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Online Goliaths Battle for Distribution Supremacy - A Hotel Story

Aug 08, 12 | 12:06 am

By Gavin Landry

Recently I attended the NYU International Hospitality Investment Conference in NYC. There was quite a buzz in the hallways as deals were being made and lots of enthusiasm permeated the event. It was great to see and stood in stark contrast to last year's event where there was nearly the opposite sentiment and bank's wallets were the equivalent of a clenched fist. Jonathan Tisch, a true leader and icon of the industry, mentioned the important initiatives underway to stimulate more International travel to the U.S. and rightly commented that our lagging infrastructure poses a great threat to our future success to attract more travelers. Hopefully, the government impasse will not prevent us from unblocking the United States' one non- outsourceable product and leading export; tourism!

Cindy Estis Green of Kalibri Labs spoke about some very interesting back-channel activities that will greatly affect the industry. There is a remarkable battle taking place among online giants to disintermediate the OTAs and become an even bigger player in the hotel/travel vertical. Let's name the behemoths: Google, no longer just search, has Google Hotel Finder [oddly still labeled an "experiment" despite being launched a full year ago]; Apple has a patent for its non-launched iHotel app [this surely will have massive adoption immediately upon entering the market]; YouTube is contemplating adding travel to its "Merch" site; and last but not least FaceBook is still trying to figure out how it can be a player in the hotel distribution marketplace despite early negative returns on its booking widget. Ms. Green anticipates the main costs for distribution will be minimized when the current OTAs are pushed out of the space and the majority of hotel third party costs will be for media... "to get seen"... paid to the behemoths.

Ironically, the much maligned RoomKey.com may become the white label back-end supplier for inventory to these players that will need an interface. I asked the question why the hotel industry does not just follow the lead of Southwest Airlines who refuses to allocate to the OTAs. If the industry pulled out wouldn't it eviscerate the OTAs and at the same time allow the industry to take back its customers relationships and lowest rate functionalities? I know it is much more complicated than this but it seems this latest battle of giants fighting over the hotel's room inventory is reminiscent of the way the OTAs siphoned off billions of dollars in revenue and valuation. In 2004 IHG cut its connection with Expedia but none else followed and perhaps the overall understanding of OTAs impact was not fully known at that time. IHG reported no major negative consequences as a result of the disconnect but they have re-engaged a partnership since that time. Expedia is exiting the discount travel game in what one can only assume is a prescience about the future.

As someone who has been directly involved in various aspects of this industry for the past 25 years, it will be very interesting to see how this scenario plays out for domestic hoteliers and travel partners. LHCS is keeping a close eye as we advise existing hotels and hotel developers all over the country.

About Gavin and Landry Hospitality Consulting Services

Gavin Landry is a 25-year veteran of the industry. He is a graduate of Cornell University's School of Hotel and Restaurant Administration and Principal of Landry Hospitality Consulting Services, L.L.C. (www.landryhospitality.com); a full-service hospitality consulting practice specializing in hotel development and existing hotel cost and revenue improvement programs. He is an Adjunct Professor at NYU's Preston Robert Tisch Center for Hospitality, Tourism and Sports Management teaching graduate level courses on Tourism Policy Analysis, Tourism Planning, Tourism Product Development and Tourism Principles and Planning. LHCS offers a complimentary financial analysis for hotel properties that want to find new revenues and improve their operating income.