In the finale of Season 5, Game of Thrones, everyone dies. There, no spoiler alert. We know that’s what happens in this TV series which Agoda’s Timothy Hughes compared to online travel at the recent WIT Japan & North Asia.
Well, the battle is about to get more brutal.
Accor’s announcement this month that it’s changing its name to AccorHotels and that it’s creating a marketplace turns it up a notch. The idea is to open AccorHotels.com to independent hotels. Independent hotels are like the “Iron Throne” everyone is fighting over to rule over the seven kingdoms in “Game of Thrones”. In Asia, in particular, they account for the bulk of hotel content.
The thinking is, independent hotels need help with distribution and technology. They don’t have scale to compete in today’s world where a hotel room has been dumbed down to a bar of soap and customers are searching online for price comparisons.
So big boys like Booking.com (with Booking Suite), TripAdvisor (with Instant Booking) and now AccorHotels (powered by Fastbooking, which it acquired recently) want to help them by giving them a platform and reach. Not to mention the local e-commerce platforms such as Alibaba, Rakuten, Interpark and Amazon which are obviously hoping their scale across sectors will give them the edge over specialist platforms.
I recall a conversation with a top Accor marketing executive two years ago when we were debating the merits of direct vs indirect and I said, “How can Accor possibly compete with Booking.com in driving traffic to your website? And how can Accor possibly compete when you only offer your hotels and not everything else, like Booking.com?”
And his retort was, “Why not?”
Well, I guess this is the “why not” moment. In creating a marketplace, AccorHotels is taking a leap of faith that choice is what customers want and if you don’t wish to stay in an Accorhotels, well, we’ve also got the rest.
Vivek Badrinath: “There is space in the middle for the leap of faith we have instigated.”
The move is part of changes being made by deputy CEO Vivek Badrinath who came to AccorHotels from Orange and who said in this interview with HeBS, “If you have a single-branded clothing store, it attracts people on the High Street, but what you get are a flow of people that are kind of in the mood to buy your product. But if you have a retail corner in Harrods, you get more people, as they have not anything specifically in mind to buy and also see they get more choice. …
“The planet does not need yet another copy of Booking.com or Expedia, but if (AccorHotels) offers an absolute catalog covering the planet with hotels that are all well done, then there is room for a customer to come and say, ‘Here is a good list of reasonable-quality hotels by someone who knows the business, and if I do not find (what I am looking for here), then I can go elsewhere.’
“There is space in the middle for the leap of faith we have (on 9 June) instigated. Studies have proven that the more products in your store, the more gets sold than if you only have one product. We see it as a win, win, win, win, for customers, for franchisees, for the independents who chose to join us and for AccorHotels itself.”
It is indeed a leap of faith. How will franchisees accept this? Will they see this as eroding the value? Or perhaps Accor is betting that these franchisees will take a step up to become branded properties if the marketplace truly reaps benefits for them?
In time, the website’s objective is to offer more than 10,000 hotels in 300 key cities worldwide, or a three-fold increase in the number of hotels on AccorHotels.com. This service will gradually become available to hoteliers in the first target markets starting at the end of June 2015, and guests will be able to access it beginning July 2015.
Here’s how it will work – independent hotels distributed on the AccorHotels.com platform alongside the group’s brand hotels will be selected on the basis of hotel criteria with guest reviews taken into account. The new offer guarantees transparent display rules, access to customer data, and competitive commission rates.
At WIT Japan & North Asia, during the panel on hotel distribution (pictured right), moderator Morris Sim of Brand Karma asked his panellists, “Would Marriott distribute on Airbnb and would you as an independent hotel distribute on AccorHotels?”
Panel on hotel distribution at WIT Japan: From left, Masaya Hasebe, Hotel Okura, Benjamin Jost, TrustYou, Philip Niemann, Duetto, Jun Shinohara, Marriott and moderator Morris Sim, Brand Karma.
The answers were tentative – all this disruption is making everyone edgy and nervous. We humans like things to be in boxes and when you’ve got things jumping out of boxes, we don’t know what to think and do.
Meanwhile, another army marches on – TripAdvisor with its Instant Booking, which channels direct bookings to hotels. This week, it announced an extended partnership with Marriott, which will cover more than 4,200 hotels around the world.
For Marriott, it is obviously part of its strategy to increase direct bookings, shift power from OTA and own the customer. Here’s what Shafiq Khan, senior vice president, channel strategy and distribution of Marriott International, Inc, said, “TripAdvisor has created a new distribution model that changes the game in the travel industry by addressing key concerns of hotel suppliers.
“The result is mutually beneficial to both partners from a strategic and economic standpoint. Marriott’s partnership with TripAdvisor will make it easy for consumers to book with our hotels, and allows Marriott to build a direct relationship with these guests even before arrival. The agreement also maintains our ability to control where the rates and inventory for Marriott’s hotels are displayed. Our partnership will continue to enable us to offer the best benefits, such as Marriott Rewards and Ritz-Carlton Rewards points to our customers who choose to book directly on our channels, including Marriott.com.”
The Marriott partnership will come as sweet news to TripAdvisor’s founder Steve Kaufer who, just this month, had lamented the slow adoption by hotels. In an interview with J.P. Morgan investment analyst Doug Anmuth, he said, “It’s driving us nutty why suppliers aren’t hopping on board sooner…. But I understand as the chains have set their goal on growing the domain direct channel, instant booking pushes against that strategic initiative, even if it makes good sense for them….
“I genuinely believe I was aggressive on the timeframe of how soon chains would adopt instant book.”
At the heart of the battle is reducing dependence on OTAs and commissions and of course, the sensitive issue of rate parity.
AccorHotels’ Badrinath explaining how the marketplace would work to HeBS, said, “Plugging will be done through the extranet and channel managers, but we will not be imposing rate parity. With all that is going on in Europe, the market is gradually moving away from that. The pressure from regulators means that idea is going out of the door. It will get further regulated.
“I came (to AccorHotels) from a very regulated sector, and I can see the writing on the wall. Logically, you will start seeing a slight spread of prices that correlate to a certain extent with pricing levels, which will drive lower commission rates.
“Currently, the commission levels charged online are excessive. Yes, (Booking.com, etc.) have the market pricing power and efficient tools, and they drive traffic, but it has gone very high for independent hotels. … ”
AccorHotels’ move towards a marketplace reinforces the belief that today, it takes a marketplace to win. Platforms that offer choice vs single-branded sites – well, Accor has chosen and thrown down the gauntlet in the ongoing battle for the “Iron Throne” of hospitality.
Note: Vivek Badrinath will be speaking at the WIT Conference in Singapore, Oct 19-21.
