Is this a relationship that is one premised upon the positives or negatives, is it a friend or foe type set of circumstances. I think ultimately what will be successful are those who can at least embrace it as a partnership opportunity, be mindful of where the OTAs can truly add incremental value. Many talk about the OTAs adding, if they can add incremental room nights, that’s definitely extra revenue you might not otherwise have achieved and that's serves a purpose. I think the reality at the moment is, yes you’re getting some of that but you’re also facing a challenge from quite a large amount of business not necessarily being incremental. So, I think it’s working on the ways that you can ensure that what you get is incremental and at the same time as we touched on before, ensuring that when we do gain access to that customer who may have arrived via the OTA channel, you try and make the most of the opportunity to cement your relationship as a hotelier with that customer going forwards to maybe cut out the OTA going forwards.
In this digital age there is tension between online travel agents and brands, as Carl Michel of Generator Hostels discusses in this TV show.
Digital age conflicts
There's always a tension between an OTA and a direct machine, one of the challenges is simply, you've got to, you've gotta co-exist - we're frenemies, basically, to the OTAs, they are a necessary evil, what we hope to see, is by driving more content onto our web-site, and more unique offers onto our website, that we'll gradually gain more brand fans, brand loyalists, but we're still a relatively small brand, we only have ten locations, so we have to recognise the OTAs do play an important role in getting our brand distributed and out there to the market.
Hospitality TV will continue to feature shows about OTAs and what the digital age means for hospitality. Why not take a look at who else has been featured in the Hospitality250.
Hotel operations can be more complex to take on than operations in other asset classes. In this TV show Ryan Prince of Realstar group discusses competencies needed for different asset classes.
Hotel operations are the most difficult
There's different characteristics, so if you look at student housing, it tends to be more stable than hotels. You don't have to deal with night to night filling, so I think there's lots of attractive characteristics of these alternatives, but similar to hotels, they're operating businesses by and large, and so there's a lot of skills that the owner needs to have in order to understand how to run those things, deal with employees, deal with day to day occupancy issues.
I generally think hospitality is the hardest asset class to run and operate, so my, in my experience, if you understand hotels, moving down the spectrum if you like, is an easier thing to do than moving the other way. I think the people who actually find the biggest difficulty is, are those people who are in student, and think moving to hotel is a logical step and that's a much harder step to make.
For more great shows on hotel operations, check out more videos from the other Hospitality 250 experts.
We operate 11 properties along with 900 apartments. Typically blocks of 50 to 150, units. We take the entire property. The guest who arrives goes into a 24 hour reception; uniformed staff running the same kind of back office software as a hotel, but with no food and beverage, and you get a key to a studio, or a one bed apartment with a kitchen in it and a living space.
We're an affiliation, so at the end of the day it's a membership-based environment for an independent hotel that needs to be competitive in an international market. So if you're an exclusive independent hotel in New York, uh, you might have a New York presence, but how do you get out to 32 global markets and be competitive? So we allow that demand that we deliver the sales to the front door, yet allowing them also to be independent, giving them the tools and the ability to compete with the big brands or other hotels in the area. So, we represent about 500 hotels worldwide, it's about 300 in the EU region, about 100 on each side, uh, but really that sales demand, so it's to hook into distribution, but it's getting the delivery of the reservations if you're not with a big brand, is usually the real challenge that they have, especially on an international level.
I think one of the first things I decided to do was to get out of Australia. You know, it's a wonderful country I lived in Sydney, grew up in Sydney, but it's quite small, in terms of what you can do in the space, so if you, if you wanna be, in the hotel sector and have international experience you obviously have to leave Australia, so, that was one of my sort of the first decision, er, was to move to London where I got a position with Hilton. And a lot of it's down to timing as well, so it's, you know, right place, right time. And being involved in the transaction side of our business, so being around M & A transactions, lots of disposals, that's something that I've made a conscious decision to stay close to. And also then choosing to go over to Dubai, where I would be able to access Africa, Asia, and the Middle East, I think that's sort of broadened my career prospects and, and is part of what I think has made me get the role with Trump, was the international experience and also the experience working for a brand, and an owner, I think whenever you can have the experience of working on both sides of the fence, then that’s a great value, so really try to make sure I have experience from all aspects within the industry. Or as many as possible, anyway.
