Not as Simple as AirAsia Makes it Sound: Murphy.
By Yeoh Siew Hoon
Friday, 24th July 2009
Kevin B Murphy, Managing Director, Asiawide Hospitality Solutions responds to an article last week on AirAsia's plans to reposition its Go Holiday hotel portal.

The article on AirAsia (Rate parity: What is that? - see link on the right), sharing Ms Kathleen Tan's comments, highlights a number of major steps that hotel operating companies need to consider more seriously.

This is because if Ms Tan's idea is to work for both parties, then most hotel operating companies will need to change not just attitudes but some basic ideas on how hotels of the future should be built and what they need to tell existing hotel owners – which might then raise questions about their own failure to adapt to the market's changing realities. 

At the same time, 'newbie' airlines need to show long term viability and the highest safety records as well as price value propositions that might also mirror guests' expectations of hotel standards.

Some may argue that if the airline is successful in moving more people and those new travellers require rooms, then they will seek the rooms anyway. So why discount further to a possible short term supplier (if that is indeed what she is really asking for?)

This could work for some although it reduces the appeal of Ms Tan's offerings without hotels – so she would be better "talking to" rather than "about" hotels if what she wants is a viable and sustainable option rather than just publicity for this quarter' s latest air promotion at the expense of hotel partners.

Selecting only some hotels (as she indicates they have already done) will naturally make the sector wary. The question – "how do I get in that programme if I don't seriously debase my own other business, or risk my positioning when Ms Tan's airline decides to take their inventory elsewhere should this destination not remain fashionable or profitable? – will be in the minds of many hotel operators.

A best case scenario and one that would be more readily embraced by more hotels would be if the rates agreed with (just ) this one select 'supplier' were kept somewhat opaque within a total package so that damage to yield elsewhere is not compromised.

If you could 'ring bark' (limit) them with the same strict deadlines and pre booked conditions – the same sort of no-refund policies these airlines make conditional on their own offers – she would find many more disciples among hotel management.

Whether the travelling public will accept those type of conditions direct from hotels is questionable but if the carrier offers to carry those conditions, and prepayments on such bookings, then greater cooperation will be come more swiftly from hotels. Perhaps Ms Tan could elaborate if that is an aspect Air Asia is willing to shoulder (as do other hotel third party suppliers) if they are now offering and moving more into the wholesale sector of travel packaging?

Fixed costs in hotels are less flexible than in aircraft as we all know. Selling a hotel bed (airline seat) more than once a day shows different profiles not necessarily identical or popular with customers.

Similarly cleaning a hotel room after use is a more involved and higher cost outlay than just brushing off the seat on to the floor. Travellers are more demanding of quality in hotels than they appear to be of many low cost carriers.

It is also unlikely that Ms Tan is going to suggest room revenue potential for the hotels she wants to use on a similar sliding scale to her own seat pricing structure and forecasts - which would quickly have more appeal. Just as booking later or closer to the flight ensures her a higher yield, will the same be true of the hotel packaging she wants to carry?

A willingness to use her same booking software for the hotel's benefit as she exercises for her aircraft yield would find more takers, I am sure. Has she considered or offered that at all?

Another reason that may hold hotels back from supporting Ms Tan is that not all customers for hotel rooms are the same – even though hotel operators keep telling investors to build identical rooms in any one hotel.

They know that segmentation already imposes severe yield differentials on same size usage with similar costs regardless of individual segment revenue. Some of us believe that in the old days (primarily pre-air and pre- homogenisation) when we built hotels with different sized rooms that better reflected this, the ROI for hotel investors' money (owners) was better than these days of enforced cookie cutter boxes imposed by operators chasing brand differentiation by size, shape or fitout alone.

But you would be hard pressed to find an operating brand today willing to espouse that and go against present brand dictates.  

I hope that both Ms Tan and the hoteliers of Langkawi, and elsewhere, can forge an effective cooperation to create profits for each party, along with value for new customers. However I think more effort on her part as well as more direct discussion with potential hotel suppliers would not go amiss.

New people and new ideas are great and are always welcome but only by understanding history can we hope not to always repeat it, or have it reported as being repeated when in fact it hasn't yet happen, again.

Yeoh Siew Hoon, one of Asia's most respected travel editors and commentators, writes a regular column on news, trends and issues in the hospitality industry for 4Hoteliers.com.

Siew Hoon, who has covered the tourism industry in Asia/Pacific for the past 20 years, runs SHY Ventures Pte Ltd. Her other writings can be found at www.thetransitcafe.com

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