More disputes between hotel owners and operators are likely. Raini Hamdi finds out why and the impact on tour operators 

WHEN hotel management changes hands acrimoniously, tour operators are left to pick up the pieces.

Clients are owed an explanation, and the reassurance that what they booked is what they will get, even though the brand has changed and a new management may mean different styles and standards. Marketing collaterals have to be amended, relationship with the new management rebuilt all over again.

In the worst-case scenario, the tour operator-hotel ties are simply severed. David Kevan, partner, Chic Locations UK, recalled years ago being advised by a well-known brand in Hong Kong on December 28 that the owner had brought in a new management/GM and the rate would increase effective January 1, take it or leave it. “As we had several clients arriving in the first two weeks of January, we had no option but to accept, but it left a sour taste, both professionally and financially,” said Kevan. “We absorbed the cost but moved clients to other hotels from February onwards as we no longer had confidence in the new management.”

Last year saw a string of break-up announces in Asia, including Mandarin Oriental Dhara Devi, Chiang Mai, Le Méridien Khao Lak, Hilton Iru Fushi, Maldives, Shangri-La Hotel, Mumbai and, perhaps the most bitter of this lot, the takeover of The Chedi, Chiang Mai and its rebranding to Anantara.

“The change at Dhara Dhevi (now managed by the owner) was a concern for many of our agencies as it’s an expensive hotel and clients wanted to be confident it would be managed to the same level,” said Hamish Keith, COO and co-owner, Exotissimo Thailand. In the case of Chedi, the agencies seemed less concerned as Anantara is a strong brand, he said.

Roger Haumueller, managing director, Asian Trails Thailand, said in many cases, upmarket clients are worried when a well-known brand becomes a local brand, even though there are locally managed hotels that do an outstanding job, he said.

One of the most common causes of hotel break-ups is sub-par performance, according to people close to the matter.

But this begs the question, what is sub-par performance?

Sometimes it is outright incapable management, where the hotel is performing at levels below what its competitive set is able to achieve, making the owner see red. But at other times, it can be downright relative: unsatisfied owners who think the hotel could perform better even if the management already is producing results.

And when markets become challenging due to an oversupply or unforeseen crises, tensions run high, particularly if an owner is in financial difficulty. Disputes then arise between owner and operator on how best to address the issue.

“In Asia, it is more common for business groups to have full control over their businesses and the contracting out of management to another party is not well understood or accepted. It fact, generally in Asia, expertise is not well-respected without ‘skin in the game’,” said Mark Edleson, president, Alila Hotels & Resorts.

“(Therefore), it is important during the contract negotiation to go over the major points of control as well as the financial issues to try to ensure a full understanding by the developer/owner of the relationship being entered into.  Even then, it is not certain that they will be well internalised or respected.”

Robert Hecker, managing director of Horwath HTL Asia-Pacific, said this management/alignment of expectations between the two parties is “definitely not always done properly”, causing issues to arise. “In some cases, it’s what the operator expects from the owner, not just what the owner expects from the operator,” he said.

Then, some marriages are just wrong to begin with. In this, Giovanni Angelini, hospitality consultant, noted that most hotel operators, in their eagerness to expand, do not do proper feasibility studies, including thorough market analysis, background check of the owner and expectations of the partnership.

“The drive to expand is so strong,” said Angelini. “ROI is dropping in most areas, except Hong Kong and Singapore, and some owners are facing financial difficulties. The blame then goes to the operator who in most cases has promised too much in order to get the contract but cannot produce the numbers.”

Kevin Hall, managing director of Questus Hospitality Consultants Thailand, which represents a string of owners, said some chains are over-stretched in certain markets, causing revenue to be cannibalised and less experienced and qualified managers hired at hotel level. Others, new to certain markets, over-estimate their knowledge/capability to manage the hotel in those markets.

He added: “Owners are also objecting to ever-increasing central services charges and forced purchases under the guise of brand standards.

“They are objecting to loss of control over their assets and their employees.”

