The wholesale accommodation market is ripe for another round of consolidation. Raini Hamdi, Paige Lee Pei Qi, S Puvaneswary and Mimi Hudoyo explain why
The hotel wholesale business, which has been unravelled by online technology, is ripe for yet another round of consolidation as big players become more acquisitive while small and/or traditional players struggle to make it in a highly competitive industry.
The latest trigger is the sale of Hotelbeds to UK private equity firm Cinven Capital Management and Canada Pension Plan Investment Board, and that of Kuoni Group – which owns GTA – to Swedish private equity firm EQT
With new ownership flushed with funds, both Hotelbeds and GTA have made no bones of their intention to expand market share through further investment in IT, tapping growth in Asia and other markets, and consolidation in the wholesale accommodation sector.
The accommodation industry itself, on the other hand, is being rocked by the consolidation of global hotel chains, the dominance of the sharing economy and the increasing size of Priceline and Expedia, all of which promise a good round of marry-making in both the hotel and intermediary sectors in the months to come.
Marry-making
So how will the hotel wholesale business be further remade?
Once upon a time, hotels worked with specialist wholesalers who gave them access to markets they cannot reach directly. Wholesaler contracts also enabled hotels to forecast occupancy patterns and generate volume business, especially for those with high inventory.
However, this system has been challenged by both B2B online distribution channels with cheaper cloud-based technology and B2C digital platforms. The former include the likes of Hotelbeds, GTA, Bedsonline, Travco, MetGlobal and JacTravel, while the usual suspects in the latter include Agoda, Expedia, Hotels.com, Trivago, Booking.com and, for good measure, throw in sharing economy giant such as Airbnb and B2B2C players like Asiatravel.com, which has added transfers and sightseeing into its offerings.
As a result, the market has splintered in many directions.
B2B platforms have spun off many new white-label online wholesale or online retail operators − for example, MetGlobal powers HotelsPro.
Some of the new players are started by people in technology, not travel, in the hope of being acquired in three to five years after operation, observed Judy Lum, group vice president sales & marketing of Tour East.
“Their objective to start a travel distribution channel is different from people who want to provide enjoyable holiday experiences; nevertheless, they seem successful,” she said.
Some traditional wholesalers have blurred the lines by building their own bedbanks, creating another variant in the sector.
For example, within Indonesia’s Antavaya Group is the AntaVaya Hotel Reservation System, a bedbank for its retail agent partners and corporate clients. It is for “convenience”, said director Bagus Priatna, as clients have their own login and password to book a hotel from their own office. It is also attractive as they have credit terms instead of instant payments when booking through an OTA.
Other traditional wholesalers remain indigenous and compete by packaging more complicated products comprising flights, accommodation, transfers and day tours. These are usually small players with loyal clients.
Niklas Andreen, Travelport’s senior vice president & managing director for hospitality, car and partner marketing, observed: “Their historic model of allotments and prepaid dedicated inventory is becoming replaced by models such as dynamic discounts of BAR. Many of them are becoming specialists or consolidating to have global coverage by plugging in other companies. In summary, they now compete in a new bedbank landscape.”
But fragmentation is not necessarily as negative as the word connotes. Said Lee Choon Loong, president and CEO of DiscoveryMICE, Malaysia: “The wholesale market is indeed fragmented but in a positive way, as each wholesaler finds its own specialisation in reaching out to and integrating with tour operators.
“There are online wholesalers who offer a large inventory of hotels worldwide with instant confirmation; wholesalers with XML connection to partner hotels inventory to which tour operators can access last-minute distressed inventory and discounted dynamic rates; and last but not least, traditional wholesalers with room allotments who package hotels usually with airport transfers.“The market is equally (splintered). The wholesale industry merely seeks to deploy different strategies and approaches in meeting tour operators’ requirements,” said Lee.
Yet, it is this very shaken-and-stirred market that opens opportunities for consolidation.
