Phocuswright brings hotel tech talk Center Stage

by Jason Q. Freed, Managing Editor | November 22, 2016

If it’s cutting-edge travel technology trends you’re after, the Phocuswright conference will not disappoint. The annual meeting shines the spotlight on technology startups looking to crack the space and pits them against one another in a battle of fundraising pitches.

But Phocuswright isn’t just for the newbies; this year’s speaker lineup was, as always, chock full of the largest players in travel, from Hilton and Airbnb to Expedia and Google. With just those four companies alone, you can expect the hotel distribution debate to be front and center.

Outside of distribution, highlights from last week’s show included discussions about online shopping, artificial intelligence and the future of hotel loyalty. Interestingly, during a week in which Airbnb launched its Trips component and hinted at future flight search, a key theme from hotel distribution partners was their attempts to diversify offerings in order to reach a bigger audience.

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For example, Expedia is working with Red Lion to build the hotel brand’s loyalty membership and Marriott to drive package business. Booking.com is strengthening its partnership with Facebook. Google has more products for air and hotel partners than ever before.

Here are 5 trending tech topics that stood out during The Phocuswright Conference 2016.

1. Let’s diversifying our offerings

Perhaps it’s a sign of the times: when demand is peaking, hotels use third-party distribution channels less. This has our familiar distribution partners looking for alternative sources of business.

“The same core technology that allows this platform to power multiple brands will allow it to power third parties. So we have essentially given Marriott access to our package technology stack and they’ve seen very solid double-digit growth as a result. We will be able to open our tech stack to a number of partners on a global basis, so this is just a start for us.”
— Dara Khosrowshahi, CEO, Expedia

“For Booking.com, we’re really focused on making sure the customer understands what’s out there in a certain destination. We want to be a one-stop shop for customers, and we want to be sure we deliver the same experience no matter what the property type. … Because we have all the varieties out in a destination, you see a lot of cross sell. You see a lot people looking for hotel end up booking an apartment, and you see people coming in looking for an apartment and end up booking a B&B.”
— Gillian Tans, CEO, Booking.com

“Our perspective is that users don’t think about it as much as everyone in this room thinks about it. They simply want to find the right hotel for them and book that hotel. In some cases the meta-option is the right option for them, in some cases they want to go directly to the hotel website, but in a lot of cases they just went to check that the room’s a good price, it has all the amenities, it’s the right room for them, they want to see photos, they want to know what the cancellation policy is, and they just want to put in their credit card and book.”
— Adam Medros, Senior VP of Global Product at TripAdvisor

“Hotels are less than 20% of our query volumes but more than half of our revenues. That’s why it’s so irritating to see someone like Trivago come along and really push aggressively on marketing hotels.”
— Steve Hafner, CEO, Kayak

2. “It’s like the Amazon of …”

Pretty much every online marketplace wants to emulate Amazon. Now we’re hearing that Expedia and Kayak are building travel package products that are similar to that of Amazon’s shopping cart. Expedia appears to be closer, with the unique goal of allowing travelers to unbundle the package – pay for air, hotel, car at different times – yet still get the package rates.

“Where we are going is a world that looks much more like a shopping cart. You can take a flight and put it in a cart, put a hotel in a cart, etc., so that you’re going to be able to combine multiple purchases any which way you want and take the time sensitivity out. If we know you have bought a ticket to L.A. during certain dates, we will allow you to search for hotels in L.A. and only you get these net rates that were previously available only if you made the hotel reservation at the same time.”
— Dara Khosrowshahi, CEO, Expedia

“Packaging for me is more like a convenient shopping cart—how can we assemble the a la carte options in a better way – and we’re not there yet.”
— Steve Hafner, CEO, Kayak

3. The cost of direct bookings

Most hotel distribution partners agree that, with their latest efforts, the brands’ will be successful at moving the needle toward more direct bookings. But they question whether the costs of doing so are worthwhile in the end.