More break-ups expected
Graeme Dickson, partner at Baker & McKenzie, said he is not seeing rising disputes in Asia currently. Horwath’s Hecker also said the recent spate of break-ups is not indicative of a trend.

Above, from left, Mark Edleson, Giovanni Angelini and Robert Hecker

“Sometimes you see increased activity of such disenchantments when market conditions become challenging or when expectations may be unrealistic or unaligned. I supposed when such instances hit the press, it may also encourage those with simmering disenchantments to finally take steps, so these spurts of activity might appear to be a trend, but are really just cycles of occurrences,” he said.

Going forward, however, several consultants believed unhappy endings will be a trend, specially when they look at the hotel landscape today.

Said Bill Barnett, managing director of C9 Hotelworks: “There is such a rise globally of hotel brands, that disputes become inevitable. Tack on nearly a decade now of the meteoric rise of new-build properties, so hotel operators have had the luxury of being in a seller’s market. This has driven hotel contracts away from what is often the trigger of disputes – hotel performance clauses – which means disputes now often escalate quicker and fast track to legal action and arbitration.”

Angelini too believed the industry has to get used to hotel break-ups in future as “we will see more of those”.  Asked if there are particular areas which will see more divorces than others, he said: “Most brands are present in Thailand and the country will see several rebrandings in the future, with no renewal at the end of the agreement as many operators are prepared to offer their services at a much lower fee than 10-15 years ago.

“Another country where we will see changes of hotel operators will be China, as business in general is weak due to overbuilding and owners are hunting for better deals, or decide to run their own properties.”

Alila’s Edleson said: “Our experience is that it is more likely to occur in Thailand than in other destinations.”

Asked if the legal/regulatory framework, especially in tertiary markets in Asia, is viable for owner-operator relationship, Edleson said: “The legal framework in Asia generally favours the ‘home’ party.  This generally means the international operator is disadvantaged. As such, it is probably a good idea to avoid litigation as a solution. In most cases, only the very largest of management companies are financially able to defend themselves in cases of premature break-ups.”

Hecker noted that particular legal/regulatory environments could indeed “influence where and the frequency of such occurrences (i.e. where it is easier to accomplish)”.

Brand importance
So tour operators may well brace themselves for more hotel break-ups.

Asked how their clients react when they slept the night in, say, a Chedi or Setai one night and woke up to an Anantara or a self-managed hotel the next, most tour operators said clients do not really care – provided the incoming brand is of equal status and quality, facilities and pricing remain the same.  The exception is the extremely loyal clientele of brands, such as Amanresorts or Four Seasons junkies.

Said Chic Locations’ Kevan: “When we advise clients of the change, the first thing they want is an assurance on the pricing, facilities and the general style of the resort, which in 90 per cent of the cases will remain at least in the first year.”

(Left, Kevin Hall)

For tour operators, that’s the issue – the uncertainty in the long run if the hotel or resort

will remain the same, and the terms just as good, especially if the new management is an unknown.

“If the hotel is taken over by an unfamiliar brand or a weaker brand, we would usually adopt a wait-and-see approach before we support the new brand,” said Country Holidays Singapore general manager, Jess Yap.

Ganneesh Ramaa, manager, Luxury Tours Malaysia, recalled that when The Datai, Langkawi was taken over by Archipelago Hotels & Resorts in July 2011, the short-term impact was minimal as the new management honoured the terms and clients of the unique beach resort in the heart of a tropical rainforest didn’t care who was managing it. However, said Ramaa: “We suffered when getting new bookings. Our overseas wholesalers had never heard of Archipelago and the terms became unfavourable. For example, we didn’t get as many room allotments and room rates were not as competitive as before.

“As the hotel was not supportive, we didn’t support them in return.”

As it turned out, Destination Resorts & Hotels (DRH), which bought The Datai, disbanded Archipelago in 2012 and the resort is back on its feet under general manager Anthony Sebastian, who is also DRH’s SVP hotel management overseeing the expansion of Datai Hotels & Resorts,  two properties of which are opening in Desaru Coast.

