Hoteliers Go On The Front Foot Over Commissions.
By Martin Kelly
Saturday, 2nd June 2007
HOTELIERS grappling with the massive impact of the internet on product distribution are increasingly putting pressure on third-party websites to lower commissions while ramping up online direct sales.

The region's largest hotel group, Accor Asia Pacific, reports that its properties are now "pushing back" against demands from some popular websites for commissions of up to 20 per cent.

Accor's Vice President of Distribution and IT, Maria Taylor, said surging consumer demand for hotel rooms – occupancies and room rates are up in all significant Australian markets – is a major factor in the change of attitude.

Taylor said hoteliers, which in the years following 9/11 used internet sites as something of a dumping ground for "distressed inventory", had now become more selective in choosing their online distribution partners.

Market leader Wotif.com, which dominates the sector, charges an average commission of 10 per cent and accommodation providers are finding it difficult to justify paying more – unless they can achieve much higher rates.

Taylor refused to comment on industry reports that Accor has pulled out of a preferred distribution agreement with US travel giant Expedia over commission levels but said hotels are now setting the rules of engagement.
"For the B2C channel we feel that 10 per cent commission is acceptable, however, there are online wholesalers that are asking for 20 per cent, which is just too high," she said.

"Similar people in similar roles at other hotel companies are getting the same feedback from their properties.

"Even if head office was prepared to pay more there would be strong push back from the hotels."

"A major reason is that the demand cycle is very strong at the moment."

Figures from Atrium Hospitality Solutions show that national room rates rose an average of more than eight per cent during 2006 over the previous year – a trend that industry observers say has continued through 2007.

Perth led the way with a 13 per cent increase, while Melbourne, Brisbane and Adelaide were also strong. 

The average national room occupancy over the same period climbed more than four per cent to 79.2 per cent, according to accommodation advisory Dransfield Hotels and Resorts.

This tension is likely to remain due to a combination of factors, including a strong economy and a lack of supply with high land costs discouraging development.
Jones Lang LaSalle estimates new room supply will increase at just 1.4% a year in major markets to 2010.
Consequently there is a rare window of opportunity for hoteliers to maximise their yield through all distribution channels, including travel agents, where hotel sales are also increasing.

And once again the internet – through which more than 10 per cent of all rooms are now sold - is playing a big role with many chains looking to lift direct online sales.

Virtually all major groups now refuse to be undercut by distributors and offer ‘Best Rate' guarantees through their own websites.

Meanwhile, groups are building more effective websites supported by deal-based pricing strategies.

Accor has lifted online direct sales by almost 500% since launching a new regional website last September.

Conversion rates have also dramatically increased and are now running between 3.9 per cent and 5.9 per cent depending on which promotions are running at the time.

However, the major challenge for many hoteliers is getting consumers to their sites in the first place.

Research from Hitwise, which monitors internet traffic, shows that the third-party hotel websites dominate the web.

Chief Marketing Officer at Hitwise, Tessa Court, said Wotif.com is by far and away the market leader with 6.72 per cent market share.

This is more than double second-placed TotalTravel.com (3.06 per cent), followed by Hotel Club (2.7 per cent), Trip Advisor (2.12 per cent) and Rates To Go (1.92 per cent).

Court said Australia's major hotel groups need to address their brand marketing strategies through the search engines.

She estimated that Google alone is driving 35 per cent of all traffic to Australia's accommodation websites.

Crucially, they are generally high-quality consumers drawn from the upper-income demographics.

They are also young and savvy, the leading edge of a new kind of hotel customer throwing up fresh challenges for the accommodation industry.


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