18 Trends to Watch in Hotel Distribution: 2023 and beyond
Vineeth Purushothaman
Founder hotelladder.com - on demand commercial L&D resource for hotels | Hotel Distribution Strategist & Commercial Leader
"The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn and relearn" said Alvin Toffler in his book Future Shock in 1970.
If the Covid pandemic has taught us one thing, it is not to take anything for granted - not even what we know and what we may need to relearn!
The start of a new year has made me reflect on the rapidly evolving world of distribution and wonder where we are heading and what we should be better prepared for.
Many years ago, revenue management (RM) was considered “the dark art”. Everyone talked about RM, but few understood it, and even fewer people applied it effectively in their hotels. But with the advent of time, improved capabilities, and newer plug-and-play RM technology solutions for hotels, “the dark art” of RM is now more accessible, easier to understand and more effective to apply.
Is it now the turn of distribution to go through this cycle in the hotel industry?
It seems to me that many people talk about hotel distribution but do not really understand what it really does, why it is important, what its scope is and where it really sits within the commercial organisation. Is it part of sales, RM, marketing, or some other area? Or should it be a stand-alone function? What specific skills does it need? And finally, why has it suddenly become so much more important?
And what are the distribution trends for 2023 and beyond that may influence some of these considerations? I started by looking at some of the numbers for context.
Biased or not, this data reconfirms to me that distribution should be at the heart of our travel and hotel business. It is the ecosystem, the pipes, the conduits and all the lesser known "under the bonnet stuff" that requires a curious mindset and broad know-how of the industry - it is high time we put distribution at the centre of the commercial conversation!
At the centre of all distribution trends - the booker journey
The way travellers use the internet to make bookings continues to change, creating new opportunities and challenges and impacting the distribution ecosystem. Costs and economics have become more critical - as have geopolitics. Source markets and destinations are changing rapidly, as is the nature of travel and booking behaviour.
Research phase: The research at the start of many booking processes is increasingly voice-driven with the increasing sophistication of chatbots and related technologies. A more accessible product/experience via augmented reality (AR) and virtual reality (VR) on social media allows potential bookers to better imagine the experience.
Pre-booking phase: "Try-before-you-buy" is increasingly becoming a possibility. Hotelverse aims to provide an immersive booking experience with its "Digital Twin", a hyper-realistic 3D model that gives customers the right to choose their room and design their stay.
Booking phase: The importance of mobile for bookers continues to grow. Use of a mobile device for travel bookings was 31% in 2019, rising to 37% in 2020. In 2021, mobile travel booking rates jumped to 41 % (Salecycle).
Larger brands also continue to embrace app-based bookings as it allows them to access data and provide opportunities for personalisation. However, it remains a challenge to provide compelling reasons for customers to keep coming back to the app.
Wyndham's Trip Planner app has received great feedback - and is the first hotel chain to launch a tool that allows travellers to plan their road trip and book it with just a few clicks.
Booking.com has adopted an app-first approach, which now accounts for the majority of mobile bookings. Sensor Tower estimated that in Europe, travel apps are forecasted to surpass 130 million downloads in Q2 2022, up 56 percent year-over-year.
In the booking phase, payments is another area where much has changed. Younger bookers seem to be gravitating towards Buy Now, Pay Later (BNPL) products. Founded in 2015, Fly Now Pay Later offers travellers a new and more flexible way to finance trips, adventures and short breaks. The company received €11.5 million in Series A funding in May 2021, following €39 million in Series A funding in 2020. Travel booking startup Hopper closed a follow-on investment of US$96 million, bringing the company's total funding to US$740 million. Hopper has focused on its Price Freeze products.
The start-up Selfbook aims to help hotels maximise conversions by integrating digital wallets into the booking flow.
Travel phase: Travellers want travel to be easier, and there is growing evidence that this is happening. Companies like Flightpath are working with airlines to provide a fun and helpful experience while travelling. More and more travel companies are using AR to provide travellers with a more immersive experience during their journey and when they arrive at their destination.
The dream of a “fully connected journey”, as articulated by Booking.com, still seems a long way off. Neoke takes a fresh look at how to avoid or minimise the frictions that still prevent us from addressing some of the issues. Their focus is on a new global identity network for travel, based on a blockchain-based, self-sovereign ID.
Stay phase: The theme of ease of travel also extends to hotel stays. Most guests checking in are more than willing to skip the wait at reception - especially on a busy day. The same goes for the interaction with the hotel teams during the stay and when checking out.
Talking Trends
Spotting trends feels like a gamble at the best of times - do you look at trends with a fresh pair of eyes or with the eyes of someone who can't unlearn? And with all the uncertainty we've experienced in recent years, it seems even more of a gamble now. However, I'm optimistic that there are patterns to be discovered and explored. And I love to connect the dots (or patterns!)
I made up my own recipe for this and it goes as follows: the first four in somewhat equal measure and the last just a pinch…
With this recipe, I have pulled together my list of the 18 most important trends that will significantly influence hotel distribution in 2023 and beyond - in three categories
Part 1 - Shifting Sands
Trend 1: Post-Covid, the blending of business and leisure travel is evolving to a whole new level
In the past, it was relatively easy for hotels to categorise travellers and travel bookers and treat them differently during the booking process. Now, as business and leisure travellers merge in many ways, it is becoming increasingly difficult for hotels to plan for these segments.
Covid has accelerated this trend, making it increasingly difficult for hotel commercial teams to understand the ever-changing travel and booking patterns and adjust pricing accordingly. This has led to a change in hotel product design and marketing as well.
This is not only a challenge for hotels, but also for Travel Management Companies (TMCs) that serve their clients - the companies. While more and more companies are starting to address this type of mixed travel in their travel policies, a large part of it is still not managed.
Although overall business travel has not yet returned to 2019 levels, the emergence of increasingly mixed formats has helped to support and revitalise this segment. However, as this category grows rapidly, hotels need to give travellers the tools they need to achieve a work-life mix similar to what they have at home when they are on the road.