I just saw this morning on the television here in Berlin, a whole transmission on, a new concept of, working only with icons, so we don't have a language any more, but we work only with icons, which would help to have all the language issues worldwide eliminated in one go. But this is very much the new generation, I mean everything is, with pictures, everything is visual, everything is, short and fast, you know, I mean what we see in the span of attention is not too high, not too long, so you need to interest in them and involve them in a very short period of time. I think visuals help a lot there. And I also support the creativity of the young generation, there's a lot of creativity and imagination, and if you try to, to limit that down to words, it’s not in line with how they function. So that's what we see, and and it means that in our curricular at our school and our university programs, we work very much with simulations, and er, interactive courses etc, so to really involve them directly and give them the chance to, to, work on their creativity. And we see that happening, and because, I mean, our students yesterday, that one against it was Cornell, it was really based on a sort of really creative imagination of how the world could be if you look into the developments of an Airbnb and all other kind of of Uber's etc that is going on. If you look into, into this development, they find a sort of very easy going answer, it's not complicated. And I think this is one of the skills of the new generation.
We've delivered significant gains in the level of growth of direct website business, over ten years now, it's very much been our core area of focus and specialisation.There are many different strategies, techniques, tools, and analytics that the OTAs have in fact studied and learned from the retail industry, and in a nutshell we would bring a lot of that same clinical approach to delivering booking conversion to the direct hotel or serviced apartment website channel. The gains we can make by improving conversion, lead directly into a more competitive and aggressive digital marketing budget, so you have one thing, in addressing improved conversion that then leads to a more aggressive digital marketing strategy, that then essentially creates a budget for better web-design and far more compelling and aggressive, competitive strategy online.
I think part of the, the reasons the OTAs have been able to pull away so effectively is that the hotel industry is in general still very bedded down and quite legacy technology, and a lack of awareness as to the gains that can be made online. So in a nutshell, yes, we deliver transformative growth of direct business, in a very short space of time, and there is a real series of methodologies and approach, and formulaic approach to delivering that, the gains that can be made are significant, and we can really help deliver, the primary hotel or service department channel as the fastest growing and the biggest channel online.
In terms of operating models, many of them start out as owner operators and indeed well, you know, we've been hearing about these concepts today. Many of these brands that have come through, you know, fundamentally they have got investment and they are owner operators, they're in charge of their brand name, they, they run the operations and they also own the real estate, you know. And frankly that from an investment perspective, it works because it allows you that ability to be in complete control of the operating model, and you have that flexibility. And I think as you start moving through and then looking to expand that model whether it's into a management contract or a franchise or something else, ultimately those types of models, you want to be, you want to be sharing a concept which is established.
So I think normally what you see is you'll see this type of concept, and we've heard about it today, you know, a lot of these are owner-operators; as they've grown they've grown within an owner-operator model, but then they are looking for that next level of growth, potentially via franchise or management contract.
That's what I do. Our business is all about operating risk, so, you know, we'll take owner operations, management contracts, franchises, you know, manchises, and that's what we do; we look at those operating cash flows and, and we understand the difference in them and how they can work. But fundamentally, at this stage in the market, which is still a relatively young part of the sector, a lot of the propositions that are coming out, they are still owner operators. And, and I can understand that, it makes sense for the investors, and it makes sense for the operators because they've got that flexibility.
OTAs have a strong position in the hospitality industry and will only get bigger as Tim Ramskill of Credit Suisse discusses in this TV show.
OTAs in 5 years
So I’m Head of Research on the transport travel leisure side of Credit Suisse as an equity analyst looking at the hotel sector, the airline sector and the whole of the travel space. Focus on the industry from the perspective of advising our institutional clients about the changes in the travel space.
I think what we’ve experienced, what we expect to continue to see is very dramatic growth from the online travel agents. That's manifested itself in a 30% growth rate over the course of the last 4 or 5 years and we’re forecasting that the online travel agents are going to keep growing their fee base at around about nearly 20% a year over the course of the next 5 or 6 years. So the pace of change has been, and we continue to believe will be, very strong.
Hospitality TV will continue to feature shows about OTAs and distribution channels. Why not take a look at who else has been featured in the Hospitality250.