Ivan Walter, CEO, GTA, told TTG Asia:“The market is so huge. There are a lot of small players out there that are involved in intermediary accommodation and destination services distribution. They can be small bedbanks or DMCs that have no differentiated value proposition – purely selling hotel rooms, which we think is not sustainable.
“So the market today is not dominated by a couple of bedbanks. In fact, it is very fragmented and is in the hands of hundreds if not thousands of small individual players. Thus, there are lots of opportunities for consolidation.”
Why consolidate?
Said Walter: “It’s crucial today for any B2B or B2C player to have relevance, and that relevance has to do with a certain size, negotiating power with suppliers and clients, global footprint and scale.”
There are also other forces at play. Observed Manuel Ferrer, chairman & founder of Olea Consultancy Asia, who previously headed Hotelbeds in the region: “What is really changing in this industry is the growth and size of Priceline and Expedia. They are already entering the B2B business and I have no doubt they will grab a part of the business of current B2B players.”
Ferrer also foresees a transformation of the hospitality sector. “This industry has changed minimally over the past decades, much less than any other industries. But now it will change fundamentally because many clients want products that they don’t offer and, whether fair or not, the competition from the likes of Airbnb or Zizaike.com is forcing them to change,” said Ferrer.
Chains too, have stepped up efforts to get more direct bookings of late, while M&As in the sector, such as Marriott International buying Starwood Hotels & Resorts, are being done partly to fend off dominance of OTAs and to harness more direct bookings from loyal guests.
“Towards this end, the large hotel chains backed by strong management companies will continue to sell direct to end-consumers. This will ultimately result in stagnant growth of the B2B market segment,” pointed out John Chan, business development director of Kris International Traveltours, Malaysia.
DiscoveryMICE’s Lee added: “While the total number of tourist arrivals have exceeded over one billion worldwide, the number of OTAs has not increased (proportionately). In the future, I envision that large hotels chains with similar brand character would consolidate than compete.”
There’s a place for everyone, say hoteliers
Andy Khen, executive director, L Hotels & Resorts and The Shanti Collection Bali
My discussions with conventional wholesalers showed they were feeling the pressure from online players. However, hotels like us still deal with both conventional wholesalers and bedbanks. We need offline wholesalers to boost occupancy as online booking is usually last-minute – three days or even less lead time.
There are so many channels of distribution. Each has its own strength and we need to be in many channels to capture the business.
To compete with regional and global players, homegrown bedbanks must not only grow their inventory, but invest in the latest technology all the time, do a lot of promotions and also invest in people: dedicated account managers that work (with the hotels to find ways to) generate roomnights.
Bernold Schroeder, CEO, Pan Pacific Hotels Group
We work with many different business partners from corporate travel agents and MICE businesses with large incentive houses to OTAs and bedbanks. As a hotelier, I don’t just depend on one segment, as I have to manage my risks.
Vivi Herlambang, director – sales marketing and business development, Sahid International
The conventional hotel wholesalers still survive despite the competition from bedbanks and OTAs. Each offers a different business proposition that we need, besides our own brand website. We cannot rely only on one or the other. That is how fragmented the market is.
One of the reasons we still deal with traditional wholesalers is because the rooms are bought in advance. This gives us certainty on room sales at a flat rate. The online players, on the other hand, gives us the liberty to make changes on room allotments and prices according to the dynamism of the market at any given time.
Patrick Fiat, general manager, Royal Plaza on Scotts, Singapore
Traditional hotel wholesalers are still in business and they have expanded their business to keep up with the competition by focusing on online distribution channels with dynamic systems.
The distribution landscape is ever-changing, thus there is no hard and fast rule as it is largely dependent on the strategies of the brands. The key for hotels is to gain an in-depth understanding in order to use these booking funnels to influence conversions.
This article was first published in TTG Asia, July 8, 2016 issue, on page 18. To read more, please view our digital edition or click here to subscribe
