June 2018, London
Partnerships, the bedrock of the travel ecosystem
For both OTAs like Expedia and hotel chains like NH Group, partnerships can expand the opportunities for business, while meeting the needs of the traveller
“Partnerships are the bedrock of the travel ecosystem. Whether it’s airline alliances or distribution relationships, partnerships expand the possibilities for the traveller,” says Brandon Ehrhardt, Director, Strategic Initiatives & Research, Expedia Lodging Partner Services (LPS).
In the past 18 months Expedia LPS has announced partnerships with companies like Vacations by Marriott, MGM, Omni Hotels & Resorts, and many others, that enable these brands to use Expedia’s white-label products. According to Ehrhardt, ‘package white label’, one of the products in the Expedia Powered Technology toolkit, was a test-and learn solution for hotel partners looking to grow their business through the powerful package path. “But ‘product development for Packages’ has grown to now offer Expedia’s best-in-class dynamic packaging technology to other multi-property partners and we’ve observed some very promising results,” says Ehrhardt, who will be speaking at EyeforTravel North America in October.
The good news is that travellers who would previously not have considered a package holiday are now rethinking their approach. That’s because package holidays have shed their largely fuddy-duddy image and now cater for a much broader audience – from those looking for a boutique and design type experience, to responsible travellers, thrill seekers, foodies and more.
Industry myths and millennials
One of Ehrhardt’s areas of focus has been on millennials and their travel preferences. “We spend a lot of time discussing generational trends as both GenZ and Millennials overwhelmingly prefer to save time and money while shopping,” says Ehrhardt. So, if, as Expedia’s research finds, 87% of GenZ and 80% of Millennials find it helpful to book travel in one place, then clearly “we want to make sure they’re coming to us”.
That’s not great news for hotels going all out to get the traveller to book direct but Ehrhardt is keen to stress that there is“an industry myth that OTA guests do not spend as much on property as guests who booked direct”.
There is an industry myth that OTA guests do not spend as much on property as guests who booked direct
After collaborating with Oxford Economics to study 98,000 travellers, “we can confidently say that is not true”. In fact, OTA guests spend about 17% more on property than those who booked through other channels.
This view is one also held by Tim Hentschel, CEO of HotelPlanner, a provider of online services to the global group hotels sales market. “For every dollar spent on a hotel room, our groups are spending $2 to $4 in the hotel on F&B, conference spaces, AV equipment and other ancillaries. So, the revenue generation of the group is so much greater than just the room spec.”
While many hotel groups do want to drive direct bookings wherever possible, they also acknowledge that partnerships are crucial, and this is especially true for those working in the B2B arena. One important area of focus for Nicola Accurso, VP Business Development, NH Hotels, who will be speaking at EyeforTravel Europe next week, is to build so-called ‘preferred partnerships’ with travel management companies, meetings & events agencies, as well as some high-end intermediaries. NH has also negotiated long-term win-win agreements with over 30 airlines to drive business in destinations where there is room for growth.
Like Expedia, NH Hotels believes in delivering added value to all parties in the travel value chain, and sets clear targets to incentivise its preferred partners to drive business in markets where it is needed. In Spain, for example, where NH has high brand awareness, new preferred partnerships are not a priority.
“We have a unique value proposition in that we offer 10% commission on rooms, meetings/events and food & beverage but, to be clear, it’s not just a matter of commission. Agreements are often much more complex and we really try to understand how partners can add value, and what the mutual benefits are. There is always a set of parameters and most of our partnerships are tailor made. It’s not just about selling,” he says.
There is always a set of parameters and most of our partnerships are tailor made
One example of how NH incentivises partners, is to offer incremental commissions if targets are reached.
That’s a different approach to what is happening in North America where some of the big chains - Marriott, Hilton and IHG - have moved to axe commission for groups by 30%.
Hentschel, who has called the commission cuts of the big chains in North America ‘shortsighted’, says that the European market, which is quite different, hasn’t been affected. “European hotels always had a lower commission rate of 8%. The European group market has several very large third-party agencies and tour operators, as well as a healthy group of regional independent hotel operators [like NH!]. So, we don’t see the European market being affected by the North American changes moving forward,” he says.
Partnerships will be a hot topic at next week’s EyeforTravel Europe where Nicola Accurso will address a Day 2 keynote panel along with Anthony Price, Director Marketing & Customer, BMI, and Dan Christian, Chief Digital Officer, The Travel Corporation