grow its consumer base.

“There is room for innovation but also for collaboration in a way that might not only be disruption in the sense of the brand,” Pyhan said.

At the end of the day, loyalty program members are important because they often book directly at brands’ websites.

“That’s the way for the industry to create a system where you can drive demand from your own ecosystem versus somebody else putting up a tollbooth and every time a consumer walks by, somebody takes a cut of it,” Pyhan said. “Loyalty is a linchpin to our distribution strategy overall.”

Playing for the long run
Rubinacci said it’s important for brands to look at a long-term success strategy that sometimes includes taking short-term losses to re-establish their consistency or entirely change their approach.

“We are not powerless. There are things happening in the industry. We just have to react for them and really account for that dip,” Rubinacci said, adding that executives must of course do everything they can to keep the dip as short as possible.

Pyhan said that’s something that has been happening more and more.

“Most of the hotels don’t look like anything they looked like 50 years ago,” he said. “Every hotel has evolved to consumer needs, and it really comes down to addressing the consumer needs and understand what the consumer wants from a product.”

The objective for hotel brands is to create an ecosystem for the consumer to come back using the brand’s own reservation platform, according to Pyhan.

“At the end of the day, we think about this very simplistically … the consumer still wants a high-quality product that’s very dependable, but in today’s environment a consumer would like to see a seamless guest experience that’s enabled by technology,” he said.

The best way to tell whether that strategy works is by analyzing performance and guest preferences, the speakers said.

“You’ve heard this before from other people … data is the new oil for this century,” Pyhan said. “The issue in the hotel industry is we have a challenge on controlling our distribution. It’s really hard for any brand owner or hotelier to understand where their inventory is showing up and how the hotel content is being displayed. It’s really frightening when you’re investing billions of dollars in brand involvement and you have no control over how your content is being displayed sometimes.”

Kapur said the profile screen of the guest in the property-management system is the obsolete communication tool that connects hotels with guests through an email address.

“The biggest investment they need to make is the (customer relationship management tool),” Kapur said. “It’s not about where the guest came from to me, it’s about what I do for the guest while he’s in my building.”

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