The below article was originally written and published by Pace Dimensions.
Why Flexibility and Partnerships are Hoteliers’ Most Powerful Tools
The Future of Hotel Distribution
Out of challenges and economic recessions come opportunities. CEO of Derbysoft, Ted Zhang, who spent the COVID-19 2020 outbreak in Shanghai unable to fly home to California, has witnessed first-hand both the local and global opportunities that businesses have grasped in order to survive, and even thrive during one of history’s most difficult economic periods.
Whilst Zhang is realistic and clear that, “The world will not be as before,” he also remains optimistic that the behavior changes forced – or accelerated – by the COVID-19 pandemic have introduced fresh thinking in the sector.
Watching ingenuity from hoteliers to package new services and sell them online in different ways is key to a fundamental shift in what hospitality businesses need from their technology suppliers.
“During the pandemic, hoteliers are no longer just selling rooms, they have created dynamic packages relevant to their local area. For example, hotels have kept revenue coming in from their restaurants by working with local delivery services to carry on selling meals, and as restrictions ease, conference rooms can be booked online for socially-distant meetings that are impossible at home,” Zhang explains.
“Everything can be for sale online,” he continues, “but selling different things online requires the ability to share data and connect with other suppliers. In the case of the COVID-19 lockdown, hotels were looking to quickly connect with local businesses and to form relationships with much more diverse partners than ever before. Those who had flexible technology platforms in place were empowered to react quickly to new opportunities. The ability of businesses to respond fast has been a key factor in their survival longer term.”
Powerful Partnerships: Future-Proofing Hotel Distribution Technology
Talking during the COVID-19 outbreak, with much of the world still in lockdown, Zhang’s optimism is because his business is based on partnerships. With no monthly fee, an almost complete shutdown of the hospitality sector hits a business like Derbysoft pretty hard. But Zhang is adamant this is the right way to do business and a future norm.
“Our model at Derbysoft means we share risk with hoteliers. The costs for using our platforms are directly associated with how many bookings made. When times are tough – and 2020 has been extremely tough – our hotel partners are not incurring costs. We believe that one of the fallouts from the COVID-19 situation will be that hoteliers demand this risk-sharing model from their distribution partners. I expect to see significant changes in the business models of our competitors over the near future.”
The theme of partnerships resonates throughout Zhang’s predictions for how the hospitality industry will emerge from the COVID-19 pandemic, and importantly, how it will recover. He highlights, “Businesses shouldn’t have to change to work with more or new partners. It must be made easier. Hotels need technology that is extremely flexible and carries zero incremental operational cost when a new partner is added. Hotel internet distribution should be limitless.”
It is this adaptability that makes it easier to penetrate local markets, believes Zhang. A situation like the COVID-19 pandemic saw, regional or citywide lockdowns come into place as smaller areas within a country grappled with fluctuating virus reproduction rates. This significantly raised the importance of hotel brands being able to respond in a very localized manner, often individually property by property.
Thinking Local: Empowering New Hotel Distribution Channels
In Shanghai, Zhang watched the quick rise of lifestyle and on-demand delivery apps as people relied on local goods and services being delivered to their homes.
“Prior to the COVID-19 lockdown, the biggest online partner a hotel might have would probably be with online travel agents (OTAs). However, as circumstances rapidly changed and selling hotel rooms was no longer an option, the ability to have a partnership with a delivery app changed the fortunes of quick-thinking hotels.” Such lifestyle apps are now some of the largest hotel room booking platforms in China, and if hotels cannot connect with their interfaces, it is business limiting.
Having the online interfaces to work closely and flexibly with other local businesses is something Zhang sees as a future norm for innovative and entrepreneurial brands in the sector. “Paying attention locally, as well as to the big global distributors, is essential,” outlines Zhang. “Local distributors are so important. I urge hoteliers to pay attention to the local opportunities relevant to one individual hotel, in that particular market.”
Of course, for large hotel chains with a centralized Central Reservations System (CRS) this can be challenging. Some of the changes seen in lockdown have accelerated booking trends and consumer expectations. Zhang urges hotel chains to balance the needs for centralized functions with empowering hotels to react to local circumstances.