It may be a happy ending in the case of The Datai. For others, who knows how the chapter will unfold after a separation?

Additional reporting from Paige Lee Pei Qi and S Puvaneswary

This article was first published in TTG Asia, March 28, 2014 on page 3. To read more, please view our digital edition or click here to subscribe.

Often criticised as lacking the human touch, online sellers tell Gracia Chiang how they are striving hard to recognise the preferences of each customer while carving a niche

John Brown, chief product officer, Agoda.com

Is it hard for OTAs to personalise/customise?
Personalisation/customisation is something that all OTAs aspire to do. Currently, there are not many OTAs doing a great job at this largely because they don’t have enough data about customer preferences and lack the technology and content required for personalisation.

Is OTA homogeneity an issue?
No. The most important thing is creating a better customer experience. Although many OTAs might look the same on the surface, the best ones offer a great deal of variety in terms of usability, inventory, content, etc.

How are you overcoming these challenges?
Very simply, we try to change and adapt our interface for different nationalities and different customer types. If customers respond well, we keep the changes. If not, we start over with something new.

How are you using data/technology in your business?
At Agoda.com’s scale, just measuring how customers respond to our website involves literally terabytes of data on an hourly basis, so we have to employ the latest big data technologies to do that.

What other resources/enablers are helpful?
We are always looking at technology providers with new offerings that can help us provide better service. We are working with companies that measure social satisfaction, trying out cloud computing services, testing new forms of social advertising, trying new big data services and more. Often these things don’t work well for us or we decide it’s more advantageous to do things in-house. Either way, we are always looking around for new systems, strategies and methodologies to explore.

How are you matching what offline agencies can offer?
We don’t make recommendations, our customers do. Agoda.com has over 6.5 million hotel reviews from actual travellers. Our scale also means that our most-booked hotels are pretty good bets for customers. These days, people want choice and they want to be able to evaluate what like-minded travellers are doing on their own. That’s a better fit than a consultant who claims to understand the customer, but really doesn’t.

Chua Hui Wan, CEO, Zuji Singapore

Is it hard for OTAs to personalise/customise? 
The Zuji site is built to cater to the wide demographic of customers and we offer full empowerment for our customers to make their own choices. We aim to provide customers with the best possible experience when customising a holiday, giving them the option to mix and match. When customers are stuck with finding a hotel, our algorithm for packages helps to recommend the most suitable accommodation.

Is OTA homogeneity an issue?
Yes. We see an increase in the number of travel websites that are not really OTAs, but meta-search or comparison sites. Customers may not see the difference, but these sites may lead them to a travel booking engine that might not be established or trustworthy.

How are you overcoming these challenges?
We believe in maintaining a strong and trustworthy brand, delivering good customer service and presenting customers with a wide choice of travel options to suit their needs. We also believe in providing value-added information on our site, such as our Zuji Travel Guide, which helps customers make informed decisions about their travel options or while they are on the road travelling.

How are you using data/technology in your business?
Big data enables us to really dive deep into the minds of customers and understand their travel behaviour and overall preferences. We use that to customise and develop services and products that are relevant to customers. Mobile platforms are also something we are looking into.

What other resources/enablers are helpful?
We operate a 24/7 customer service centre and have an offline sales call number should our customers require help with their bookings. We also have a free live chat function on our website which we recently enabled.

How are you matching what offline agencies can offer?
A lot of resources goes into building a powerful and flexible travel search engine that provides a multitude of options and combinations to cater to each individual customer. Customers are also our consultants, with travellers sharing their travel experiences.

Anita Ngai, senior director of marketing, Hotels.com Asia Pacific

Is it hard for OTAs to personalise/customise? 
We want to provide the best and most suited experience to visitors to our site, so personalisation is a natural step in the path to improving our service.

Is OTA homogeneity an issue?
At first glance, OTA websites may seem quite similar and difficult to differentiate. But once you’ve actually performed a full search on several websites for a hotel in a specific city, you will soon notice the differences from site to site and distil the strengths of different OTAs. The level of detail on a website is often not obvious until you actually use it to book.

