Skift Take

It's an occasion to pause and appreciate the accomplishment of Joan Vilà, who created Hotelbeds and led it to become the world's largest bedbank. But looking ahead, Hotelbeds must rev up its digital metabolism.

Hotelbeds said on Wednesday it had installed a new CEO, Nicolas Huss, to lead the travel technology business.

Huss takes the reins as Joan Vilà is stepping aside from his role as executive chairman. Vilà has led the Palma, Spain-based company since its creation in 2001, scaling it to become the market leader among wholesale distributors of hotel room inventory.

Hotelbeds’ controlling investors Cinven, Canada Pension Plan Investment Board, and EQT, tapped an outsider to be the company’s CEO. Huss, the former CEO of Ingenico and Visa Europe, now confronts the task of speeding up the company’s digitization.

Hotelbeds didn’t have a CEO before. It had an executive chairperson and managing directors. Huss’s team includes chief operating officer Carlos Muñoz and chief financial officer Andrés García-Tenorio.

“Coming from a digital background, I truly believe that this is an industry which is well-positioned to capitalize on the benefits of artificial intelligence, machine learning, and automation,” Huss said. “If we can become even more frictionless — and if we can keep adding value by providing more data granularity to our partners and therefore to their end customers — we will rebound even faster.”

The pandemic took the shine off the company’s narrative of year-over-year growth.

In December, Hotelbeds received a cash injection of $210 million (€175 million) via its current backers to give it more time to turn around its credit metrics before a future debt refinancing. The move was their second investment after the backers arranged an approximately $480 million (€400 million) term loan D facility in April 2020 to help the company manage through the pandemic.

Hotelbeds’ total transaction value was only about $540 million (€451 million) in six months ended September 30, 2020. That was a fraction of the €3.4 billion it reported in the same period before the pandemic. The company suffered net losses and a significant operating cash burn. Ratings agency S&P has a “CCC+” rating on Hotelbeds, meaning that it believes the company is “dependent upon favorable business, financial, and economic conditions to meet its financial commitments.”

Before the crisis, 80 percent of Hotelbeds’ volume depended on international travel, including cross-border travel in Europe, and about 20 percent was domestic. So the disruption of international travel hurt the company. Hotelbeds responded by adding about 10,000 properties in markets where it needed more to serve a sudden domestic demand.

“We have been great in domestic,” Vilà said. “We recovered the domestic 2019 volumes in China very quickly, and the same in Mexico, and in Dubai in last time. Already many countries in Europe, we have almost the same level of domestic business as we used to have in 2019, but we have several markets already that we’re doing better than that.”

But Hotelbeds still needs to recover long-haul travel demand to get to breakeven. Approximately 40 percent of its pre-crisis volume was driven by intercontinental travel. Yet 2019 levels for intercontinental might not recover until 2023.

Hotelbeds executives intend to get back to operating profitability by 2022. Many travelers have also been booking at the last minute, while much of Hotelbeds’ historical business has been in providing advance reservations — adding a headwind.

Learning From Digitization in Payments

Nicolas Huss CEO Hotelbeds

Nicolas Huss is the new CEO of Hotelbeds. Source: Hotelbeds.

Huss argued in an interview that the payments sector followed a path of digitization that hotel wholesale distribution also needs to follow.

“Technological trends and the fintech players have created the need and willingness among consumers to be in control of their own destiny when it comes to payment,” Huss said. “The sector has been adapting frictionless and almost touchless processes.”

“The needs from tourists are evolving pretty quickly,” Huss said. “The appetite is growing to build trips and experiences differently.”

Will Hotelbeds be able to fund its ongoing digital transformation out of the revenues that it has been earning on an ongoing basis in the recovery?

“Yes,” said Huss and Vilà.

At the end of March, the group had a cash balance of about $450 million (€376 million).