The Global Business Travel Association (GBTA) surveyed members and industry representatives who manage or source travel for their companies in April 2022. The results show that 90% of respondents said their employees are more (30%) or equally (60%) interested in bleisure travel compared to pre-pandemic times. Only 10 % indicated that employees were less interested in mixed travel.
Even though this is a challenge, on the one hand, hotel public spaces and hotels with restaurants and bars have the chance to profit from this trend by adapting their offer to the needs and wishes of this new segment. This means free high-speed internet, sufficient power sockets and good coffee. Examples of product development
What about air travel? Since the pandemic changed the way people think about business travel, the major US airlines have been thinking about new types of travel to replace it. Delta has talked about the premium leisure traveller, people who would pay for a nicer experience on board and an upgraded hotel and ground package. Other major US airlines have spoken of the "blended passenger", or the "bleisure" passenger.
So what does this mean for distribution in this blended version of travel? Do bookers continue to seek the best deals through one channel (the TMC) or do they split it in two - with business travel booked through the TMC and leisure travel booked separately on their own? Or does this give us the opportunity to re-evaluate the way we bundle services and products?
It could be argued that this is where attribute-based selling can play a role and have an impact, as travellers seek very specific experiences and features for their hotel rooms or during their trips.
It may also be worth separating the growing demands of Bleisure travellers from those of Workcation travellers, as they may have different motivations and expectations. For example, there is a difference if the spouse goes along for a long weekend or if the whole family works elsewhere for a longer period of time.
Companies like Spotnana, which just closed a $75 million funding round, aim to fill some of these gaps, for example, through personalised travel booking, where travellers can see booking options based on their preferences and take advantage of the same loyalty benefits available on suppliers' websites.
Finally, there is the ongoing debate about how terrible the name "Bleisure" is and that it is time to find a new name. Among the suggested alternatives is "Mullet Travel", originally coined by the Wall Street Journal. If you feel strongly about Bleisure, do not miss this article.
Trend 2: Regulatory environment grows in its ambitions, capabilities, and complexity – with new acronyms coming thick and fast
Regulators in Europe and elsewhere are in overdrive - they have a lot of catching up to do. Technology companies have grown so fast that legislation hadn't really kept pace. It's not light reading, but all of this has significant implications for hotel distribution and relationships within the travel industry ecosystem.
The most far-reaching legislation that has significantly impacted our world recently is the General Data Protection Regulation (GDPR), probably the strictest data protection law in the world. Although it applies in the European Union (EU), it binds organisations all over the world when collecting data from people in the EU. Due to the large amount of (sensitive) personal data and the fact that this data is constantly in circulation, the travel and tourism industry is heavily affected by the GDPR. If you want to compare the GDPR with data protection and security laws around the world, this website is for you. Effective date - 25 May 2018.
Package Travel Directive – This allows for strong cancellation rights on packages: With the new rules, travellers can cancel their package holiday for any reason by paying a reasonable fee. They can cancel their trip for free if their destination becomes dangerous due to war or natural disasters, for example, or if the package price is increased by more than 8% of the original price. Although the impact was skewed during the Covid 19 pandemic, this is an area that hotel and travel companies need to consider when creating and pricing packages. Effective date - 1 July 2018
Payment Services Directive 2 (PSD2) - Originally scheduled to come into force on 14 September 2019, but has been delayed until 31 December 2020. PSD2 aims to reduce fraud and improve consumer choice, in particular through strong customer authentication (SCA), which is required for all European e-commerce transactions. Effective Date - 31st December 2020 Enforcement Date UK – 14th September 2021 (more information here)
The Omnibus Directive, which came into force on 7 January 2020, aims to provide EU consumers with additional protection in situations where accommodation is available and bookable for EU consumers. For the hotel industry, this has implications for special offers and discounts. The discounts displayed on the platform of an online travel agency (OTA) should represent the actual savings for those booking. This means that the price used by hotel companies as a benchmark for the discount should be the lowest price available for bookings on that platform during a reasonable period of time before the discount. The reasonable period must be at least 30 days. Effective date - 7 January 2020
Digital Markets Act (DMA) – a regulation proposed by the European Commission in December 2020 and signed into law by the European Parliament and the Council of the EU in September 2022. The Digital Markets Act (DMA) came into force on 1 November 2022 and aims to make the digital economy fairer and more competitive. The DMA focuses on regulating the monopolistic behaviour of gatekeeper platforms. Gatekeepers are large online platforms, measured by annual turnover or market capitalisation, that are active in several EU Member States. Many well-known OTAs such as Booking.com and Expedia and their role are likely to be reviewed as part of this process. Being classified as a gatekeeper means additional checks and controls. Effective date - 1 November 2022
Digital Services Act (DSA) - The DSA imposes new obligations on digital service providers operating in the EU. The DSA focuses on more security for users, more transparency of platforms and better enforcement. The most important element for hotel companies is that the DSA targets the "secret sauce" of the big OTAs and other online platforms. It requires the platforms to share more on how their algorithms work. This should give bookers a better idea of who is trying to influence us and how, and allow bookers to decide for themsleves whether or not to trust. The law will come into force on 16 November 2022 and most companies have 15 months to implement it. Effective Date in all EU Member States - 17 February 2024.
What’s coming next? Short-Term Rental Regulation is expected on the back of the DSA.
This is where legal meets distribution – organisations need to find time and resources to ensure that we stay compliant and optimise the benefits of these regulations.
Trend 3: Cybersecurity is more important than ever & distribution infrastructure can be a weak link
Hotel chains and travel technology companies are increasingly vulnerable to cyberattacks. They are key targets because of the amount of sensitive data and customer information that flows through them. Another reason is the frequent use of personal devices such as smartphones and laptops in hotel rooms. This increasing use of devices also makes hotels a prime target for cyber hackers.
A short list of recent issues illustrates the challenges facing the hotel industry. And these are just some of the high-profile cases. The actual number is probably much higher. Even if you're an optimist, it's hard to ignore the scale of the problem - predictions made in 2018 state that over 33 billion records will be stolen by cybercriminals in 2023 alone. And if you look at recent attempts, it may well be coming true.