How are you overcoming these challenges?
We are constantly looking for ways to improve our customer experience and have been using big data to achieve that.In addition to the website,Hotels.com provides strong offline customer service support, so if a traveller has an emergency situation, we can still help them through our call centres around the clock, in their local language.

How are you using data/technology in your business?
Mobile is a clear focus for us, especially in Asia-Pacific where smartphone penetration is so high and the mobile device could be someone’s first personal access point to the Internet. We are spending a lot of our resources on making sure Hotels.com’s mobile experience is optimised.

What other resources/enablers are helpful?
As 4G network service rolls out in more markets, we expect to see more people using their mobile devices to book. We have been building features into our app to take advantage of the higher speeds and enhanced capabilities.

How are you matching what offline agencies can offer?
We offer convenience and speed, allowing users to book 24/7 with instant confirmation, as well as our Welcome Rewards loyalty programme, which offers one free night with every 10 nights booked. We also have more than 260,000 properties available on one single platform, along with verified guest reviews. The amount of experience and expertise we have accumulated in serving customers with different needs, continuously builds our role as a travel consultant.

Clarence Lin, head of marketing, Asia-Pacific, AsiaRooms.com

Is it hard for OTAs to personalise/customise? 
Being in the digital space means that we are able to understand how consumers behave on site, which allows us to introduce more options at lower cost in a scalable manner. Our complex technologies identify and tailor accommodation choices to the individual user.

Is OTA homogeneity an issue?
Our software and hardware differentiators have proven effective. Our book now, pay later policy with instant confirmation and no cancellation fees, coupled with a rich, user-friendly experience, have been great differentiators.

How are you overcoming these challenges?
AsiaRooms.com has the first loyalty programme in the region that provides direct cashback for accommodation spends, a valuable unique proposition. Our all-new app, completely redesigned for the latest mobile operating systems, will also be launched soon, giving customers the flexibility of choice in booking platforms.

How are you using data/technology in your business?
AsiaRooms.com has developed a Traveller Confidence Index (TCI) that tracks leading indicators for travel propensity, spending confidence and regional momentum. These insights allow us to develop effective go-to-market strategies and tailor products and services.

What other resources/enablers are helpful? 
We work with a range of class-leading technology firms to grow revenue through fast, personalised web experiences, manage complexity from peak demand and implement data collection. A great deal of multivariate testing helps us remove the guesswork and empowers us with information, so our marketing decisions are based on real-time data.

How are you matching what offline agencies can offer?
We aim to dispel any belief that an OTA like us is a faceless digital entity. Apart from having a multilingual call centre staffed by travel experts 24/7, we help customers through a ‘live chat’ on our site. Our concierge Ask AsiaRooms is also available should one prefer to seek travel advice through social media channels. In addition, international travel experts on our community site are always happy to connect for tips.

Boh Tuang Poh, executive chairman and CEO, Asiatravel.com Holdings

Is it hard for OTAs to personalise/customise? 
Consumer preferences are constantly changing; customisation is an ongoing process. The real challenge is to be able to establish and cater to the mainstream requirement of every market. We review site data and CRM to narrow down our marketing to avoid wastage of resources.

Personalisation is important, and we focus on areas like product mix, frequency of communication, clarity of marketing messages and conducive site design to enhance a customer’s search experience.

Is OTA homogeneity an issue?
We developed an online system for products that used to be transacted by physical tickets. Today, many consumers and even the trade buy our standalone tours, transfers and barcoded e-tickets of theme parks and attractions.

We are also likely to still be the only OTA that displays the addresses of all our offices in Asia and the Middle East. When you visit our offices, you will be welcomed by reception counter consultants who are able to serve travellers face to face.

How are you overcoming these challenges?
We have been building an in-house system capable of managing a global inventory of all the different travel components. This system develops and manages packages of different permutations based on real-time pricing and availability. Our interface has been enhanced to distribute content and pricing to other online businesses worldwide.

Our own payment gateway is also integrated with all major credit and charge cards worldwide and we are now entering the final phase of enhancing users’ site experience.

