07 October, 2017

Local suppliers in the world of global sales platforms: David vs.Goliath?

Hotels, in particular, holiday hotels, are challenged by the dominance of global booking platforms. As shown in the following remarks, it is worthwhile to pause and take a look at the sales and distribution as a whole.

Booking platforms have become a globally dominant sales channel within a very short time. Hardly any provider of a tourist core service comes by today. This also applies in particular to hotels. What to do?

Before discussing this, it is helpful to know what is going on.

The dominance of booking platforms is based on enormous - because global - network effects of their business models. Many guests find many offers; many providers reach many guests. As a result of growth, such platforms become more and more popular, which then assures them great power (e.g. with regard to price parity and other conditions).

The fact that these networks can play, however, requires a high degree of similarity between the services distributed; an overnight stay or a flight, are more or less interchangeable tourist commodities. The platforms are successful in the distribution of these commodities; there are, however, only a few possibilities for mapping performance differentiation and, if only, also for services that are largely standardized globally (for example breakfast in a hotel).

Most hotels currently offer the same or similar services at the same time over many different channels. This is expensive and complex. It would be worth a try to move away from this middle of the market and orientate itself more and more different to potential customer needs and processes and to partners who have access to these customers. This results in two extreme approaches at or between which a provider can orient himself in the configuration of his distribution channels:

  • One approach is to outsource the distribution of the commodity "overnight" to a globalized distribution platform and to accept a low price guarantee (for the commodity!). On its own web page, only a link to a globalized platform will appear. As a result of this, the provider focuses on a high service achievement and thus the achievement of good guest feedback. In addition, they aim at maximizing additional income from ancillary transactions.

  • The other approach is to enrich the commodity with additional services and then sell it as bundles with flat rates via own platforms (company or destination) or segment-specific channels. In this case, the dynamic packaging on the basis of a performance configurator should be considered; such playful support for the purchase decision increases the attractiveness of the own channel and creates value in itself.

A guest who only wants to stay overnight should be able to land on the global booking platform. A guest who wants more should be offered a pleasurable selection and booking process (on which he may land after seeing a platform offer). Travel and holidays are more than just consuming a commodity!

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