The Evolution of Hotel Contracting – TravelMole guest comment

It was always a clumsy time consuming operation, says Andrew J Wood, general manager of Chaophya Park Hotel & Resorts, Thailand & Skål International Councillor for Thailand.

Firstly there was the actual process itself, involving long trips and endless meetings. In this fast paced world do people really have time to conduct face to face sales calls to buy hotel space? Surely there are many other ways of communication in this electronic world?

The answer is product managers still need to inspect the hotel hardware. Litigation is too costly if you get it wrong. We are also a service/people orientated industry and the software, the human touch, is just as important, developing a strong buyer-seller bond.

However, the business environment is changing rapidly. The way we communicate today is infinitely more efficient than in the past, just remember the telex machine!

With the advent of mobile phones; skype; msn messenger; blackberry; video phones, and email, we can be seen and heard, everywhere and anywhere.

Booking Patterns.

The way people buy a hotel room today, says much about the way we need to evolve the way we contract hotel space. The distribution diversity – the method in which companies promote its travel products – can often dictate how it buys and display its hotel space.

For example, the traditional method for a consumer to buy a travel product is through a printed brochure from your local travel agent. The brochure has a validity of say six months to one year. The rates quoted therefore are usually valid for the same period.

The time span between booking the holiday and actual travel varies, but tends to be weeks and months.

Then we have the “techno” tourist who is comfortable at searching the net themselves, seeking information and researching the destination of their choice. They are equally comfortable to competitor shop, book air tickets and have everything confirmed on line. The time span prior to departure may be weeks but it is also possible to be days.

Live availability.

Many in the industry are questioning why book early at all? Unlike low cost airlines where the earlier you book the cheaper the seat, holidays have become a commodity that are being dynamically package to offer last minute shoppers bargains on unsold inventory.

So marketing to the needs of your distribution channels, be it diverse or otherwise, (many companies now only cater directly to the consumer and focus their marketing solely on-line), the availability of hotel products needs to be all year long and also last minute .

Daily rates and short lead-time allocations are not possible in the more traditional model using print material, but dynamic packaging and live availability allow many companies to satisfy the demand generated by the “techno” tourist.

Contracting is therefore changing and the hotels now have to consider offering room inventory that was traditionally reserved for short lead time corporate business, for which they charged a higher rate.

Can you satisfy all markets with one rate structure as in the past? I believe the answer is “no” and the difficulty is that both the buyer and seller have to understand this clearly in order that they can find common ground.

In the past there has been a fundamental flaw in that tour operator and agent have been allowed to access the “techno” tourist using a confidential contract online which it was never intended. Put more simply it comes down to the tour operators/agents wanting increasingly access to last available rooms, but at a rate that allows them to be competitive and profitable which means allowing for mark-ups. The consumer wants the best deal and the seller wants to sell rooms direct with higher margins.

The solution? A buyer who is prepared to accept time sensitive flexible rates and a seller who is prepared to offer the allocation of available rooms, both long and short lead-time but at a price dictated by demand.

The role of the traditional tour operator…? It’s changed forever. Those that understand this will survive, by evolution and specialisation, those that don’t…won’t.