How are you using data/technology in your business?
Our system generates a suite of reports, but we also partner research companies to better understand market and industry trends at macro levels. We also evaluate if the adoption of applications by technology service providers can add value.

How are you matching what offline agencies can offer?
A live chat will be launched in March. This is useful for those who book our all-in-one flight packages. Our ready-built packages are being expanded continuously while system filters and keyword tags are constantly enhanced.

Keyur Joshi, co-founder and chief commercial officer, MakeMyTrip.com

Is it hard for OTAs to personalise/customise? 
Online stores have a history of what you have purchased and they track visits. This reveals information such as where a customer lives, if they prefer expensive or low-priced items, etc.

Is OTA homogeneity an issue?
Visitors and repeat customers look for an intuitive, predictable interface, and to weave that with an element of surprise and discovery is the challenging aspect.

How are you overcoming these challenges?
The process is easier for those whose purchase history or browsing behaviour is captured in our database. Repeat visitors who have not shopped with us earlier are retargeted with offers deemed relevant to them based on previous browsing history. For existing shoppers, personalisation is much more in-depth and comprehensive.

We have a loyalty programme and customers receive customised offers on special occasions. For non-members we attempt to provide a personalised experience by identifying their device type and adapting our offers.

How are you using data/technology in your business?
Data from multiple sources is consolidated and analysed using different parameters to improve sales and marketing effectiveness. This information helps us to analyse trends and customer preferences.

What other resources/enablers are helpful?
We use third-party solutions to help us become more effective in leveraging the information at our disposal. We are also big proponents of an open source/collaborative approach to technology. There is an opportunity to tap mobility, cloud, big data and collaboration to affect positive cultural reform.

How are you matching what offline agencies can offer?
Our strategic approach is fashioned by technology and innovation. Our travel-related and destination-expertise matches that of the best in the industry. Customers know they can expect the best value-based deals. Further, they get the added advantage of convenience and ease of access – whether through website, walk-in stores or full-service mobile apps across all operating platforms.

Christian Lukey, commercial director, HRS

Is it hard for OTAs to personalise/customise? 
It is a challenge but not the hardest to do because it has always been a priority. We developed as a leisure website adapted to the needs of the client. This experience in leisure is a big strength in developing our B2B website.

Our website offers the opportunity to create a personal account, which centralises all the bookings (personal bookings + business bookings). For our B2B website, personalisation is very advanced as it is customised specifically for the company in terms of branding and content.

Our big selection of hotels worldwide also allows us to personalise our offers.

Is OTA homogeneity an issue?
It can be an issue. If customisation is too developed, we can lose the homogeneity of the website. We have always tried to keep the homogeneity of the website during personalisation. Furthermore, one of our challenges is to maintain homogeneity between our B2C and B2B websites.

How are you matching what offline agencies can offer?
We adapt our B2B website to the travel policy of the company and in the way the travel manager desires. In this aspect, HRS starts to be a travel consultant for the company.

We also offer much more than the website: a variety of tools and services that cover the whole value chain from hotel procurement and payment solutions to the transmission of relevant data for the analysis of accommodation expenses. Intelligent solutions for conference and group bookings complete our services.

We have a high availability of hotels, while our hotel sales managers contribute with their knowledge of the local market and customer service. The question is what are travel consultants offering nowadays, as often their own knowledge of a distant destination comes from the information found on general public websites.

Should offline agencies be worried?
No because HRS is working with traditional agencies. We have integrated our full content into the core GDS as well as mainstream OBTs. Depending on the market maturity, pure offline agencies may be challenged but solutions are there to support and give them easy access to the same (or better) content available to consumers.

Christian Mischler, co-founder and COO, HotelQuickly

Is it hard for OTAs to personalise/customise? 
We are optimising our offers real-time, based on 12 different factors – some are user-dependent, others hotel- or even market-dependent.

We follow a pull strategy (we learn which hotels a member prefers and show him/her more of these) instead of a push strategy, which is followed by many OTAs (e.g. “flash sale!”, “1 room left only!”, “price will increase soon, book now!”, etc). We feel the market gets less receptive to these buzzwords and quality is key.

