Hotel Distribution - Understanding the Current Situation
Hotel distribution is a multi-billion dollar industry involving large swathes of intermediary companies. A complex web of OTAs, Bed Banks and Channel Managers exist, all of which are profiting in a big way from the business of selling rooms, whilst the people that actually provide the rooms are not. Hotels have very little control over how their own product is distributed and are repeatedly losing out. How and why is this happening? And what role can Impala play in shaking things up?
To get a better understanding of the situation we’re in, I’ll briefly unpick the story of how we got here.
A bit of background
In the early days of mass tourism, hotel distribution happened through tour operators. Hotels would sell rooms to a tour operator at a certain price, then the tour operator would sell the rooms on to customers. The final price that the room was sold for would remain unknown to both the customer (as it was part of a package), and to the hotel itself. This is known as opaque distribution.
Around 20 years ago the internet allowed for a much more transparent system to establish itself. Online Travel Agents, such as Booking.com and Expedia, cropped up and hotels could see the prices that their rooms were selling for. This meant they could have a better understanding of their customer and create a commercial strategy, giving them more control.
But there was a drawback. Unlike selling through tour operators who paid upfront, OTAs offered zero security. It was a gamble to sell through their platforms as you were completely at the whim of the market. Neither model was ideal, so hotels continued to use both side by side in the hope that something better would eventually come along. But it has carried on this way for decades.
What’s the current situation?
In the last 3 or 4 years things have gotten noticeably worse from all angles. Tour operators have followed the customer online and are selling their excess stock with naked rates. This has been a disaster for hotels as they almost always lose out. If a customer can find the same room somewhere else for cheaper, then of course they’ll book it there.
In reaction to this, hotels have started to cut out tour operators altogether. This move means relying almost solely on OTAs, which comes with its own problems. OTAs are becoming so powerful that they can essentially do what they want - and they are. In order to be competitive and maximise their profits, they’re losing their transparency. The very reason that they were attractive in the first place, is quickly disappearing.
So after decades of using this two-pronged selling approach, the situation has now become a two-pronged problem. It seems that no matter where hotels turn, someone is taking advantage of them.
What’s the future looking like?
Working with hotels in the Spanish market, I hear a lot of scepticism surrounding the industry. Hotels have lost faith and are wanting to cut out the middlemen altogether. This is totally understandable given the way things have panned out so far.
But if hotels cut all their smaller channels, the bigger players will expand even further. The monopoly will be entrenched and there will be no space for new innovators. This would be a huge shame as it would hinder those that can bring about some real change. There are so many other exciting ways to approach hotel distribution, we just need to have a rethink. And that’s exactly what Impala is doing.
But isn’t Impala just another middleman?
Well yes, technically we are an entity that stands between the hotel and the customer. But what’s different about us is that we actively hand control back to hotels, rather than take it away. Our whole purpose is to introduce a technology that simplifies the distribution process so that both hotels and their guests start to see some positive changes.
Hotel distribution has clearly gotten out of control. Hotels feel betrayed and left adrift by a system that benefits everyone but them. At Impala, we are committed to bringing about some much needed change across the industry. By building a future in which travel is seamless. Impala connects room sellers and hotels, instantly. We empower hotels to regain control of their distribution, and reach new customers they wouldn’t that they wouldn’t have been able to before.