IHG represents a broader industry trend in that it's getting tougher with online travel agencies and wholesalers in the West while becoming more experimental with online travel sellers in Asia, where it needs help to grow its sales. Its use of new technologies to try to keep its strategy coordinated and to boost revenue are eye-catching.
As online shopping options multiply, large hotel groups have scrambled to keep up. Hotel companies want to manage which discounts are seen in various sites and apps.
IHG earlier this year hired Jamie Cole as its senior vice president of global channels. Cole previously ran digital marketing at Mandarin Oriental and worked at digital players Travelocity and Travelport.
Cole, who now oversees IHG’s distribution, is helping rein in where rates for its 5,795 open hotels appear. It’s a significant role. Unlike many other large hotel groups, IHG has all of its channels rolling up into one team for oversight.
It’s a daunting challenge.
“The waters are muddied,” Cole said. “Some TMCs [travel management companies] are displaying rates now from OTAs [online travel agencies] as well as from GDSes [global distribution systems], and some corporates are going through different partners like Egencia or HRS.”
“It used to be clear cut that corporates went to the GDS [global distribution system] and consumers went another way, now it’s becoming much more ambiguous,” Cole said.
IHG represents a broader industry trend in that it’s getting tougher with online travel agencies and wholesalers in the West while becoming more experimental with online travel sellers in Asia, where it needs help to grow its sales.
This year, IHG renegotiated its contract with Expedia Group. The companies didn’t reveal contract terms, though.
One geography where the UK-based hotel group is looking for help is in Asia. It’s working with China-based online sellers like Alibaba-owned Fliggy, Baidu, and Tencent-owned WeChat. This year, the company has done a lot of work with Tencent’s WeChat in particular. (For a free summary of how travel brands are using WeChat, see this Skift Research cheat sheet.)
Hotel Distribution in the News
Hotel distribution is a hot topic. Average revenue-per-available-room or (RevPAR) has been sluggish in several markets. Causes vary, with an oversupply of new buildings being a factor in some cities. Economic weakness in some markets, such as in the UK, Germany, and Italy, may also be factors.
However, in a report in late October, Morgan Stanley research analyst Jamie Rollo presented data suggesting that neither hotel supply issues or economic factors could explain the sluggishness in the growth of average daily room rates, which grew by only 1.2 percent in the last year in the U.S., well below the 6 percent to 7 percent increases enjoyed in long stretches in the past two decades.
“We think this breakdown in the pricing mechanism is largely a function of the internet enabling greater price transparency,” Rollo wrote. “Hotels experience this via online travel agents (which encourage hoteliers to price match to save on commission) and shadow supply through alternative accommodation providers.”
True or not, many companies have been changing their approach to how and where their rates are displayed across the internet.
In a move that went into effect in recent weeks, Marriott International made Expedia Group the exclusive distributor of its wholesale and promotional room rates, availability, and content to resellers in most circumstances.
In September, online travel agency Amoma collapsed. Hoteliers had long offered discounted rates to offline niche channels, such as ethnic travel agents, tour operators, and airline websites. Amoma would get these deals and offer them to consumers online instead. This year, Amoma lost these discounted rates when Hotelbeds, a travel technology and distribution company, caught it violating its terms.
Earlier this week, Hotelbeds said it had ramped up its investment in stopping rates intended for offline channels to get sold by online travel agencies and that it stopped about $325 million (€300 million) of otherwise profitable sales to ensure compliance. Over the last six months it reduced incidences by inventory it processes by 90 percent.
Hotelbeds may be the largest company that distributes wholesale hotel inventory. Yet dozens of other smaller players remain, and they may be laxer about compliance.
An End to Static Rates
To more tightly manage distribution, IHG is trying to modernize its rate-setting process, though some segments of its sales are still a ways off.
“We’ve worked hard to dynamically flex rates up and down in response to supply and demand,” Cole said. “We want those rates to flex in sync across call centers, online agencies, and elsewhere.”
“We want to move to have all rates connected to our new reservation system, either directly or through third-party intermediaries,” Cole said. “In the past, property owners offered static, or fixed, rates. When they send static rates out, that can lead to them losing control.”
During off-season periods, slow days of the week, and for new markets, IHG will use third-parties to fill vacancies. Otherwise, it will try to drive consumers to its mobile app and website to book directly, which costs it less.
“Our strategy is that, rather than have generic contracts, we will identify where we need third-party distribution the most, whether by geography, or day of the week, or by season, and then structure contracts to reflect that need,” Cole said.
In recent months, IHG tapped a “rate parity” matching service from OTA Insight, a business intelligence vendor. The software helps properties check if their rates match, are cheaper, or are more expensive when compared across direct, online travel agency, and other channels.
“We want to help the individuals who manage our hotels see what rates are showing up where, so each can better manage that,” Cole said. “We offer our hotel owners tools from other vendors, too, such as ones for web analytics to understand conversion.”
IHG moved recently to a new central reservation system from Amadeus. The system will let it run attribute-based booking, which means selling rooms by starting with a base price and then adding costs for extra amenities and perks.
“We’re starting to pilot that through some hotels at the end of this year,” Cole said. Offering consumers the new “build-a-bear” style booking flow might make its app more appealing.
IHG has been revamping its mobile app, which is its fastest-growing place for taking direct bookings, to be of use to all guests no matter where they book.
Cole said the segment of shoppers looking at luxury hotel purchases might have extra questions. So IHG is continuing to invest in its call centers. Cole said the company needs to boost its digital content to help better present visually online what its luxury offerings are.
Once a company jumps on a new trend like dynamic rate setting, it has to spend to stay ahead. IHG is trying to keep its technological expenditure tied to its core needs.
“We look to keep product management experience in-house with people who know our industry, our business, and our customers really well, such as at our development center in Shanghai,” Cole said. “But otherwise, we partner with vendors that have the technical expertise to build them.”
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Photo credit: In October 2019, IHG-owned brand Kimpton said it would launch a Stay Human Project where it transforms the decor in one room in a handful of European hotels to more explicitly connect guests to a sense of place and community. IHG, Kimpton's parent company, has been embracing new tech tools. IHG