At the turn of the twentieth century, the world was booming to dot com. Internet was spreading like wild fire across several businesses. India unfortunately was a tad behind when it came to implementing these changes. Indian players like Taj Hotels and Resorts, Oberoi Group of Hotels and ITC Hotels refrained from investing in them. I remember starting as a management trainee in hotel sales back in 2009. The idea of digital sales was doing the round back then. This was a new disruption in the digital world and hotels used it for distribution of their booking platform.
Online sales or digital sales was treated as a new segment and their share for the hotel revenue was growing at a fast pace. International players like Expedia, Travelocity were taking the business away from local travel agencies. This was the trigger for a new large distribution channel for hotels that became a large consolidator.
Traditionally hotel bookings were largely done through faxes, phones, letters and emails by individuals. This process was eased by a consolidator who would do the bookings for the individuals. Hence travel agency business was booming in India. Airline ticketing to hotel bookings were done by an expert while the traveler just went through the process hassle free.
These travel agencies would internally use a platform of Global Distribution System commonly known as GDS. It was powered by either of Amadeus, Galileo or Worldspan. This system was integrated with live inventory for hotels and airlines and room bookings were done on them.
This is still the backbone for hotel bookings that happen through travel agencies. Unfortunately, the system used coded language and was not friendly for use by individuals. Online Travel Agencies or OTA’s like Expedia and Travelocity used this shortcoming to their advantage and created a software that bridged the gap. It directly connected the consumer to the end hotel or airline to directly reserve rooms at the hotel or seats in flights respectively.
Suddenly the middleman was left behind. Over a period of time the commission percentage that traditional agents use to charge was demanded by OTA’s. Today several OTA’s are in the market and local OTA’s like Make my trip, Yatra, Cleartrip have also made their mark. OTA’s today command a percentage commission of anything between 15-25% of the room rate booked through their website.
But hotels then developed a counter strategy wherein they developed their own booking tools. Travelers could directly do the bookings in the hotels through their website and bypass any OTA. Today some of the leading hotel companies in the world like Marriott.com and IHG.com drive a considerable share of their bookings directly through the strong loyalty programs. This has further shortened the gap between the consumer and the hotel.
With increasing supply of hotels in India and burgeoning OTA’s there is immense consolidation of this industry and soon the industry will see 5 large players in both the business which will lead in the front.
Towards the end of 2010, social media websites like Facebook and Orkut were increasing user database rapidly. The hotel industry did not foresee that even they can change the outlook of consumers. Hotel industry kept themselves away from social media and employees in ITC Hotels and Taj Hotels were asked to not use company imagery or company name in any of their communications on social media.
All this changed when Tripadvisor became active in India in late 2012.
Tripadvisor connected all the consumers on one platform to share their experiences and views on hotel brands and rate them basis their visit. This public platform became increasingly popular for referral purpose within travelers. The fate of the hotel was decided basis the kind of reviews they received. Tripadvisor took this data to the next level by ranking hotels in order of preference city wise.
This became the new benchmark for hotels to showcase their strength to the outside world. Soon hotels started responding on reviews and questions asked by travelers on Tripadvisor and other platforms. There was a sudden desire to be ranked among the top tier for hotels. The website seldom discriminated in star categorization of hotels. No matter whether you are a 4 star or 5 star hotel; your service excellence is a proof of what the travelers say about you. This effective media tool gave a voice to the consumers and hotels started having a mandate of responding to guest grievances within hours. The service recovery required immediate attention of the General Manager in several cases.
Facebook soon followed steps when they allowed businesses to have pages and communities to attract the audience. Hotels soon had their pages and links on major platforms like Facebook, Twitter, Instagram, Youtube etc. The fear of being left behind and adoption by International hotels led even the smallest hotels to ensure they are visible on all platforms to communicate their story.
The paradigm shifted when the same Indian hotel companies which refrained their employees from communicating their organizations on social media; started encouraging and rewarding them for sharing good posts to increase brand image of the hotel/ hotel company. Today hotels have a dedicated resource that manages the various social media and content marketing in building a strong communication for their company for an ever-increasing pool of consumers.
Airbnb and Oyo rooms have certainly created a new niche for themselves in the Indian market. They have combined the strength of global distribution system and ability to connect socially through digital media. They have infused a completely new inventory of makeway rooms where anyone can open a mini hotel room that can be as basic as their extra room in the house.
By 2015, Indian consumers started using these new innovative options to satiate their stay options during travel. This segment is still growing and the world still needs to see where these brands can take them. Airbnb is valued at $31 billion which is far greater than any individual international hotels company.
Oyo rooms on the other hand used live inventory of existing small hotels to run their own set of bookings. Now they are growing the fastest in their segment. Consumers just stay at a local brand but the services are managed by Oyo. The future of hotel industry is yet to be seen. But these sudden changes in the last fifteen years have brought about an immense respect for the power of digital media. The impact it can have on hotel industry has strong evidence to back up now.
As I type this blog currently, a small budding innovation might just be created somewhere around the world that will again see a disruption in hotel industry. The idea is to analyze the trends and see if you can implement the usage before competition and have a first mover advantage.
Phase IV……..Is waiting to showcase itself to the world.
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- Impact of digital media on Hotel industry in India - July 25, 2017