Skift Take

The chief financial officers at Marriott and Accor are closely watching the entry of banks, financial technology (fintech) firms, and tech giants into the selling and servicing of travel. As they should.

Series: Early Check-In

Early Check-In

Editor’s Note: Skift Senior Hospitality Editor Sean O’Neill brings readers exclusive reporting and insights into hotel deals and development, and how those trends are making an impact across the travel industry.

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I spent last week at two major hotel conferences, and the most intriguing thing I heard was a couple of hotel executives contemplating the coming competition from financial and tech players.

Someone asked the executives what keeps them up at night. They said it’s the rise of fintech players in travel.

  • “When you ask me about sleepless nights, it’s this topic [of fintech players]” said Leeny Oberg, chief financial officer and executive vice president, development, at Marriott International. “The reality is there’s tremendous capital and good digital know-how in these spaces.”
  • Nodding along vigorously was Jean-Jacques Morin, Accor’s group deputy CEO and CEO for the hotel giant’s premium, midscale, and economy division.

    The panel was at the season’s biggest industry event, the New York University International Hospitality Industry Investment Conference.

This topic was one of the sector megatrends that Skift highlighted in January: Big Banks Chase a Much Bigger Piece of the Travel Market.” To recap:

  • JPMorgan Chase believes its recently launched Chase Travel will by 2025 process $15 billion in gross bookings a year out of a possible $80 billion in online travel bookings.
  • Capital One has invested in, and bought, a few travel based businesses to create a consumer-facing travel offering, partly powered by online travel agency Hopper.
  • Citi in the U.S. and Amazon in India have shown interest in selling travel.
  • These businesses need much less spending on marketing because the financial firms are cross-selling current customers through existing channels, often amplified by their credit card offerings with loyalty programs.

It’s unpredictable what the impact of fintech players or tech giants selling travel might be.

  • “I am nervous that, in the next three or four years, the value chain will be disrupted by financial services firms,” said Alex Cosmas, a partner at McKinsey.
  • “It worries me now that there are more margins to be gained,” Cosmas said. “It’s partly of the post-pandemic improved ADR [average daily rate] picture.
  • It’s not just the fintechs, either. What about Google, Amazon, and Microsoft (such as a business travel portal via LinkedIn)?
  • “The hotel industry has always been surrounded by the big tech giants,” Cosmas noted. “They’ve always been around in our space, but not competing directly.”
  • Another factor is that companies like Expedia haven’t come out of the pandemic as strong as some expected and may be more vulnerable to competition than in the past.
  • “The [traditional] intermediary distributors [or online travel agencies] are in a fundamentally different spot than where they were pre-Covid,” Cosmas said.
leeny oberg and jean jacques morin at nyu
Marriott’s chief financial officer, Leeny Oberg, talks on-stage at the New York University International Hospitality Industry Investment Conference. Source: Skift.

The optimistic view is that the hotel industry may rise to the occasion.

  • “Traditionally [the hotel sector] has been arguably a little behind on technology,” Oberg said. “I do think our industry is making some leaps and bounds in there. At Marriott, we’re undergoing a digital transformation that’s going to dramatically change the experience for customers both before during and after their stays.”
  • “We want to keep that ecosystem [of direct bookings and interactions with customers] even tighter, but it’s going to cost a lot,” Oberg said. “It’ll take a tremendous amount of investment, including on being able to manage our data better.”
  • “The reality is that we control the experience,” Oberg said. “At the end of the day, it is the stay and knowing what your customers want in that stay for whatever trip purpose and being able to communicate with them about whatever it is they’re looking for and then executing on that.”
  • “That’s our golden ticket that gives us a competitive advantage,” Oberg said.
  • “This reminds me of the industry discussion back in 2016 2017 that the online travel agencies and Airbnb would disrupt us,” said Morin. “People forget that we handled it pretty well. The [hotel groups] evolved and got better at playing the loyalty game, encouraging direct bookings. There were some laws that were put in Europe to make sure that distribution was done in a competitive way.”
  • “During the [pandemic] crisis, there was speculation that the OTAs [online travel agencies], with their very powerful balance sheets, would put us at a disadvantage forever,” Morin said. “It never happened.”
  • “It’s kind of a balancing act,” Morin said. “You need to embrace technology and adopt it to enhance what you’ve got in your relationship with the customer.”

The darker view is that it’s hard to compete against platform players like Amazon.

  • “For hotels, maybe it’s okay to part ways with distribution, but I think the most vulnerable part is the servicing of a trip,” Cosmas said. “Yes, maybe the stay is owned and operated by the private property, but there are irregular operations, cancellations, and weather events. All of that can be serviced outside of the four walls of the property.”
  • “I worry about Amazon [creating a travel service that involves] selling a stay and then saying, ‘Well, we will re-accommodate you with a trip insurance type product through Amazon customer service in the case of disruption,'” Cosmas said.
  • “It’s basically Amazon becoming a tour operator, aggregating inventory, setting pricing depending on the contract, and servicing it,” Cosmas said.

Antitrust concerns and distractions may keep tech giants like Amazon from entering the space.

But the fintech players are already entering.

  • Here’s a summary of their interests, from a free book published in late May — Demystifying the Digital Market & Guide to Commercial Strategy — written by Cindy Estis Green, founder of Kalibri Labs, and two co-authors.
  • “Depending on the model, they can get interest income from the traveling card holder and “interchange income” from the hotel which is a fee for processing the credit card payment, along with a commission on the booking,” the authors write.
  • “Potentially even more powerful than the travel-based revenue stream alone, creating a point of entry for the financial services companies around travel gives them a way to offer more targeted and possibly instant offers at the point of sale that may extend beyond travel. This is something JP Morgan calls “connected commerce” that taps the customer’s current intent along with their buying profile at the point of sale offering rewards or discounts most likely to resonate with the cardholder.”
  • “Knowing the card holders purchase and repayment behavior will enable tailored ‘buy now, pay later’ offers that could prove to quickly expand the use of the card and with it, interest income,” the book says. “JP Morgan contends that their cardholders spend $1 out of $3 spent on travel.”

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Tags: accor, distribution, Early Check-In, fintech, future of lodging, Marriott International

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