Spotlight

Marriage of convenience

With tourism in India growing at an accelerated pace, the subsequent surge in online travel portals has opened an additional distribution channel for hotels, other than their websites, to sell off unutilised inventory. Bhavika Jhaveri looks at how this alliance works and whether it proves beneficial

With the online population in India projected to increase to 100 million by 2007, hotels just cannot afford to ignore the Internet.

Having higher visibility and wider reach is the mantra for any hotel, and travel websites facilitate the same; it's a cost-effective medium for hotels, as hotels can cut down their marketing costs.

Advantage, hotels

Hotels benefit in several ways by tying up with travel websites. These sites act as an alternate distribution channel for inventory at higher yields and on rates that the hotels decide to sell at; it gives hotels access to the portals' ever-growing target audience, offers infinite possibilities and quick turnaround time for promotions/last minute selling via banners on the site, email and SMS to registered users. According to a spokesperson of Taj Hotels, "We benefit primarily through the extra reach these sites offer in the Internet space. Customers log on to sites that they know or prefer, and therefore being visible on travel portals helps us reach out to these customers."

Hotels can also target specific individuals who are slated to travel into a particular city on a particular date. It ensures immediate payments prior to guest check-out, possibility of opaque rates where only a generic description of the hotel would be available to customers till they actually make the purchase, as also a possibility of bundled (air+hotel) package rates where actual room rates are masked and it also offers full flexibility in increasing/ decreasing allocation and rates according to seasonality and market conditions.

Pradeep Kalra, vice president, sales & marketing, Sarovar Hotels, says, "As computer penetration pan India catches up with global trends, online booking, which offers convenient and multiple purchase choices at the click of the mouse, is gaining popularity. Sarovar Hotels has tied up with international and domestic distribution partners such as Expedia and Hotels.com internationally and, Makemytrip, Indiatimes Travel, Yatra, Desiya, Travel Guru, Golden Passport etc., in the domestic space."

Search is based on price sensitivity, on star rating or on the sites' recommendation. "Makemytrip.com has tied up with over 1,400 hotels through direct contracts in India. These hotels range from five-star super deluxe hotels to budget hotels. In addition we have thousands of hotels connected through the GDS. Hotels are an integral part of any travel agency operation. Worldwide, the focus is on hotels due to shrinking margins in air tickets," says Amit Saberwal, VP (business development), Makemytrip.com.

Reiterating a similar view, Gautam Chaddha, chairman and CEO of JourneyMart.com, explains, "Hotels are getting more yield management savvy. Travel portals can help hotels work on their demand and supply by reducing the time gap between the hotel's need to fill a room and the time when the customer gets to know about it. So if hotel invests in technology then the time gap is reduced. And hotels can change the rates by seconds as it’s real-time."

How does this alliance work?

Some are direct alliances, and the others are via the GDS connectivity these portals have. The alliances with travel portals typically work on an NNC module (nett non commissionable). The travel portals are left free to mark up and market the products. Alternatively, on packages, a percentage of commission can also be offered varying from 10 per cent to 25 per cent. Depending on the relation between hotels and travel portals, generally the hotels guarantee room availability on a cut-off date and offer a rate that is generally lower than their published rates. This room availability is featured online and can be booked by customers in real time. It also depends on productivity commitments and other marketing and promotional considerations.

With this trend gaining momentum, will it replace the traditional GDS system, where majority of the hotel inventory is sold? According to Kalra, that won't be the case. "GDS systems globally protect the agents for commissions. Unless the travel portals also take on the role of wholesalers versus retail and go for protection of commission for the agent, it is unlikely to replace the GDS system in the near future. The concept of using the travel specialist for sourcing a hotel's needs is still a very dependable medium, insulating GDS systems from extinction." While GDSs would continue to be in operation for the top-end hotels, it may become unfeasible for medium and small hotels, as it is the most expensive way of distributing hotel inventory electronically. So there might be a surge in the number of small and medium hotels opting for such alliances.

Future's bright

Benefits from such alliances come through mass usage and visibility, improved penetration and increased productivity. Undoubtedly, the trend of tying up with travel portals is only going to increase for the convenience, cost and distribution that this medium offers. The future is likely to see consolidation rather than direct growth in online portals. The really effective travel portals will survive and grow, while the rest will either be taken over, or simply fall by the wayside. The future of hotel distribution is the Internet and electronic distribution and this trend is only likely to gain momentum.