Learning From the Mass Cancellations

Last March and April, when much of the world endured stay-at-home restrictions, mass cancellations of hotel bookings created a backlog of customer service issues for Hotelbeds and many other companies. Some critics said the problem at Hotelbeds was that it had too many manual processes.

But executives at the company disagreed.

“Many of the problems were from that many hotel employees disappeared because of furloughs and so on, so our customer service representatives had no one to talk to for resolving issues,” Vilà said. “We accepted the cancellations and we gave money back to our customers. We didn’t keep funds the way many other travel companies have done. So even though it was a tremendous crisis for six weeks, we managed it pretty well. Hotel companies have said we weren’t their big problem.”

Huss and Vilà noted that while the process can be improved and made more automated, it needs cooperation from its supply and demand partners for additional digitization to fully work.

“To go back to my analogy with payments, the payments ecosystem collectively got to where almost everything is automated,” Huss said, underscoring that industry cooperation is important.

Market Opportunity

Hotelbeds estimates that approximately 10 percent of all the travel accommodation sold each (non-pandemic) year is through bedbanks.

“We do a market analysis every year, and the bedbank market has grown at approximately the same pace as the overall accommodation market,” Vilà said. “Not faster, but not slower either.”

Other players have been eyeing the market.

In February, Expedia Group vice chairman and CEO Peter Kern made comments during an earnings call that he anticipated an expansion of the company’s business-to-business hotel wholesale sales.

In October 2019, Expedia Group became the exclusive distributor of Marriott International wholesale and promotional room rates.

“The way I see it is Marriott wanted to pay less commission to Expedia,” Vilà said. “Marriott has lost millions in business that we’ve diverted to other hotel chains. In my opinion, it was more of an economic move than a strategic move. I don’t know of any other hotel chain thinking of a move like this.”

“What hotels love about us is that we don’t compete with them,” Vilà said. “We don’t have a consumer-facing brand, and we’re not going to force them to spend more on Google ads to sell their brand. We also are better at providing early, or advance, bookings than the OTAs [online travel agencies] from international markets they couldn’t cost-effectively get on their own.”

Before the pandemic, rumors floated that Hotelbeds would either seek a buyout from a bigger travel technology company or it would continue its acquisition spree, such as by acquiring smaller rivals like HotelsPro or Travco. Its second-largest rival is Webbeds, a subsidiary of WebJet, and executives at WebJet have implied in earnings calls that, before the pandemic, they had floated the idea of selling Webbeds to unnamed potential buyers.

Looking Back and Looking AheadHotelbeds New CEO Looks Ahead

Huss believes he understands the travel sector well. He has been a non-executive independent board director to Amadeus IT Group, the world’s largest travel technology company, for four years.

Cinven had been a major stakeholder in Madrid-based Amadeus, along with BC Partners, between 2005 and 2011.

Many of Huss’s commercial partners at Ingenico and Visa are also business partners for Hotelbeds.

As for payments tech at Hotelbeds, when asked about some initiatives for cooperation, such the new technical standards created by the non-profit Hospitality Technology Next Generation (HTNG), Huss said he was just starting on the job and it was too early to comment.

But when speaking about payments innovation in general, Huss said it was something he was interested in pursuing at Hotelbeds.

“I have a couple of ideas in mind, though it’s early days,” Huss said. “But finding solutions that will bring something different to our clients, something that no one else is doing today and that removes friction, that would be my ambition.”

“My track record is in driving organic growth and digital transformation, as well as have some experience in highly transactional businesses like the fintech sector,” Huss said. “Hopefully this would be helpful to Hotelbeds in the new market reality.”


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Tags: distribution, hotel distribution, hotelbeds, hotelbeds group, Ingenico, wholesale, wholesale rates, wholesalers

Photo credit: A two-bedroom loft at the Angsana Laguna Phuket. Banyan Tree Group, which owns the Angsana brand, decided in April to distribute some of its hotel inventory via Hotelbeds. Banyan Tree Group

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