The hotel sector allowing new intermediaries who take up to 30% commission to take business from traditional travel agents was described as ‘nuts’ by a leading hotelier.
Richard Lewis, former chief executive of Best Western, was speaking in the opening session on the first day on the Travel Distribution Summit in London today.
“How did we as an industry allow 18% to 30% of our revenue to be stripped out by new intermediaries? We reintermediated, we got rid of travel agencies who we paid 10% and brought in new players we paid 18% to 30%. That’s what we did. Are we nuts?”
Lewis said the growing shared economy was making huge inroads but he feared the industry had its head in the sand by believing that the emergence of the likes of Airbnb and other copycat sites will make no difference.
He said that in 2012 Airbnb sold more hotel bed night than Hilton did globally.
Lewis said failure to change with the times and adapt business models is why Kodak didn’t become Instagram, and why Blockbuster did not become Netflicks: “They did not understand the businesses they were in. They should have been in the new age but they missed it.”
Lewis added: “There are new pressures on pricing and margins, competitors emerge from unexpected places, there’s a winner takes all dynamic, plug and play business models, dispersed talent pools and converging global supply and demand.
“We are seeing relentlessly evolving business models at higher velocity than ever before.”
Lewis rejected the notion that the question was who owns the customer because the customer does not want to be owned, but they want to engage with brands that are easy to do business with.
“Then you will get the loyalty of people who want to do business with you,” he said. However voracious attackers are geared up to break into markets at incredible speed, added Lewis, using the staggering amounts of data that’s accessible today to achieve that.
“To stay ahead leaders across all industries will need to challenge their assumptions and pressure test their strategies. Businesses are under increasing pressure to increase their performance. They need to be even more competitive. If they do not they will become marginalised and we see a lot of that happening in travel.”