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“More rooms, combined with economic uncertainty, could put hotels under renewed pressure to keep rates in check this year”
increasingly a place to sleep or relax rather than work or socialise –these activities are more focused on the communal areas. Hence the new generation of hotels in
the already crowded mid-market – such as Hilton’s new Tru brand, due to debut in Okla- homa City this spring and next year in the UK – will eschew such traditional features as wardrobes, baths and desks (replacing them with open hanging space, showers and a chair with mini-table attached). But while developing new brands is a
key strategy for hotel groups, they still have to fill up the rooms created. Last January was the ‘calm before the storm’ for hotel distribution, as the following month Hilton Worldwide decided to take on the powerful online travel agents (OTAs) by launching its biggest-ever marketing campaign ‘Stop Clicking Around’. This was aimed at per- suading potential guests that the best room deals could be found by booking direct with the hotel chain rather than an OTA, such as
hotels.com (Expedia owned) or booking. com (Priceline). To sweeten the deal, it offered members
of its loyalty scheme HHonors discounts of up to 10 per cent if they booked through the chain’s own distribution system. Hilton’s strategy was soon followed by its rivals including Marriott, Hyatt and IHG. This proved a smart move and, according to the hoteliers’ latest financial results, appears to have worked with a shift from OTA book- ings towards the hotel’s own channels. But the OTAs have not suffered as much as might have been expected, with more bookings through smaller chains and independent hotels to compensate. But this year the battle for a slice of the
hotel distribution ‘cake’ may pivot towards the metasearch hotel comparison sites, says Paul East, chief operating officer at Wings Travel Management. He points out that “many of our clients are working on best- rate-for-the-day using comparison sites to validate who has the best rates”. He adds: “What will be interesting to monitor in 2017 is how this affects the ongoing battle between OTAs versus com- parison sites versus hotels’ direct bookings.” Given that metasearch comparison site
Trivago is owned by Expedia, while rival Kayak is under Priceline’s ownership, the OTAs clearly have a foot in both camps –
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although the main challenge this year will likely come from Google and its growing ambitions in the travel sphere with Google Hotels and Flights.
ACCESS TO CONTENT Yet the online bookings scenario is changing, suggests CTM’s Birkin, who does not see the hotels’ direct booking strategy “gathering much more traction”. He argues that travel management companies (TMCs) now have more access to content and understand the need to search outside the global distribu- tion systems and even book direct if need be to get the best deals. “Corporates spend a lot of time and, in some cases, money tracking their travellers for safety and security reasons, so they wouldn’t take kindly to travellers going ‘off piste’ and booking direct, as long as the TMC offers the best rates.” But having invested so much in their booking-direct strategy, hotels are unlikely to give up their approach too easily this year. And already there are indications they
are sharpening their key weapon: loyalty schemes. Hyatt, for example, is revamping its long-established Gold Passport loyalty programme on March 1 – re-naming it World of Hyatt – to emphasise both its focus on high-end travellers and the ‘best rates’ available when booking direct. While hotels in 2017 will – like all sectors
of the economy – face some uncertainty from Brexit and the new US administra- tion, the hotel world is not yet cutting back on development. Latest figures from STR show that, in Europe, there are 442 hotels with 66,787 rooms under construction for opening this year – a near-15 per cent increase on 2016. London, Europe’s largest hotel market, expects to add 6,217 rooms this year from 36 hotels, mainly in the budget and mid-market sectors. The potential good news for corporate
travel buyers is clear: more rooms, com- bined with economic uncertainty, could put hotels under renewed pressure to keep rates in check this year.
Chinese takeaway
WHEN CHINESE INVESTOR ANBANG WAS FINALLY OUTBID by Marriott International for Starwood Hotels last spring, it turned its attention instead to a collection of 16 luxury hotels under the Strategic Hotels banner owned by US investment company Blackstone. Perhaps the most high-profile hotel of the portfolio being sold was the iconic Hotel del Coronado near San Diego, the background to Billy Wilder’s 1959 comedy Some Like It Hot.
All seemed to be going well until a little-known US government oversight body, the Committee on Foreign Investment in the US, last autumn
blocked the sale of the Del Coronado on national security grounds. It reportedly had concerns about the fact that the hotel is straddled on either side by a US naval base. The lesson from this episode is that even if the US and European countries are keen to attract foreign investment in hospitality, there remain some limits. But these are probably not enough to prevent Chinese investors in 2017 again becoming one of the key catalysts for ownership change and consolidation in the global market. Among the targets could be Hilton Worldwide, following the acquisition last autumn of a 25 per
cent stake for US$6.5 billion in the hotelier by HNA Group, which owns China’s fourth largest carrier, Hainan Airlines. Meanwhile, Jin Jiang
International, a state- owned Chinese tourism conglomerate which claims to be the world’s fifth biggest hotel group following its 2015 takeover of European chain Group du Louvre, could make a move this year for Accorhotels. Yet it is not just hotels
that are attracting Chinese interest. Ctrip, a leading Chinese travel group and major OTA, late last year bought Edinburgh- based metasearch engine Skyscanner for £1.4 billion.
BBT January/February 2017 39
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