“One misperception about OTAs that hotels have is they’re comparing the cost of acquiring an OTA consumer against the cost of a core business consumer. The fact is the OTA consumer is not loyal to any brand. These are consumers who want a hotel in downtown L.A. and they want to see what’s available to them. Anytime you acquire this consumer that’s outside your core, the cost may be higher.”
— Dara Khosrowshahi, CEO, Expedia

“Over the past five years or so, a channel that we call ‘direct’ has changed significantly. Our direct channel used to be a near-zero marginal cost, but that direct channel has changed and bifurcated into two pieces: one is still direct – firing up our app or website at near-zero cost; a second part is coming to our direct channel via an indirect source, whether that be via Google or TripAdvisor, and the cost of that is growing across our business. … When we look right now, we definitely see there are some customers that would’ve booked with us anyway who are now booking a lower price, because there is dilution, that definitely exists. We also see there are many more new customers are coming into our system.”
— Chris Silcock, Chief Commercial Officer, Hilton Worldwide

“Very often, users are still flexible in what exact hotel they are booking at the last point in time. We recently launched a feature in our hotel product that makes it easier for users to discover deals. We see that by exposing more deals to users, the hotels that have a deal see a 2X conversion rate.”
— Oliver Heckmann, VP of Travel, Google

“To reach customers all over the world if you’re a single property is just extremely complicated. I understand the sentiment of booking direct, but I’ve never seen a P&L that didn’t include marketing costs. It’s important for Booking.com to be the most efficient in marketing costs for companies. Don’t forget most customers that come into properties from Booking.com are new, they’re coming for the first time, and that’s why you need marketing channels.”
— Gillian Tans, CEO, Booking.com

4. The future of hotel loyalty

Earlier this year it looked as if the big hotel brands were going to use their loyalty programs as a vehicle to offer discounted rates to those customers who booked direct. And they are. But then we saw Red Lion break the mold and offer loyalty rates to Expedia, which tells us personalized pricing is just as much about growing and improving loyalty membership programs as it is about direct bookings.

“HHonors is great for people who collect points and want the added benefits, service and recognition you get when you arrive at our hotels. But we had to transition HHonors from being great for frequent travelers to providing instant benefits and value to all travelers, such as free WiFi, digital check-in and access to preferential pricing. So Honors is increasingly becoming the vehicle through which we are able to personalize and customize every aspect of your relationship with us. … When customers book through channels where we can identify them more easily and know who they are, then we know more about them, and that enables us to deliver us a better experience.”
— Chris Silcock, Chief Commercial Officer, Hilton Worldwide

“What we’ve done with Red Lion is allow them to sign up Expedia customers as loyalty members, and Red Lion saw a quadrupling in number of loyalty members signed up. Are we just stealing loyalty members off each other? I’m highly confident that these loyalty members are net new customers and this is extending their customer relationships. We’re allowing customers to self-select — if they want to join that service then we’re just providing that choice.”
— Dara Khosrowshahi, CEO, Expedia

5. Artificial intelligence and machine learning

While most agree that it’s early days, a number of Phocuswright speakers predicted artificial intelligence and machine learning will play a huge role in future travel search, booking and service ecospheres. Not to be confused with advanced algorithms, machine learning systems can be trained to decipher data or queries they have never seen or heard before. But one distribution legend, Paul English, is going retro with a bet on human travel agents.

“We’re using a lot of machine learning and AI techniques. It’s still very small—it’s still testing and learning. But it’s an area which we are investing in a lot because it can really help people book travel in the future and we can make that experience even better.”
— Gillian Tans, CEO, Booking.com

“In the world of AI or machine learning, bigger is better. So I think five metasearch players is probably a few too many. I would hope that Kayak would be one of the consolidators; no one is going to buy us, but we might like to buy someone else. … I think there is a role for chat bots and natural language processing and we have to invest in that even though it’s a longer-term play.”
— Steve Hafner, CEO, Kayak

“Almost half of travel is still booked offline. It felt fun to look at the other half. And then frankly there are a lot of types of things that humans are better at than computers. And there are certain ways humans deliver better experiences.”
— Paul English, Founder, Lola

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Jason Q. Freed, Managing Editor

Jason joined Duetto as Managing Editor in June 2015 after reporting, writing and editing hotel industry news for a decade at both print and online publications. He’s passionate about content marketing and hotel technology, which leads to unique perspectives on hotel distribution and revenue management best practices.

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