In December 2022, a ransomware gang The Play took responsibility for a cyberattack on a hotel chain in Germany that led to communications outages.
In November 2022, Sonder learned of an unauthorised access to one of its systems that contained certain guest data.
In September 2022, hackers told the BBC that they had carried out a destructive cyberattack on Holiday Inn owner Intercontinental Hotels Group (IHG) "for fun".
Between May and July 2022, Shangri-La disclosed that "a sophisticated threat actor" had undetected bypassed IT's security monitoring systems and illegally gained access to guest databases.
If you go further back the Marriott/Starwood breach took place sometime in 2014, but it wasn’t discovered until 2018 when an internal security tool caught a suspicious attempt to access the internal guest reservation database.
According to a survey conducted by Travel Technology Xchange (TTX), only one in five hotels has a formal policy for dealing with cybersecurity threats.
It's not just hotel chains that are vulnerable. Booking.com was breached in 2018 when phone scammers targeted 40 employees of various hotels in the United Arab Emirates to obtain login details for the Booking.com extranet and gain access to several thousand guest profiles. Expedia's Orbitz was hacked in 2017, resulting in the loss of customers' credit card data.
Lithuanian startup Nord Security has become a Unicorn after a €91.6 million funding round in April 2022 that took its valuation to over €1.4 billion.
With customer data and identity theft at a premium, hacking customers' credit card details is one of the biggest risks to a hotel's security and reputation. Network security upgrades and staff training are critical here.
Expect to see more developments and companies working to offer improved products and higher levels of cyber security, but ultimately hotel companies need to be prepared with a formal policy, approach and processes while ensuring careful selection of robust distribution technology partners.
Trend 4: The path to more direct bookings and loyalty continues to challenge and intrigue?
Everyone loves the idea of direct bookings and increasing their share. Simply put, it's about lower sales costs and the ability to interact directly with the booker to encourage future bookings. At the same time, reach is always a challenge. Even as part of a global chain, you need a range of diversified channels, including third-party providers, to reach markets that are geographically, culturally or linguistically distant.
One of the most important levers to attract and appeal to a wider range of bookers from around the world is a loyalty programme. But the word loyalty can be very divisive. Some will argue that it's not loyalty to a brand if a booker participates in the loyalty programmes of 5 different hotel companies. Others would say that loyalty programmes for direct bookings incur additional costs that bring it on par with those of third-party channels.
The shift from business to leisure travel, or the blended version has led to a change in interest in loyalty programmes. Research by Cornell University's Centre for Hospitality Research shows that hotel loyalty programmes can increase room revenue by 57 per cent.
One thing is certain, then. Loyalty and rewards programmes are on the rise and continue to be a major focus and growth area for most major hospitality and travel companies. Features in demand include flexibility in earning and spending reward points, greater personalisation and instant rewards.
Customers are tired of carrying multiple rewards cards in their wallets and are questioning the use of their personal data and the actual benefits of these programmes. Mobile wallets like Google Pay and Apple can shop travel tickets and loyalty cards, allowing easy access to loyalty programmes.
Other new developments include Flycoin, where loyalty meets cryptocurrency. And Statusmatch looks at how travellers can transfer their loyalty status to a new airline or hotel chain and continue to enjoy the benefits of being a high-value traveller.
Another important lever for direct bookings is metasearch. A well-managed metacampaign can be very effective in driving direct bookings, with an average return of investment of $8 for every dollar spent. But this is now being challenged. Cost per click (CPC) has increased by 150% in North America and EMEA compared to pre-Covid. Add to that the problem of rates being undercut by an OTA. According to this article, 61% of all direct prices appearing in metasearch are undercut by at least one OTA.
Social Booking Spaces are a relatively new arena to generate direct bookings. This hybrid model combines technology and tailored booking endpoints with an ad-supported distribution model. Integrated with TikTok, WeChat, Instagram and other channels, hotels here have the opportunity to generate direct revenue in the mobile space. Technology providers are currently using the social booking space to develop solutions in the form of mini-apps that bypass traditional booking engines such as OTAs or even the hotel's own website and suggest hotel properties and rooms according to the user's behaviour on the social network or the host's digital platform.
Frederic Lalonde, Hopper's chief executive, predicts a "profound change" in online commerce as the social commerce model already established in Asia takes hold around the world. "Social commerce is completely different," he said. "You don't spend money on Google, you don't even spend money on Facebook or TikTok”.
There has been a lot of talk about attribute-based selling, but it hasn't really caught on or been adopted fast enough to be impactful. GauVendi wants to move away from static inventory management of spaces and introduce dynamic and function-based inventory management. Aidaptive's mission is to provide hospitality and e-commerce providers of all sizes with OTA-level machine-learning capabilities.
Trend 5: Extended stay and short-term rental (STR) sector powers ahead despite regulatory challenges
The STR sector is thriving despite some regulatory challenges. This growth is due to the increasing demand for short-term rentals as well as the popularity of vacation rentals. The combination of business and leisure activities, as well as longer stays in general, have helped this sector significantly.
Hostaway reports that many travellers - business travellers, digital nomads and families - choose longer stays. The average number of nights per booking has increased on Airbnb to over 4 nights in 2021, and bookings of 28 days or longer are capturing overall market share. On VRBO, stays between 21 and 30 days have increased by 68%, with families in particular staying longer in holiday accommodation. 59% say they're more likely to take a two-week holiday, while 30% are more likely to take a sabbatical.
However, the sector also faces many challenges, including high fees and limited availability. STR has a competitive market with a growing number of players, including hotels and other rental companies, with the number of properties increasing by around 4% each year. The sector faces regulatory challenges that can make it difficult for developers to obtain funding.
Another area is the direct comparison of STR with hotels. According to a 2019 survey commissioned by Airbnb, "functionality" (like a working coffee machine) was more important to most travellers than "thoughtfulness" (like a handwritten welcome sign). But it's precisely when it comes to functionality that holiday accommodations lose out compared to hotels.
