Is there a future for intermediaries? In an open forum on the issue – hosted by an intermediary – is it any wonder that the answer is a resounding yes? But not all is PR, reports Raini Hamdi
Skeptics might be squirming in their seats when a select group of people flown in by GTA to Bangkok for its inaugural ‘g meet’ recently all said they believed there was a future for intermediaries. After all, they were suppliers, clients and technology companies that work with GTA, a B2B intermediary, and were being hosted for the one-day powwow.
But the arguments they put forth might convert even the hardiest non-believers.
Arthur Kiong, CEO of Far East Hospitality (FEH) Management, recalled when he was a 25-year-old sales executive at Hyatt International, sitting in a conference room much like the one at the InterContinental Bangkok where the ‘g meet’ was held, and the chain’s then executive vice president John Wallis had said agents would be obsolete because of the advent of the GDS. It amused Kiong that 25 years later, “we’re still sitting in a room asking if there is a future for intermediaries – of course there is. And that’s why the hotel business is a good business, because we keep selling conference rooms to people like you. So it is very important we keep you guessing and asking, ‘Is there a future?’”, said Kiong, turning furrowed brows on a serious topic into bellows of laughter.
A good joke aside, Kiong explained that for a company like FEH, whose brands and products are so disparate – from boutique hotels to conference resorts – intermediaries are essential. “We don’t have the capability to build a distribution infrastructure; it’s not our core business. Our conversion rates (from look to book) are terrible. We do want direct bookings and we have been working at it but the reality is the results improve by decimal points,” said Kiong.
Similar sentiments were echoed by a far bigger chain, AccorHotels, whose recent acquisitions leave some in the industry wondering if it is on the path to cut out intermediaries. AccorHotels acquired Fastbooking in April last year, a French firm that helps more than 3,500 hotels in Europe and Asia mainly sell directly to guests online with tools including website builder, channel manager, digital marketing campaigns and business intelligence software. More recently, it acquired a 49 per cent stake in Squarebreak, the disruptor operator of hotel homes in France, and a 30 per cent share of Oasis Collections, another ‘Home meets Hotel’ category of accommodation founded in Buenos Aires.
But Markus Keller, deputy senior vice president of AccorHotels, said these moves did not mean the chain was muscling in on intermediaries. Private home rentals were an extension of its core business – which is hotels – and widening the range of products it could offer guests, he said.
“Our new CEO has taken the approach of doing what you’re good at. We’re hoteliers by core, if we’re not good at it, we’ll be overtaken by someone who is. So there will always be a role for intermediaries in the short term and in the future. Customers need them, but they are also good for hotels. I don’t want to manage thousands of clients, (only partners) that can connect me to people who sell specialised products. I don’t need people who sell standard rooms; we have people doing that already,” said Keller.
Kiong couldn’t agree more. There’s a future for intermediaries that sell specialty products as it is those that drive the yield, or that add value. But he said intermediaries like GTA want to sell standard products at the lowest possible price. “One is fast-driven, quick volume; the other wants to push the specialty products. Either the agendas are misaligned or the system does not allow us (to sell specialty products),” said Kiong.
He said however that GTA had done a lot for FEH by marketing and promoting its brands in an effective and entrepreneurial way. “That’s what intermediaries should do. Value add, seek out the opportunities and capitalise on them,” he said.
“I predict a bigger future for intermediaries because the travel market in ASEAN and Asia is not only growing in size, but the people are becoming more sophisticated in their travel choices. And when they spend more on travel products, they want to talk to somebody. But intermediaries do have to step up, not just be a postbox of contracting most effective rates. The value add has to be a lot more sophisticated than the cheapest price and the easiest way to pay,” added Kiong.
Metin Altun, CEO and founder of Metglobal, a technology provider, said the industry did not need more players. “Current players need to be more efficient in order to grow. The big boys are monopolising the market, so the current smaller players must focus on what they do in order to maintain the business,” he said.
MakeMyTrip’s COO Mohit Gupta said if the larger, mainstream intermediaries got their act together and start addressing the broader requirements of either clients or suppliers, some of the smaller players who are on the fringe face the risk of being cut out. Conversely, if the small players are faster, the larger intermediaries would find it difficult to displace them.
Asked what some of the broader requirements might be, Gupta said: “One is to focus beyond booking to experiences as well. Right now, a lot of the focus is around price, availability and inventory. While you continue to work on those, you need to shift the focus to great quality content, the types that are more useful for mobile, pictures that are more detailed in nuances, more promotions flow-in to the system – all this will help significantly to expand the services in a relevant manner.
“Also, let’s say someone makes a booking with an OTA, which is connected to GTA, which is connected to hotels, and he wants additional services, say, bed arrangements, special food, handicap support, etc. An intermediary’s ability to support that kind of conversation between the hotelier and the customer in a seamless and easy manner is important. Similarly, going beyond selling the cheapest room to upselling services like early check-in/late check-out and other add-ons. Suppliers want to sell more than just the basic room and there are customers who really need the services. Essentially the system needs to expand its ability to handle those types of cases.”
Q&A with CEO Ivan Walter on GTA’s Vision 2020
Where is GTA at now and where do you want to be?
We are a leader in the industry in our specific segment. We have great people, strong global footprint with local people all over and we are innovative as an organisation. What we now need is acceleration of pace, making sure we can bring to the market quicker all the digital initiatives that we have made, and that we have the funds and back-up to do so.
To stay a leader, we need to invest, not just in technology but people. There are also lots of opportunities for consolidation, as the smaller players may lack the resources and funds to play a role.
Are you saying you will be acquisitive?
We can do it organically and inorganically, the latter looking at what elements are missing to make us a leader, what technology out there that we are lacking today and which potentially could be part of our portfolio going forward.
What’s your take on TUI putting Hotelbeds up for sale?
For TUI, it’s a consequence of their vertical integration strategy. They want to be in control of the entire process, be it the booking process, their own airline, hotels, cruise ships, etc. They want to make sure that every touch point is proprietary to them and the content belongs to them, so in that sense Hotelbeds does not fit in. That does not mean it’s not great business.
How will this remake bed banks?
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 is not sustainable, we think.
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. So any potential buyer of Hotelbeds would be looking at consolidation as well. How can we drive consolidation faster, how can we remove some of the players that may not have sufficient differentiated value proposition out of their market?
Why is consolidation important to you?
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.
The process of selling hotel rooms is also something that needs technological support. And if you have strong customer base, strong technology and very robust infrastructure, adding additional demand on it is easy because your processes end-to-end are already streamlined and automised.
As well, suppliers have created quite a dependency on OTAs. I’m sure they are looking for alternative partners so they don’t put all their eggs in the same basket. They want a more balanced client portfolio, but at the same time they don’t want to have to manage thousands of small players with different touch points, contracts and systems.
This article was first published in TTG Asia, April 1, 2016 issue, on page 8. To read more, please view our digital edition or click here to subscribe.
