The Price Wars in Some Markets Have Really Hurt Profitability.
By Ritesh Gupta
Wednesday, 17th March 2010
Interview with Marriott International's Greg Albertini -

The nature of the lodging business is that there are always peaks and troughs of demand related to the supply available in any given market.

This can be seasonal, development-related, or economic, which the industry is seeing most acutely right now.

Can one believe that the best partnerships between companies are those that can flex to the varying demands and needs of each party across time?

Providing his insight into this debate, Greg Albertini, Regional VP Revenue Strategy Asia Pacific, Marriott International, says the best partnerships do not take inappropriate advantage of a specific situation but have a long term view in mind.

"When demand is down and hotels are desperate the OTAs have a bit more power than they do when demand is strong and hotels are selling out. In order for all to thrive we need to work together to augment each others' strengths. When demand is strong, I will remember the OTA that took advantage of me when demand was low, just like they will remember hotels that did not give them availability when demand was high," Albertini, who is scheduled to speak at the forthcoming Travel Distribution Summit Asia 2010 (to be held in Singapore, April 28-29).

In an interview with EyeforTravel's Ritesh Gupta, Albertini spoke about trends in the industry, price parity and the hotel-OTA relationship. Excerpts:

What do you see as the biggest changes in the industry as far as RM is concerned?

Greg Albertini: Globally there are a lot of exciting changes taking place; many companies are focused on price optimisation, CRM integration and effective distribution of both rooms and space across a portfolio. The markets here in Asia are rather young from a RM deployment perspective, so I would say biggest changes here in Asia are more around acceptance and willingness to invest in the discipline.

Price parity is an important element, and plays a key role in today's revenue management and hotel distribution strategy. The concept of profit parity disregards that there are varying levels of value and fluctuations in demand depending on the distribution channel. In this context, how does the online channel offer unique benefits?

Greg Albertini: True, e-channels have built incredible brands with unique value propositions that speak to specific customers. Expedia has told us that 2 out of 3 customers shop on Expedia.com but then go buy on Brand.com; Expedia is okay with this as they see the one customer that books with them as a loyal Expedia customer. You can discuss profit yield all you want, but at the end of the day, if you want access to Expedia's loyal customer base you will need to be a good partner and offer parity in both rates and availability. The key is to find strategies that provide good partnerships with your e-channels yet also promote loyalty among your own customers to avoid channel / loyalty shift.

OTA's say that they offer services to hotels that are very much tailored to market demand factors. The key factor is that prices and promotions can be created, adapted, in real time for real customers. Rates are not set seasonally, but rather daily. How do you assess the utility and efficacy of this channel in today's environment?

Greg Albertini: This issue really depends on a brand's pricing strategy and technology platform to distribute that strategy across all the distribution channels. We do not see OTAs as being more effective than we are at distributing our own pricing strategies; we can implement in real time any changes we decide need to be implemented.

What some OTAs do bring to the table is access to a loyal leisure customer base that is more price conscious than a typical corporate customer. We look for opportunities to fence away these customers from our typical business traveller with pricing products that are available to both the OTA customer as well as our buy direct customer, otherwise we are telling our loyal buy direct customer that they must become an OTA customer to get the same great deal.

Do OTAs share their rate research with hotel partners so that hotels can be aware of how their rates are being sold online?

Greg Albertini: Some do. The research we like is around parity shops that ensure the OTA in question is not at a price disadvantage in the market. This type of research helps us to better police our own hotels and ensure we have sound execution of our intended strategy.

However, many OTAs work hard to share data that supports missing opportunity that can be realised by offering exclusives in exchange for preference. The problem with this type of thinking is that you alienate other OTAs and you also promote channel shift away from your own lower costs channels which has very negative long term implications.

How can one work on strategies which would allow customers to purchase where they want without encouraging them to book a costlier booking path?

Greg Albertini: There are two significant areas:

1) Parity. If your customers can find a cheaper rate on a costlier booking path, then they will go there to buy.

2) Invest in your online buy direct technology! Marriott spends significant amount of money each year to improve the customer experience on Marriott.com. If price is the same, but the shopping experience is much better on an OTA, then it is just a matter of time before customers go for the better experience. Of course, you could entice with better offers on your own website, but this will put the OTAs at a disadvantage and as a result don't be surprised when your page placement falls to `page 14' on their website.

What according to you is the next big thing for travel in Asia? Or can we have a prediction about where the industry is heading in the next few years?

Greg Albertini: Let's all just cross our fingers for the sustained return of business and MICE demand over the next few years. The price wars in some markets have really hurt profitability of the industry and getting back to the profit levels we had prior to the economic crises (once adjusted for inflation) would be a general blessing!

What are you most looking forward to at TDS Asia? Who are you most looking forward to meeting at the event?

Greg Albertini: I was very sad that last year I had a lot of urgent work that kept me out of many of the sessions. I hope that this year I am able to attend more sessions as it is always exciting to see and hear what is going on around the region.

Greg Albertini is scheduled to speak at the forthcoming Travel Distribution Summit Asia 2010 (to be held in Singapore, April 28-29). http://events.eyefortravel.com/tdasia/index.php/revenue-management-a-pricing

For more information about the Summit, contact:

Marco Saio
Global Events Organiser
Direct Line: (+44) 020 7375 7219
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