“It really is time to re-think the principles of operating hotels, the relationships hotels have with partners in distribution, and how central distribution works. New distribution connections can be determined by the data that the CRS needs, but they cannot be limited by this. This way of working requires new and different values for a business, and the ability to put changes into action quickly.” In short, traditional hotel distribution platforms and hotel distribution software need to be reassessed.
Real Time, Real Quick: Accelerate Hotel Distribution Channel Strategies
Never before has real time, accurate content on distribution platforms been so essential. During the 2020 COVID-19 lockdown there have been countless examples of hotels still available to book in destinations that are in-fact shut down. Or, perhaps more challenging, hotels have been bookable in a destination, but they are in fact not accessible to foreigners due to local restrictions. There is currently no mechanism for an OTA to tell the customer this. Live information is crucial, especially in rapidly changing times.
Zhang’s assessment is that the one certainty about the future is that businesses will require the flexibility to manage fast changes. And it isn’t just external factors that will change quickly. Zhang is quick to point out that hotel businesses must also equip themselves to move much faster than is commonly seen now. “Action is needed to deal with the new world,” explains Zhang. “Businesses must be able to take quick decisions, and then action those decisions swiftly.”
Time becomes more of the essence when assessing the booking window in the immediate weeks and months after the COVID-19 pandemic. Trends show that bookings worldwide are commonly in an exceptionally short time frame, often just a couple of days before travel. Whilst this is perhaps exaggerated in the immediate period after an extensive lockdown, a shorter lead time is a pattern Zhang expects to continue in the medium term.
He explains, “Hotel availability can change quickly as situations change, and booking lead times are extremely short. With cities opening and closing to respond to low or high virus reproduction rates, hotels have to be able to offer relevant pricing to local partners, as quickly as situations change. Open inventory, accessed via all manner of partners, is a must.”
Closer Scrutiny: Online Travel Agents
Despite the new opportunities for different distribution partners, Zhang is very clear that relationships with existing OTAs and platforms such as Google need to be stronger than ever. “Don’t pull out from the OTAs is my message to hoteliers,” says Zhang, however he is keen to stress that these relationships also require the ability to sell direct, and on commercially attractive terms. “OTAs and hotels need to be able to work together in a way that supports each other – both selling direct and via these powerful platforms. It’s time to figure out how.”
Zhang predicts forensic scrutiny on ad spend in this new world, and that it is hard to see how spend levels will return to where they were, particularly in pay-per-click (PPC) Google advertising. He explains, “Tighter management and pinpoint accuracy will be required in order to see the returns required.” No business has a marketing slush fund anymore for experiments that don’t have a real business impact.
In the same way that scrutiny will be applied to all distribution channels, Zhang believes that the extreme situations that hospitality businesses have found themselves in during 2020 will also means that lenses will be focused internally too. “Hotel brands are realizing that they are not the experts in everything, and, that in order to thrive, they need to outsource some functions to relevant specialist professional service providers. This is leaving hotels to focus on the core values of what they do and not try to be good everything.”
Creative Thinking: Hotel Distribution as Never Before
One of Zhang’s passions is turning momentum into bookings. One recent example he’s watching with a very keen interest is how platforms such as TikTok – the short form video network – are able to translate huge consumer interest into revenue.
“There’s no reason why, with the right technology, hotels can’t provide real time inventory on a network like TikTok. I’ve increasingly seen brands engage on TikTok, and it really feels like a distribution partner to watch. Just because they aren’t a traditional hotel booking platform, doesn’t mean it cannot be successful.” With 500 million monthly active users, it isn’t hard to see why sectors such as fashion are embracing marketing via TikTok with vigor.
Looking to the future, Zhang also believes that online celebrities are powerful marketing tools. Harnessing the reach and engagement of influencers, in a way that can bring revenue to companies, is one example of how the internet empowers the individual. Selling through online celebrities is just one way in which Zhang sees distribution changing and becoming much more diverse.
His ultimate vision is a little further reaching. He is working towards the reality that every travel company in the world will have its own system, and all those systems will connect with each other. Essentially this sees the Global Distribution System for hotels (GDS) evolving to become a Global Data Network (GDN). Zhang’s GDN will be a completely open interface, where everyone can share data together. Then all manner of different businesses can be distribution partners, and there will be no limitations. As he summarizes, “Nothing will be as usual, nothing will be as before.”