Accommodation-only brokers have flourished due to advances in technology. As a result of demand largely created by the emergence of dynamic packaging, some accommodation brokers have grown from start-ups into major organisations, processing thousands of bookings in just a few years.
However, as technology evolves it continues to create new channels of distribution. And, as a result, it could be that technology developments, the key factor fuelling accommodation brokers’ growth to date, will now prove to be the greatest threat to their long-term sustainability. In short, could accommodation suppliers be the next victims of technology-enabled disintermediation?
Looking at these technology and channel developments in more detail, we are now seeing the rise, particularly in Europe, of Destination Management Organisations. For small properties, it is proving economical and practical to use these local companies as their prime distribution channel rather than accommodation brokers.
At the same time, Property Management System suppliers are now building XML interfaces, and thereby a distribution capability, into their products. Hotels using PMSs to administer their activities are therefore now able to connect with third-party travel technology suppliers – enabling them to potentially bypass brokers by providing access to the hotel’s inventory directly to the large communities of users that are customers of these technology suppliers.
In three to five years’ time, it’s likely that hotels of all sizes will have a PMS that will either have its own booking engine and/or a link into a local DMO, making them potentially less reliant upon accommodation brokers as a distribution channel. As a result of these developments I believe there will be a ‘leakage’ of existing channels to market, with an increase towards more direct distribution by hotels. However, the extent to which this occurs will vary – by market, by type of accommodation intermediary and by the type of accommodation product.
Market variations are present today. In the US, around 80% of hotels are part of a chain/brand and these brands provide a powerful means of promoting a hotel directly to the trade and consumers. However, in Europe, where about 80% of hotels are not part of a chain, many are more reliant on brokers. So a greater potential for technology disintermediation of accommodation brokers exists here.
Leakage will also vary by type of intermediary with the biggest impact being felt by smaller operators and ‘true’ accommodation-only brokers. TUI, for example, owns resorts and properties, thereby controlling the distribution channel and guaranteeing access to product for its accommodation-only brands. In addition, TUI is not exclusively a broker and sells only a portion of its inventory this way so it is cushioned from the leakage effects I’m describing.
Finally, the villa market is likely to be less vulnerable to the disintermediation trend as a villa is not run operationally in the same way as a hotel i.e. they are not reliant on a PMS and therefore intermediaries specialising in villas will not be impacted by the development of PMS technology previously described.
So, are we about to see accommodation-only brokers dramatically disappear in the next few years? I don’t think so. For one thing, brokers deliver value to hotels and the trade in other ways. For example, by consolidating distribution channels and taking allocations they reduce booking processing overheads and risk for hoteliers while providing the trade and consumers with volume discounts. These commercial factors will reduce the rate of leakage.
Also, having developed strong brands and large communities of customers, I suspect many brokers are planning to extend into new areas of business. This will include offering a wider range of products and services to agents – for example packages, ancillaries and information services – acting as principals and competing more directly with traditional operators in a more competitive online space.
Roberto da Re is president of Dolphin Dynamics