The extended stay hotel market is estimated at USD 48.60 billion in 2022 and is expected to reach USD 132.40 billion by 2032, at a CAGR of 19.60% between 2022 and 2032.
No wonder there is still a flurry of activity still happening in STR and the extended stay hotel sector.
Buoy does pricing for STR and Beyond does something similar. Placemakr aims to become one of the largest owners of mixed-use apartment and hotel assets in the US and has raised a total of $127.1 million in funding. Lodgify, which offers a PMS, website builder, channel manager, booking engine and payment service, recently raised $30m. Sonder is probably the best-known company in this space, having raised nearly $840m.
The growth of the sector continues in 2023. French luxury holiday rental brand Le Collectionist has raised €60 million in a growth funding round to accelerate the company's expansion through acquisitions. Global corporate accommodation platform AltoVita has announced that it has secured $9.5 million. Wander, which was founded in 2021 with the aim of creating the travel experience of the future, reflecting new consumer behaviours where people increasingly combine travel, family time, work and leisure, has announced that it has secured a $100m credit facility from Credit Suisse to accelerate the growth of its portfolio in the US.
But don't expect it to be plain sailing either - Sonder had to go through a painful period in which 21 per cent of its head office staff and 7 per cent of its frontline staff were made redundant as part of a restructuring to boost cash flow.
For a more comprehensive analysis of STR performance, read more here.
Trend 6: Tightening Venture Capital (VC) funding pushes for better industry start-ups
If you follow the start-up ecosystem even a little bit (not just in the travel industry), you'll have heard that venture capital firms are withholding capital as valuations fall and economic headwinds slow growth in 2022. And that 2022 was a year of reckoning for the VC industry.
Early funding rounds in particular were influenced by the more conservative approach of investors who, perhaps under the impact of the pandemic, turned to start-ups with a proven market fit - and possibly a real, working product that delivers measurable added value.
Phocuswire has a good summary of travel startup trends here. It mentions the surprising fact that despite the impact of the pandemic on the business travel segment, some startups in this space were still able to attract investment. To me, this means two things: first, it shows the impact of blended business and leisure travel, and second, that startups with a good market fit and a working, impactful product are still likely to get funded.
Recent months have also seen €1m invested in UK-based Hotel Manager, €5.3m in Greek startup Welcome Pickups, €30m in Spanish travel tech startup Lodgify and €20m in another Spanish startup called Exoticaa. Arguably the most eye-catching investment, however, was that of ￡185m in Mews Property Management Systems.
Investors have become demanding and therefore it has become more difficult to raise money, but there is still enough activity to indicate continued investment.
Skift sums it up really well – “Sometimes raising investment is hard, and sometimes it's harder. But that's no reason not to move forward — a product that's strong and needed will still sell.”
Trend 7: Sustainability paints a mixed picture in the distribution landscape
Ambitious. Fragmented. Optimistic. Chaotic. Hopeful. Necessary. The travel and hotel industry has a lot to answer for and needs to address the issue of sustainability - and bring it to the forefront. In this case, I wanted to look at how the industry communicates its efforts to the general public through the lens of distribution.
Distribution was complicated enough before the big sustainability discussions and the need to share sustainability attributes came into play. The lack of a coherent industry-wide approach and the seemingly dramatic shift in sustainability awareness among consumers has led the industry into interesting but unpredictable territory.
Travel companies have taken different paths on their sustainability journey, achieving different levels of impact and visibility. However, this different landscape and approach to sustainability became a challenge for bookers when trying to compare products and services. Thus began the race to create certifications and certify hotels.
ABTA's Travelife was developed in partnership with tour operators such as TUI, Thomas Cook, Virgin Holidays and many others to provide an affordable, step-by-step system to help accommodation providers achieve international sustainability standards so that holidaymakers have more responsible travel options.
Global Sustainable Tourism Council (GSTC) collated a range of certifications under their sustainability certification umbrella. And the sustainable hospitality alliance did something similar.
Booking.com developed its own sustainability badge and HRS launched its Green Stay audit initiative.
Travalyst launched in 2019 with the aim of making it easier for travellers to find sustainability information on the platforms they already use - platforms like Booking.com, Expedia Group and Google. This seems to have led to some convergence, although there is still a long way to go.
Equally challenging were the discussions on how to present and update sustainability-related content consistently across all major channels. So far, it has been a big schlepp!
One of the companies leading the way in dynamically measuring and sharing sustainability initiatives is Chooose, an all-in-one platform with tools to integrate climate action into every customer experience - through automated emissions calculations, dynamic sustainability ratings, a verified carbon reduction and offset marketplace, and climate programme reporting.
In many ways, the sustainability discussions have forced most industry stakeholders to work together - and I expect this will also contribute to the broader improvements in content distribution that the industry really needs.
Trend 8: The difficult labour situation in most industries continues to be of great concern with no immediate solution in sight
There are several historical trends at play here, and COVID -19 accelerated the impact and speed of change. The hotel sector is traditionally not very well paid. Working hours are often unsocial. In hotels, there can be a big gap between senior teams and the "normal" workforce, and in many global regions it can be quite hierarchical.
According to BCG, employees who’ve left the industry also quit for reasons related to self-development, workplace climate, and work-life balance.
Many hospitality professionals who were furloughed or laid off during the pandemic also remain angry about how the sector treated them, according to a just-published study by researchers at the University of Houston
And as Larry Mogelonsky argues forcefully here “Hotels are guest-centric businesses and now we need to become employee-centric in order to drive team retention by providing a handful of incredible non-wage incentives”
What does this mean for the industry and for the world of hotel distribution in general? Well, this is a macro issue that affects us at all levels. At the executive level, leaders need an excellent understanding of technology-enabled efficiencies and talent management supported by a mix of technology-enabled rapid recruitment and retention models.
I can also see the structural silos of the traditional commercial organisation in sales, marketing and revenue management being shaken up to allow more team members to try their hand at areas they're good at! Curiosity is the key...
Distribution education is hard to come by – just as with revenue management education 20 years ago. So, there is work to be done to attract new talent.
