"Legacy channels will share parity for deluxe price point purchases"
Published: 25 Nov 2008
India Special
New Delhi-based Lemon Tree Hotels is making steady progress towards establishing itself as an upscale hotel brand in the full-service, moderately priced category by 2010-2011.
The company, valued at over $500 million in April this year, has five operating hotels in India and has 18 more hotels, aggregating over 2500 rooms, currently under development across India.
From e-distribution perspective, Lemon Tree Hotels currently manages a little over 20 percent of its production volumes through electronic channels.
"Our target is to drive 35 percent of our topline online by 2011," says Rahul Pandit, VP – Operations, The Lemon Tree Hotel Company.
Pandit, who is scheduled to speak during Online Travel Strategies India conference, to be held as a part of EyeforTravel's Travel Distribution India Summit 2008 in Mumbai on November 26-27, spoke about the role of various channels and some of the current issues. Excerpts:
EyeforTravel.com: How do you assess the role of five channels - hotel direct, voice / reservation center, 3rd party Internet, brand web and GDS / agency in this region? How much value do you think is still associated with such channels and how much has eroded?
Rahul Pandit: It is advantageous to be distributed on all channels preferred by the customer. Online is fast becoming a preferred channel and it is supplier's interest to focus resources on this.
Overtime, online channels will have dominant market share for mid to economy price points. Legacy channels will share parity for deluxe price point purchases where customer engagement with the experience is a bigger differentiator than price alone.
EyeforTravel.com: One of the most cost-effective methods of distribution – from a cost per transaction perspective – is online since the GDS and travel agent commissions do not apply. However, there is a need to consider the 'hidden' costs of online sales - consumer advertising, web search engine optimisation and IT personnel. What's your viewpoint regarding the same?
Rahul Pandit: India currently has 49 million online citizens. This number will rise to 100 million plus over the next three years. Online, with 24x7 access, TG focused and measurable campaign spend will become the preferred choice for marketers.
Also, majority of the online costs are variable i.e. linked to conversion. Conversely, most costs in legacy channels are fixed. The cost margin for online will also reduce with the increase in volumes.
EyeforTravel.com: Suppliers acknowledge that online-direct can turn out to be more expensive than traditional GDS distribution if not properly controlled. There are various costs related to marketing/advertising, customer servicing, credit card fees, fraud, transaction cost, booking engine and payment gateway. What's your opinion regarding the same?
Rahul Pandit: Yes, this is a possibility if the ROI is not tracked for results. Strict control and directed efforts yield better results.
EyeforTravel.com: The increment in the number of distribution channels has highlighted the significance of channel managers especially when it comes to handling a multitude of manual extranets. How do you assess the situation today from an hotelier's perspective?
Rahul Pandit: Channel manager is definitely the need under the current scenario, however in the long run, direct CRS interfaces to the most productive channels for optimum revenue maximisation would be the appropriate solution.
EyeforTravel.com: Would it be right to say that the individual hotels have lost out on technology and support costs simply due to the fact that they many are small businesses with limited scale. That is where the power of big hotel groups allows operators to take advantage of scale and leading edge technologies by joining a network of hotels. What's your viewpoint regarding the same?
Rahul Pandit: Technology is an enabler, and it is perpetually in a beta. India is an emerging market, to find the right tech partner, there needs to be extensive research on business objectives before deploying a solution. Hotel groups should take advantage of market forces and the cost arbitrage available to a vendor in penetrating an emerging market to get the best value for their businesses.
EyeforTravel.com: A price change and the ability to make it simple to buy and simple for customers to understand that they are gaining value for money is crucial in setting your pricing strategy. What according to you is critical in achieving the same when there are so many distribution channels?
Rahul Pandit: It is essential to have rate parity. Also, suppliers need to work with the most productive distributors to ensure they get a fair share of the marketing spotlight.
EyeforTravel.com: Suppliers are investing in new opportunities such as the Internet and Web 2.0, OTA XML interfaces and mobile technologies. What kind of progress has been made in this market?
Rahul Pandit: Mobile is the market with the maximum potential. It is the future and we need to seed it now.
Ritesh Gupta,
EyeforTravel.com
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