Wyndham looks to Katanox to save distribution and payment costs

Wyndham Hotels & Resorts is rolling out a combined distribution, payments and commission settlement technology platform across its portfolio.

The company, which has more than 9,000 properties under franchise, is working with Katanox to drive cost savings and operational efficiencies as well as better control for franchisees with the technology.

Vikram Pradhan, vice president of revenue management for the company, said it chose Katanox after he looked at the group’s increasing cost of distribution and commissions for third parties on our franchisees.

“I started looking at the entire food chain. There are so many toll gates today from the hotel supplier side when we start to send rates out to the end consumer through third parties," he said.

“There are distribution intermediaries that are tech providers, then there are actual distribution channels, then payment platforms because you have to process payments. Then you have commission reconciliation because now someone has to reconcile who gets paid what. All these toll gates are adding a lot of money eventually depressing what our franchisees get in their pockets.”

Paul Beukers, co-founder and chief commercial officer of Katanox, said he estimates that hotels currently pay about 3% of the transaction to be able to accept virtual credit cards and a further 2% for a commission settlement system. The startup's financial model is to just charge 1% for the payments element.

Wyndham therefore wanted a solution that could solve for all the pain points. 

“I started thinking why is that. Those business models, in my opinion, have different criteria. For example, a payment provider potentially needs a banking license," Pradhan said. "With distribution technology, you've got to be a real master at understanding the messaging that goes back and forth so that you are reducing error rates between reservations."

“So each of them separately are experts and have expertise in their own way. And, companies find it hard to translate one type of expertise to another, because they simply don't have either the legacy systems or the talent or just purely the drive.”

The first transactions are now going through the system following a process of about a year getting all the involved parties integrated including Sabre as the central reservation system, Wyndham and the end corporate travel business partner.

Pradhan said there are three other partners in the pipeline and the goal is to have all corporate travel partners on board initially although the company is also looking at leisure. The plan is to use 2025 as the transition year and get three to four further connections up and running while 2026 will be about the savings and efficiency.

Shifting landscape

Early success indicators include higher value transactions through Katanox than through a GDS or online travel agent, new business and advanced lead times, Pradhan said.

Once Katanox is fully implemented, Wyndham will look at its existing processes and partners but Pradhan said it would not be efficient to “keep all in play.”

“A couple things can happen. Either they will reinvent themselves and come up with other things that even Katanox is not thinking about today or, eventually they will lose their moat, the advantage they have created because the switching costs are too high. 

“This is definitely a wake up call for some of the legacy players that they've got to absolutely think about how how they do business today, which is mostly fencing or creating barriers to entry, as opposed to competing on merits.”

Pradhan believes the hotel distribution landscape is beginning to shift more widely.

“I honestly believe that there are changes going to happen in the industry in the next three to five years in distribution. We've been talking about it for so long, I don't think this change is going to take as long as NDC has taken for the airlines frankly. Everybody just kind of cringes when NDC is mentioned but I think the hotel industry is on a faster path. You know how things are slow at first and then all of a sudden, I think we're at that inflection point, That's not only my wishful thinking but see it every day in different companies and, frankly I see it in how the legacy players are reacting.”

Beukers said Navan is already live with Wyndham on the system.

“If you look at what you need to book a window room on Navan, you need content - pictures and descriptions, you need to be able to book the hotel room, you need to be able to pay out the hotel room and you need to be able to settle the commission. These four elements are currently being done by four and sometimes six different companies.”

He said that Katanox, a PhocusWire Hot 25 Startup for 2024, is focused becoming the “financial backbone of this industry” and was built to address the costly and complex processes including virtual credit cards and the lengthy commission payment process. 

“Hotels are ready and getting ready. If you look at how distribution has been consolidating, how different players have arisen from the GDS onwards to where we are now, everybody optimized always for the distribution. Everybody looked for content aggregation, direct access to the CRS or to the PMS, but everybody overlooked the financial flow.”

As part of its roadmap going forward, Katanox wants to continue bringing more hotel supply to corporate buyers and bookers and vice versa as well as drive efficiency in foreign currency payments and look at the potential to provide credit by partnering with banks.

Meanwhile, Pradhan has a vision of removing the payment at the front desk.

“I wish the front desk never had to deal with payments at all. They could just stand there and smile and welcome, provide a great service and never have to deal with payments," he said.

“I think Katanox is our first shot to actually making that a reality. Who knows if the entire ecosystem switches to payment behind the scenes. That would be Utopia.”