Part 2: High-impact technology infrastructure
Trend 9: Fintech & payments finally starts to take their rightful place in the booker experience
Travel bookers seek different options to pay based on where they live and where they travel. But more often than not, however, they are frustrated because they have no choice. This is now changing faster than ever, driven by some important changes.
Open Banking is a technology and regulatory standard that aims to return control of banking data to consumers to increase both transparency and control. It works in the EU and the UK. Other countries are in the process of introducing their own versions of this standard. Key benefits include the elimination of middlemen (significant savings), higher success rates and improved conversion at checkout.
Buy Now, Pay Later is a fast-growing trend that allows bookers to have a flexible, short-term financing plan - spreading the total cost of the booking over time, which is then collected by the BNPL provider. The biggest advantage for providers is that they receive the full amount at the time of booking. However, this has led to some challenges as consumers take on more financial risk. BNPL is increasingly regulated (UK) to ensure that customers are treated fairly. The US regulator is set to follow.
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Demand for multiple payment options - Almost a quarter of UK consumers (22%) believe that the travel industry could offer better or improved payment services, such as the ability to pay a deposit or request a refund.
Changing consumer payment trends - A big shift from using bank cards to more modern payment methods such as Google Pay, Alipay and Apple Pay
Changes in fintech are enabling our industry to adapt and embrace these changes. New solutions that offer flexibility and speed are key to reducing payment problems and increasing customer loyalty. Online travel agencies were probably the quickest off the block given their travel tech background and the geographical diversity of their business model.
Hopper's CEO Fred Lalonde said the company doubled its revenue during the pandemic thanks to fintech solutions. Indonesian company Traveloka has partnered with a Thai bank to offer a "buy now, pay later" service for people in Vietnam and Thailand. The company has also started integrating "pay later" credit cards in Indonesia.
Travel management companies have followed suit, although there are still large gaps between a separate travel management company (TMC), online booking tool (OBT) and expense management solution.
Fintech is driving a new generation of all-in-one tools that integrate travel booking, itinerary management, corporate cards and expense management into a unified solution. All-in-one solutions like TripActions have reshaped the entire T&E experience with unified travel and expense management tools that eliminate the need for traditional expense reports, automatically reconcile purchases and provide unprecedented control and visibility of spend.(Phocuswright)
Payments companies have also been a target for takeovers: Corporate accommodation platform HRS acquired PayPense in August. In the same month, Sabre announced the acquisition of Conferma Pay.
Despite the critical impact on conversion rates and the potential for cost savings, hotels have been slow to adapt, although there are some signs of an upswing. And this applies equally to hotel and distributor payments.
Milan-based innovative payments network Satispay became a unicorn in September 2022 after a €320 million Series D investment round. Satispay has developed a mobile payment network that works as an alternative to credit and debit cards. Launched in 2015, the Satispay app allows users to pay at physical and online shops, exchange money between friends and benefit from a range of other services, including phone top-ups, bill payments, car tax stamps, donations, gift envelopes and savings.
Fintech efforts are also addressing the digital identity challenge - the digital wallet and the digital ID. In June 2021, the European Commission set out to tackle this problem head-on. It proposed to give every EU citizen a set of strong digital identity credentials that will be recognised everywhere in the zone. These IDs will be accessible through a digital wallet and anyone can use them from their mobile device.
Why is this relevant to payments? Providers, like Worldline, are currently taking steps to integrate their systems with this new digital wallet to create a more seamless customer experience when booking, guaranteeing and paying for travel products and services. This would also save time and money and improve the customer experience when booking a hotel or a flight when the digital ID is already verified and officially approved.
Central Bank Digital Currencies (CBDC)s & Non-Fungible Tokens (NFTs): CBDCs are digital replications of existing monetary cash value and will be an area to consider for the industry as it looks to advance digital payments capabilities. When combined with a customer’s digital ID, CBDCs could dramatically prevent fraud or loss of funds amidst an accelerating shift towards cryptocurrency assets.
Trend 10: Voice & Chatbot commerce starts making an impact
We've had Alexa, Siri, Cortana and Google Assistant for a while. Expedia has shown in this video how it works with Alexa to rent a car, and KLM shared how it can use Google Home to help pack! However, the widespread adoption of voice or chatbots to fully book a hotel room still seemed a long way off. That is changing fast and the traditionally hesitant adoption may get faster with all the labour challenges facing the industry.
Travel Outlook introduced what they refer to as the industry’s first AI powered voice assistant Annette who started out as Bella.
Winimy shows examples of how to speed up event registration and gives restaurant recommendations and bookings.
According to Engati, there are three areas where chatbots are already making a big impact - in travel planning, customer service and comparison and booking. They point to TBO Holidays, which uses their chatbots to automate enquiries about bookings, cancellations, plans, etc., answering 90.4% of questions and handling more enquiries to further increase customer loyalty.
Voice and chat automation company Verloop says OTA Flyin (Cleartrip) has stopped using emails for support after switching to a chatbot.
Servisbot shows the example of Car Trawler helping to handle complaints: a single bot intercepts all customer complaints on over 30 partner websites and in five languages (English, French, German, Italian and Spanish) and either answers the customer query automatically or pre-processes it before forwarding it to the complaints team.
There has been a lot of excitement lately about Chat GPT - a model that has been trained to be even more conversational. According to its creators, the ChatGPT dialogue format allows people to answer follow-up questions, admit mistakes, question false premises and reject inappropriate requests.?
Clearly all this voice commerce comes with its own concerns around security and privacy. So I asked Chat GPT “ What are some of the security and privacy concerns that people may have? The answer was the following:
There are several security and privacy concerns that people may have when it comes to using voice commerce, particularly when it comes to sensitive personal information, such as payment details and travel itineraries. Some potential concerns include:
??Unauthorized access: There is a risk that someone could gain unauthorized access to a person's voice assistant or voice-enabled app and make purchases or access sensitive information without the user's knowledge or consent.
??Hackers: Hackers may try to intercept voice commands or steal personal information through voice assistants or voice-enabled apps.
??Data security: There is a risk that personal data, such as payment details and travel itineraries, could be accessed or misused by third parties.