Is OTA homogeneity an issue?
Absolutely. Especially because of “rate parity agreements” enforced by OTAs, it really does not make any difference whether I book a room on any of the OTAs. OTAs are applying a one size fits all, trying to capture business travellers, families, singles, couples, etc. This results in an average product, and there are limited ways to offer the same product.

We focus on a niche: mobile last-minute booking. We can optimise everything to build a superior product just for that very unique use case, resulting in a different value proposition.

How are you overcoming these challenges?
We listen to the market and further improve our app constantly, product-wise and with regards to offers. We are currently working on a more granular business intelligence tool that will allow us to better predict which hotel an individual user is likely to book.

How are you using data/technology in your business?
We love to push the limits and technological advancements help us to deliver a better end-user experience. Big data is only one element of it.

What other resources/enablers are helpful?
We are first movers in many aspects and some technology companies even pay us good money to integrate their services in our app. We receive requests from traditional OTAs to develop mobile platforms for them.

How are you matching what offline agencies can offer?
We are not competing with offline agencies; sometimes we collaborate directly. We are in a very niche market for which we barely have any competition.

How can OTAs do better? 

From left: Angel Gallego, Ming Foong and Martin Symes

Angel Gallego, president, Amadeus Asia Pacific

We see vast potential in turning search into an engine of discovery and inspiration. Gone are the days of only finding the cheapest fare. Our research shows that there is a substantial group of travellers who do not have a destination in mind when searching.

OTAs need to start thinking outside of the traditional city pair/travel date box. For example, Amadeus Extreme Search allows consumers to search by budget range, group size, number of days and the minimum temperature at the destination.

OTAs are evolving their offering from pure online intentions to hybrid models of Internet, call centre and in some instances, retail shops. These players have become specialists in managing traveller needs through call centres.

OTAs are leveraging big data to better understand travellers’ behaviour and desires, and for clearer visibility on their competitors in their markets. By applying analytics to the goldmine of consumer data, they can adapt their offerings in response to real-time market conditions.

They are also tapping big data to improve their search engine marketing decisions and to deliver the most relevant and bookable recommendations to travellers, to address the challenge of the fast-increasing “look to book” ratio.

Ming Foong, director, OTA, Asia-Pacific, Travelport

We will continue to see more OTAs improving personalisation and user experience, as we’ve seen in the past two years. We are noticing more iterations of the search process such as integrating map searching, humanising search through semantics, expansion into mobile and differentiating how consumers interact with the business on each of these different platforms.

In the past year, we have launched several new products that are geared to supporting OTAs. Priceline.com, for example, has built a highly interactive and engaging search interface powered by our Flex Explore product. It has advanced the research process into a fun, personable experience that seamlessly integrates to the booking flow. This increases engagement and time spent on an OTA booking site, which are both key factors in driving conversions.

Martin Symes, VP, marketing, Abacus

The yields, particularly on domestic flights are very low, but the cheap deals attract traffic, so the challenge for OTAs is to align low-cost flights with higher yielding products.

Only a few OTAs offer dynamic packaging, even fewer fixed packages effectively. Activities, tours and rental cars are still an afterthought and they shouldn’t be, as new entrants are specialising in selling these secondary products to gain traction.

OTAs currently tend to be geared to different marketing channels, but they need instead to pivot around their various customer groups and not just based on purchase history.

Some have begun to focus on the personas of those visiting their sites, grouping them by common characteristics. Others are embracing personalisation based on data gathered from external sources, such as the referral from a partner site, to make intelligent assumptions on what an individual customer might want.

The most progressive are also remarketing to them: a traveller may visit an OTA then later go to a media outlet and see an offer for the destination they were searching from the same site to encourage them back to the OTA.

We also believe that mobile technology in travel, in combination with big data, is going to be very powerful and so we are investing further in this area.

This article was first published in TTG Asia, March 28, 2014 on page 16. To read more, please view our digital edition or click here to subscribe.