Distribution Revolution Is Not Just for Airlines

The turbulence of airlines altering their corporate relationships and advancing their direct engagement with customers (both business and leisure travelers) has been a lead post-pandemic story. NDC is changing business models, redefining downstream data ramifications, and redesigning how technologies expedite retail options to the right target audiences and at the right price. NDC has proven to be the catalyst for many buyers to question their entire travel program and the underlying business model and technical capabilities of their travel agency, online booking tool and preferred suppliers.  

Nothing like a little more complexity for the already complex managed travel environment, right? 

It’s important that we not get so tied up in the “how” and “when” of these new developments…but understand the “why.” Simply put, travelers in any category seek and increasingly expect personalized services and options that they get in other areas of their daily lives. Established distributors are investing millions of dollars to transform their retailing capabilities, but they are challenged to deliver the depth of tailored options for the modern traveler (aka customer) at the pace suppliers seek. Suppliers see all this, and the largest ones are reacting by allocating significant resources to drive this change on their own.  

Attribute-Based Shopping Accelerates Hotel Ecosystem Changes for All Parties 

The automotive industry already owns the acronym “ABS,” defining technology that helps slow us down via advanced braking systems. It’s ironic that the same acronym in hospitality circles is about driving opposite force: speeding up data-driven options to guests that are likely to enhance their hotel stay. Elements of attribute-based shopping are already used in some regions by select hotel brands in their direct relationships with travelers; these same shopping options are now being refined to further satisfy business travelers in secure corporate booking environments.  

While change in our industry typically comes with uneven waves of progress (which we sometimes only exacerbate with angst over evolving models and processes), there are reasons to be optimistic that this distribution transformation will be smoother than others. Here are five predictions related to the transformation of hotel distribution to look for over the next 18 months:

Better Alignment between Travel Buyers and Hotel Suppliers – The target outcome is one on which all parties can be aligned: a better, more personalized experience, featuring offerings to guests delivered in a timely manner at a lower cost. While the retailing scenarios do offer positive margin opportunities for hoteliers, the buy side of the table should not underestimate the benefits of higher traveler satisfaction and increased compliance. With safety and security needs driving more volume into managed channels in the future, attribute-based shopping can be a win-win. 

Business Travelers Receive More Tailored Offerings – Business travelers will gain from more tailored offerings, driven by data related to their history merged with specific negotiated elements from their employer. This, in turn, promises to enhance the stickiness of the preferred hotel program, as well as strengthen loyalty programs that are so valuable to hoteliers. 

Data Transparency Will Benefit Corporate Buyers – The progress in data transparency will lead to significantly more data available for precise negotiating. The depth of spending data (including amenities, resort fees, meetings, F&B, etc.) will give buyers long-sought insights on the specifics of their spending at preferred hotels, driving true value in annual contracts beyond simple transient rates. 

Distribution Costs Will Fall – The potential for a sharp reduction in distribution costs for hoteliers cannot be emphasized enough. Of course, hotels can direct the resulting savings in a multitude of ways, but buyers can have a sense of confidence that some of those streams will be to their benefit (competitive rates, enhanced amenities, property enhancements, etc.). 

Technology Investments Will Accelerate – We’ve got some time to get ready. The technology investments that will enable property management systems to have the secure, two-way data exchanges with a hotel chain’s central reservation systems that enable ABS are substantial. The programming work is intensive. Even in the best-case scenarios, testing will not happen until mid-2025. 

Hotel program leaders can learn from applicable tactics and processes put in place from NDC, engage with suppliers and relevant tech providers to adopt and adapt, and establish a foundation for efficiency as the ABS enhancements get into real-time production. HRS sees this via our engagement today with corporate procurement leaders, travel managers and hotels as new ABS technology is developed and tested.

To be sure, the dawn of attribute-based shopping presents immense challenges for hospitality distributors and some intermediaries. While established entities are taking initial steps, the people and technology investments are substantial given other trends buffeting their bottom lines. The negotiations between large hoteliers and distributors are likely to become truly fascinating, with a prioritized focus on customer value that likely redefines legacy financial models. 

We are clearly on the brink of a remarkable, game-changing revolution in the hotel distribution space. By using our time wisely in this “developmental year” of 2024, and collaborating with the right orchestrators in our ecosystem, our industry will increase our collective odds at a smoother integration of ABS into corporate hotel programs for years to come.