??Privacy: Some people may be concerned about the privacy implications of having a device that is constantly listening and potentially recording their conversations.
To address these concerns, it's important for companies offering voice commerce services to implement robust security measures, such as encryption and secure authentication protocols, to protect against unauthorized access and data breaches. It's also important for companies to be transparent about their data collection and usage policies, and to give users the ability to opt-out of data collection or delete their data if they choose.
I can't help but think Chat GPT's contextual understanding and conversational tone stands out. It's still in testing phase, but it's something to keep an eye on.
As a distribution channel, the impact of voice reservations has been declining in many parts of the world. Perhaps we'll see a new kind of revival of voice bookings through chatbots.
Trend 11: Artificial intelligence (AI) as a service and AI driven marketing offers new potential
Although there is no single definition of AI, it's best understood as machines that simulate the thought processes of human intelligence through assimilation, learning and subsequent application of logic to complete an action quickly and without human intervention.
Our expectation of marketing is that it must be fully data-driven. However, in a semi-automated or manual environment, this has often been difficult, with delays caused mainly by slow decision-making.
AI has helped a range of software-as-a-service (SaaS) tools make automated decisions almost instantaneously, and this allows companies to make a radical impact. Quite a few of these tools have also made their way into the travel industry in recent years. They range from tools dealing with content creation, image verification, search engine optimisation, e-mail delivery optimisation, content quality, chatbots, social listening, translation and much more. Examples here.
Persado talks about Motivation AI to create personalised messages tailored to drive travel booker engagement and trust. Here are a few more examples.
Travel management company TravelPerk uses Twilio to segment the market to create a better customer experience.
Companies large and small have the opportunity to use these tools to optimise their marketing efforts and achieve a level of marketing impact that was previously unattainable.
For companies looking to take AI opportunities into their own hands, Artificial Intelligence as a Service (AIaaS), while relatively new, is likely to have an even greater impact. As you might expect, larger tech companies like Google and Amazon also offer such services, but I'm more excited about the potential of a service like Levity for small and medium-sized travel and hospitality businesses.
Pricing is another important area currently included in revenue management tools (RM) and often supported by AI. However, there will be more and more cases where RM and pricing will overlay marketing campaigns more effectively by enabling dynamic pricing. Hopper's AI-powered recommendation engine predicts when the price of a flight is likely to rise (the worst time to buy) and when it'll fall (the best time to buy).
So what else can we expect from AI and related innovation? Could it be a personalised AI analyst for your business? ANIE is an artificial mind that not only listens to the voice of the customer, but also understands it and helps your business act on it.
Part 3: Distribution – Day to Day
Legacy distribution technology is being challenged by new players but they still have a long way to go
The total cost of distribution is increasingly in the spotlight. As hotels face higher operating costs and inflationary pressures, more and more questions are being asked about costs in the various distribution channels. Equally important is the question of transparency and knowing where prices are distributed. Distributing content with attribute-based sales was also a challenge with legacy systems.
The high cost of distribution Global Distribution Systems (GDS) have long been a thorn in the industry's side, with airlines at the forefront of challenging the status quo. The major GDSs charge airlines and hotels a fee for each booking made through their platforms. European airlines have actively explored distribution models outside GDS. In 2015, Lufthansa began charging a $16 fee (now $21) on GDS bookings made by travel agents to shift GDS bookings to direct channels. British Airways has also started charging a fee of $11 (now $14). If you want to know which airlines have gone down this route, check out this website.
Apart from cost, the biggest pain point from the airlines' point of view (and this isn't so different from that of hotels!) is the difficulty in offering additional/ancillary services such as baggage insurance or in-flight food. As airlines only make small profit margins, charges for ancillary services are crucial. The legacy GDS framework doesn't allow for this requirement. Therefore, a new standard NDC was developed to solve this problem. This gives travel agents the opportunity to bypass GDS (and save on the airline surcharges) by connecting to an airline either directly or through an NDC provider.
Some airlines now want to go further - Finnair has called time on legacy GDS EDIFACT flight distribution and plans to phase out the technology completely in the next three years. Rogier Van Enk, senior vice president of customer engagement at the northern European airline, said it was "fed up" with supporting two data standards.
Startups like Aeronology enable Sabre, Travelport, Amadeus, TravelSky, IATA NDC - LCC certified and full travel web services connections to every available airline and travel product in the world. And Travelx's technology enables airlines to manage their inventory more efficiently and tokenise their inventory into NFTs, increasing both traveller flexibility and supplier profitability.
Hotels have only begun to dip their toes into alternative distribution platforms, although they face similar problems. Cost and content are a constant concern. In their defence, the revenue share of GDS for hotels has remained somewhat steady over the years and continues to be an important channel for city hotels.
New blockchain-based distributed ledger technology solutions such as Arise are beginning to offer products that could help hotels reduce intermediary-driven business. Blockskye and Dtravel are some of the other companies offering blockchain-based travel systems today.
So is your company ready for Web 3.0 and all its possibilities? McKinsey differentiates here in great detail. Essentially, it goes as follows:?
Web 1.0 > open protocols that anyone could build on - and from which hardly any user data was collected
Web 2.0 > a more centralised model, where user data such as identity, transaction history and credit score is collected, aggregated and often resold
Web 3.0 > Control no longer lies centrally with large platforms and aggregators, but is widely distributed via "permission-free" decentralised blockchains and smart contracts. Governance is meant to take place in the community rather than behind closed doors but is the trickiest aspect of transition!?
Trend 13: A whole range of new marketplace models linking supply and demand, especially with Long Tail
Hotels often struggle with the long tail of travel. The larger demand partners among OTAs, wholesalers and tour operators are highly visible. The time, effort and cost involved in working with them can usually be justified. However, this misses out on great opportunities in certain strong source markets where hotels may not have a presence or structure to identify and contract with smaller regional partners, let alone connect with them.
