Tnooz attended an event hosted by RezNext in Bangalore this week, where leading hoteliers discussed the challenges and opportunities in Indian hotel distribution.
Below is a summary of the discussion:
In some respects, and inevitably, the Indian hospitality sector is evolving differently compared to other parts of the world - mobile is ballooning in the country and the middle class demographic continues to grow.
Most hotels in the country are online, with the sector as a whole reporting that 40-50% of business comes via the web. Also, local travel service providers contribute a similar percentage share for their hotels.
More than the sale numbers, Indian hoteliers are more focused on getting visibility in online channels. It doesn’t matter in which channel a booking comes through, hoteliers appear to be happy as long as they are available to book in all online channels.
Hoteliers look at the net yield per channel. In tourist destinations like Goa, a large amount of hotel bookings are made via OTA. For a hotelier, this is not a positive sign (due to commission payout). But from an yield management perspective, hoteliers find it better than other channels.
A hotelier also commented:
"You can never beat an OTA, even in Google - if you search for my hotel, the OTA come first."
In reference to all above reasons, hoteliers prefer online channels that gives regular rates on a consistent basis, and also at a lower cost.
Indian hotel distribution market is very complex, cost is seen as an important factor when it comes to selecting a distribution channel.
In India, a large number of people don’t have a credit card, and they don’t have data service in their smartphones (though smartphone usage is high in the country). The end consumer here in India is not very sophisticated when compared to the west.
Also, corporates in west are large sized and they are present in multiple cities, where as in India there are lot many mid-segment companies that doesn’t want to invest in technology for travel bookings. So, a large sales team is definitely needed in India.
A hotelier said that opaque model is creating a buzz in the Indian hotel market, especially in the “flight + hotel” packaged model.
Non-traditional channels like mobile networks are also being explored by hoteliers. This channel is pursued primarily to ease (mobile) payments in the similar context of Africa's M-Pesa. [Related: Middle East's online travel payment challenge]
Revenue management in hotel industry vs airline industry
A hotelier defined the job of a hotel revenue manager as one who not just maintains a relationship with OTA, rather s/he should be trying to increase revenue for the hotel via the OTA.
Hoteliers also compared the online hotel distribution and revenue management principles with the airline industry.
In air industry, the number of planes are limited or not available in abundance. Where as in hotel industry, the competition is intense with numerous hotels at various star categories operating in every city in India. So, the probability of a guest bypassing a hotel (because of price) and moving on to an another hotel is very high.
The major difference between airline and hotel industry: In India, an airline seat is (more or less) either a seat in Airbus or Boeing , and the in-flight food is supplied by limited number of service providers. So, irrespective of the airline a customer books, the service will more or less be the same.
Where as, in the case of hotel industry where the supply is beating the demand every year, the service a guest gets from every hotel will be different, and lowering the rate below certain amount would result in serious revenue loss for hotels.
Airline industry has done a remarkable job in segmenting the market, has lot of fare rules and restrictions, has trained customer to book well in advance to get price discounts, etc.
Airlines know that in a particular segment, if there is a booking made by a customer three days before departure date, then the customer might be a business customer and s/he is price insensitive. They also offer last minute discounts on very selective markets.
In case of hotel, if the targeted occupancy level is not reached, hotels are not going to run deep discounts. Doing so will simply spoil the brand and revenue for the hotel.
Almost all hoteliers concurred that the airline revenue management model won't work for hotel industry.
Below are two interesting questions raised during the discussion:
When a hotel hits an 80% occupancy, should the hotel maintain the rate? or increase it? or decrease it and try to gain 100% occupancy?
You need to look at hotel performance in term of market segmentation. Based on it, a hotelier can do channel wise strategy – be it OTA, be it GDS, or be it a brand website. It depends on what kind of market segment is filling in your hotel. If you are making rate decision based on occupancy, then its wrong.
When a hotel knows that its rooms are going to be empty for the night, should it drop the rate? or sell just above the cost?
It depends on various factors like booking curve, market segmentation, the type of hotel - business or leisure. Generally, a hotel doesn’t have to lower the rate until it sees a big gap in occupancy during the week. For example, if you are getting only weekend bookings, and all weekdays are empty.
NB:India technology image via Shutterstock.