Hotel consolidation: Businesses should cast a wider net

2015 was a year of consolidation for the hotel market – we saw three major hotel group consolidations: Marriott’s acquisition of Starwood, AccorHotel’s acquisition of Fairmont, Raffles Hotel and Swissôtel, as well as IHG’s acquisition of Kimpton. More recently in March this year, Marriott amended its agreement to acquire Starwood, boosting its initial bid made in November 2015 to US$13.6 billion.

In this new environment of mega hotel groups, the ability for other smaller hotel brands to preserve their bargaining capacity in client negotiations has been put to question. Amidst this current consolidation saga, Commune Hotels & Resorts announced plans for a merger with Destination Hotels – suggesting that smaller hotels may be going down the merger route as an antidote to being bought, or sold.

Todd Arthur, managing director, Asia-Pacific, HRS

No doubt, chain hotels are able to improve their competitive positioning and negotiation power through size with OTAs like Expedia and becoming strong competiton for the hotels. As such, consolidation may be an immediate solution to harnessing value by combining distribution strength. While hefty acquisitions like Marriott’s will see it taking top spot as the biggest hotel chain, it too carries implications; they will either have to compensate by cutting costs, increasing Average Daily Rates (ADR), or likely by doing both.

Consequently, when planning their executives’ travels, corporations may want to work on a plan B; look for alternatives and shift volume to fortify themselves against this disruption. Despite having consolidated chains, there are many private brands and independent properties that fall outside their distribution systems. This means that there is still a long way to go before the iron grip of OTAs on the hospitality industry is completely loosened.

In such an environment, having full transparency of the market and available rates becomes even more important. This level and depth of content on properties allows customers to tap into more choices. For instance, with a portfolio of 300,000 hotels globally, including 180,000 independent hotels, HRS has the scale to source on a global level – taking the fuller market into account instead of individual chains. After all, chains only make up a fraction of the total market in most regions.

Beyond the access to a wide range of hotels to optimize value, corporations should also tap on end-to-end services that go well beyond content alone. Flexible, streamlined booking conditions, corporate discounts and content-rich user experience are also made available through a platform like HRS. As HRS’ content becomes further integrated into systems of Travel Management Companies (TMCs), Online Booking Tools (OBTs) and Global Distribution Systems (GDSs), corporates are able to enjoy a holistic view of the whole process and make better-informed decisions when selecting a hotel. This will minimize both direct and indirect costs, allowing room for providing better services, upselling other products and increasing contribution to the company overall.

The trend of consolidation in the hotel industry is expected to continue, with hotels eager to improve their bargaining position with OTAs, and companies will need to look to independent hotels to drive savings to their programs and move their business forward.

By Todd Arthur

Todd Arthur is the managing director, Asia-Pacific for Hotel Reservation Service (HRS). HRS is a global hotel solutions provider and serves more than 40,000 corporate customers worldwide through its inventory of more than 300,000 hotels in 190 countries.

Todd Arthur’s core responsibilities include setting the business direction, driving organic growth with new and existing customers across Asia-Pacific markets, establishing strategic partnerships and talent development. 

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