From a channel mix and diversification perspective, this long tail could be very important. One source market can be impacted while another remains strong. We have already seen this with the regional shifts during the Covid pandemic. We prefer a balanced and diversified mix of distribution channels, including Long Tail, to ensure business continuity and control distribution costs. However, the biggest hurdle is determining the return on investment (ROI), i.e. the time spent finding the right partners, contracting with them, ensuring they respect price controls and distribution, and establishing connectivity. Get this wrong and you've spent a lot of time chasing a (proportionately) small amount of revenue!
A number of technology-based solutions have begun to address this need by providing access to a wider network of long-tail partners from which to choose from and collaborate, without direct contracting or connectivity conversations.
Hyperguest which received $15M in funding from Lightspeed Venture Partners offers a B2B marketplace for accommodation providers and demand partners.
Hotel Trader, Roibos and Nuite offer something similar - a B2B marketplace that allows hotels to distribute rates and inventory to OTAs, tour operators and travel agencies.
Katanox is targeting the $150 billion business travel market by "streamlining and improving the distribution of travel accommodation previously controlled by OTAs, GDS and bed banks". Katanox received seed funding of $5.7 million in early 2022.
Holibob is building something similar targeting the tours and activities market and received $12M in funding.
It seems clear to me that the "new" marketplace model is here to stay for now and evolve.
Trend 14: Content distribution beyond Availability, Rates & Inventory (ARI) still lags behind but some hope on the horizon
As an industry, we're obsessed with rates and parity - and while there has been more of a focus on rate integrity in Europe recently, rate distribution control remains paramount. What about the other important factor for conversion - content quality and consistency? What if you could update relevant, descriptive content quickly and with minimal effort?
During the Covid pandemic, it was crucial to quickly update the latest information about the hotels on all channels - whether it was hygiene protocols or the availability of specific facilities. This was not easy. Once the Covid pandemic was reasonably under control, sustainability attributes became a priority again. But updating them wasn't easy either.
There is a lot to be said for better ways to update descriptive content in line with ARI and visual content - but the challenges are obvious. Many hotels have worked hard to optimise content on third-party channels to achieve higher visibility and conversion, but with a multitude of channels and multiple hotels in a portfolio, it's a thankless task!
Other issues relate to key areas such as cancellation policies and how quickly they can be updated through third-party distribution channels.
Companies like Leonardo, ICE Portal, DHISCO, Derbysoft and major OTAs Expedia/Booking.com have been providing onward distributors with descriptive and visual content (Leonardo and ICE only visual) for years.
DHISCO Rategain has introduced what it claims is the first AI-powered content platform for the hospitality industry. The use of AI is meant to help prioritise hotel content that has the greatest impact on conversion rates. In addition, images are automatically tagged so they can be easily identified and categorised by demand partners to increase searchability.
GIATA offers a unique GIATA-ID that helps clearly identify a specific accommodation and detect duplicates, keeping the hotel portfolio in sync.
Hotelport also uses AI to monitor the accuracy of content for hotels. Hotelport's hospitality technology will be integrated with Sabre GDS under a new agreement announced last year.
I'd be happy to see more happening in this area!
Trend 15: Companies seek an edge with new age Travel Booking Platforms
Despite higher airfares and room rates, a Morgan Stanley survey of 100 global corporate travel managers found that many respondents believe their company's travel spending has already returned to pre-pandemic levels and will continue to rise. One of the most striking findings is that smaller companies are leading the demand for business travel. More than two-thirds (68%) of companies with annual revenues of less than $1 billion expect their travel budgets to increase over the next year, while only 41% of companies with annual revenues of more than $16 billion expected an increase.
But as we all know, travelling for business in 2022 wasn't easy. Most airports in Europe and the US were in chaos during the spring and summer. A recent Skift article says that nervousness (and corporate liability) about catching Covid turned to nonchalance, but was replaced by worry about being stuck at the airport for hours or even days.
The demand for flexibility to meet the growing needs of smaller businesses, as well as agility and adaptation to rapidly changing travel environments, seems to have accelerated the development of fast and flexible business travel tools. And as Business Travel News Europe puts it “Disruptive upstarts from the technology sector pumped up with cheap venture capital money are beginning to park their tanks on the legacy TMC’s lawns and they do not like it"
Companies founded in the last ten years, that received significant funding and made great strides include Travelperk, which promises response times of 20 seconds on the phone with a real human being, and products such as FlexiPerk, which allows very flexible cancellations of flights, hotels, cars or trains in any case.
TripActions provides cloud travel and payments technology paired with a world-class global travel agency service to protect employees and control costs. ITILite, which was founded in 2017 and raised $17 million, provides travel management services and a marketplace with curated integrations and offerings.
Spotnana, which raised $75 million last year, describes its solution as a "travel-as-a-service" platform and a "single cloud-based technology stack" that can be used by businesses, travel management companies, suppliers and technology providers. WorkTrips, which recently raised $23 million, is an AI-powered travel management tool that optimises costs, automates processes and provides care during business trips.
Other companies in this space that have received funding include Tripbam, an online hotel price shopping and review service for travel managers, and Pleo, a business spend platform that has received $428 million to date. Troop Travel has an interesting concept to simplify meeting planning.
There are still many exciting developments to come in this area, as we see some of the classic problems associated with business travel being addressed more quickly by some of the new entrants.
Trend 16: There are glimmers of change for booking groups online
For many hotels, large and small groups form an important segment in their business mix. The most widely accepted definition of a group is a reservation that requires 10 or more rooms. However, even booking a small group online with immediate confirmation is a difficult proposition at most hotels. But that's not for lack of trying.
At the property level, PMS and sales and catering systems have been effective in supporting the group booking process. Moving this process to the central reservation level and making groups bookable through hotel brand websites has been less successful. The highly variable requirements of the group segment have challenged both the processes for group reservations and the corresponding technological solutions - with the result that they're still somewhat fragmented.
This was not helped by Covid as the segment was badly affected. But now that business has returned to near 2019 levels in many parts of the world, are we starting to see renewed efforts to better integrate this high-revenue segment into the distribution pipes? Smaller group bookings and lean teams in hotels make this more urgent than ever.
At an enterprise level for businesses, companies like Groupize offer comprehensive meeting management solutions. On the other hand, companies like Groups 360, Cvent, Meetings.com, Hotel Planner and Meeting Package offer a platform for hotels to sell groups online.
Group 360 has an interesting story. It was founded in 2014 and received a $50 million investment from Accor, Hilton, IHG and Marriott in 2019. In 2022, they received an additional $35 million investment from institutional investors that included Blackstone.
Meeting Package claims to be the only platform that enables the distribution of inventory across hundreds of channels, uses dynamic pricing to optimise revenue and increases sales activity through real-time bookings.
Group Reservation System is an early-stage company that uses its API to disseminate availability and pricing in real time, focusing on leisure groups. Another company that has already successfully attracted capital is Reposite.
And business travel meets group booking platforms in a new guise. Troop and Spotnana, two next-generation travel technology providers, are teaming up to automate and unify corporate and travel booking venue selection and travel booking technologies into a single strand.
Another trend that I'd like to see develop further!
Trend 17: Property Management Systems (PMSs) aim to conquer new frontiers
PMSs have been at the centre of many conversations and debates. I've rarely come across a "perfect PMS". It never seems good enough or "right" enough. Sometimes it's the reporting and sometimes it's the lack of interoperability and connectivity. And then there is the hosted version versus the cloud version. Good support or no one to pick up the phone. The high costs and many, many more.?
Since the PMS is constantly being talked about and is at the centre of most hotel technology discussions, it is clear that PMSs will continue to evolve. But in what areas? What do we expect from the new generation PMSs and the current market leaders in this field? Many of the themes in demand are familiar:
Two companies leading the way in new generation PMS are Cloudbeds, which received an additional $150m in funding in 2021, and Mews, which received an additional $185m at the end of 2022.
What do these companies hope to achieve with their new funding? Consolidation and scaling or an equal emphasis on product development? Are they trying to fill some of the gaps above?
Mews addresses some of these items in their blog on how they intend to use their funding. “We were the first PMS to open our APIs. The first to fully integrate additional space solutions like parking. The first to offer memberships and long-term stays as part of the same platform. And we’ll continue pushing our industry forward, enabling new revenue streams and business models for hotels while also giving guests more holistic hospitality."
But is it all down to the PMS companies? This recent article from Skift says that hotels are extremely reluctant to spend on technology despite the clear potential for a good return on investment.
And if you want a fascinating insight from the founder of one of the earliest and most successful PMS companies of all time, read this interview with Keith Gruen, co-founder of Fidelio Property Management Systems.
Finally, if you are interested how PMSs have evolved, here is a great infographic from Shiji.
There will definitely be more to come on the PMS front in the next few years - whether the whole space develops into a more homogeneous troupe of players supporting the whole ecosystem, or lone wolves develop microcosms in which only they can thrive, only time will tell!
Trend 18: Availability of actionable data insights improves despite the fractured nature of distribution ecosystems
Our industry, with its complex ecosystems, multiple stakeholders and high staff turnover, has struggled to develop an actionable approach to revenue performance and related data.
This isn't just about the tools, but also about how we as an organisation can develop an effective approach to data management.
We have seen market leaders and current incumbents in this space like STR evolve and also consolidate by acquiring smaller regional benchmarking solution providers like Fairmas. Amadeus has consolidated and expanded the TravelClick portfolio of business intelligence products.
Fast-growing companies like OTA Insight have developed a range of products to help understand revenue and market performance - and drive better results. Their approach was reinforced in 2021 by an $80 million investment from Spectrum Equity, a leading equity investment firm focused on internet-enabled software and transformative data companies. Since then, they have also acquired Transparent, a company specialising in short-term rental data.
Juyo analytics provides great visual data displays and detailed reports to better understand the cost of distribution.
Swayed maps and designs customer journeys in physical environments. Swayed uses guest location, behavioural and transactional data to learn in real time how guests spend time and money during their stay, and then automatically uses this data to send contextual and personalised touchpoints to guests.
Zytlyn enables organisations to navigate the future with predictive insights to improve decision-making while redefining commercial planning and operations across the travel industry.
At the level of market and revenue performance, we seem to be in a much better position despite the fragmentation of technology systems.
However, I cannot help feeling that we haven't really made much progress in analysing the distribution data and the performance of the distribution pipes - essentially looking "under the bonnet". Considering that turnover is highly dependent on how well oiled the distribution pipes are, we need to pay much more attention to this point. Companies in this area include Fornova, Gimmonix and Triometric.
Exciting times, but there needs to be more work on understanding what is under the bonnet!
In summary, there are a lot of exciting developments. As always, some will occur sooner than others.
Some trends, oddly enough, also contradict and conflict with each other. For example, the increased use of AI in our industry requires powerful machines that consume more and more energy, which isn't very sustainable at this point.
There are many macro trends that have nothing to do with distribution but can have a big impact on travel and hotel distribution. One of them is travel logistics - multimodal travel, autonomous vehicles and air travel in cities can change travel in ways we cannot even imagine today.
What do my industry colleagues think? Which of these trends do you expect to accelerate and which ones may fall flat in 2023 and beyond?
Here is to the year ahead - and hope you enjoyed the "long" read if you got this far!
Note: This article is a passion project from the year end holiday season and I published it first on Hotelladder.com. The views, thoughts, and opinions expressed in the article belong solely to me as an industry professional and do not necessarily represent the strategies or opinions of my employer.
Congrats !!
Powering Business with Data Driven Decision Making | Data and Reporting | Data Analytics | Business Intelligence | Data Enthusiast
2 年Insightful and extensive. Thank you! for writing such a useful article.
Hotelier
2 年Excellent and impressive, thank you Vinnie!
Senior Advisor, Hospitality
2 年Brilliant and comprehensive insights Vineeth. Thank you and I wish you all the very best for the New Year!
Revenue Management | Hotelier | Beratung | Technologie | Team-Motivation | Adaptive Strategien | Speaker | Moderator
2 年A great read and a lot of work you put in here Vinneth. Thanks a lot for making it public and so being able to follow your great thoughts and analysis. Well done!