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Innovative hotel offerings expand TMC revenue reliance beyond air

June 18, 2019
Lee Fulford
Lee Fulford

As the commissions paid by airlines dwindle and the battle on lowering service fees continues, hotel sales are increasingly an invaluable way to improve content profitability for TMCs.

Lodging and accommodation accounts for almost 36% of the trillion plus travel spend by global businesses. However, those bookings are increasingly being made outside of managed travel channels by travelers who are increasingly turning to consumer booking sites and apps as a source of making business bookings.

These unmanaged hotel bookings make the hospitality spend an increasing challenge for client travel managers who track the travel. It also causes nightmares in disruption management. And for TMCs, this impacts the bottom line directly by limiting one of the most profitable sources of revenue available.

Why do travelers book off-channel?

Content shortage

Compared to airline bookings, the hotel and accommodation business market is a buyers’ market and is significantly more fragmented, with only 25% run by chains.

Meanwhile, recent Expedia research shows that nearly 45% of business travelers have an accommodation preference that is not available through the standard global distribution system (GDS) inventory.

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Lack of rates

Price is a key consideration for hotel bookings. Clients want access to the best, negotiated, exclusive rates, ready to book on their system, and the direct booking channel provides a source of competitive rates against traditional distribution.

Poor retailing experience

Corporates are traditionally loyal when it comes to airline bookings. They enjoy loyalty programs and often have a set of preferred suppliers. The only variables are the destinations, flight times, and upsell packages.

For hotel bookings, however, traveler behavior demonstrates they want more. Their accommodation bookings rely on proximity to meetings, the free amenities available - wi-fi, breakfast, shuttles, and more - as well as reviews, and descriptions and images of the locations and rooms. The rich content that hoteliers provide on their own sites and specialty apps is a draw beyond what's shared through corporate booking tools and direct agent interaction.

Struggle influencing traveler behavior

For half of trips, the hotels and flights are booked simultaneously. For others, the hotel is booked after flights. Travelers may want to lock down airfares while finalizing plans, or because they plan to independently book the hotels while the TMC books the flights, or perhaps they’re waiting for colleagues to coordinate plans, or because there’s a lack of policy mandating hotel bookings.

More than half of those going outside of a managed tool on hotel bookings booked directly on the hotel website and 41% booked via a third-party website. Less than twenty percent of these rogue travelers even checked their CBT before booking hotels by themselves, and a large number of them are not even required to share information with their company when booking through alternative channels.

The reality is that despite agreements with specific hotel properties, clients and TMCs alike struggle to influence traveler selection to preferred properties.

Business travelers

An additional concern, especially for smaller TMCs is the capacity of travel consultants to sell more. With travel agents increasingly stretching to cover a wide user base, agents in mid-sized TMCs may not be motivated to even suggest a hotel if they know it will take a significant time commitment to sell it, and in some cases, we have seen agents themselves recommending third-party sites to travelers due to lack of servicing capacity.

How can TMCs expand revenue reliance beyond air?

Here are two key areas where to every TMC should focus on to get the most from hotel content.

Offering fuller, richer content

The solution for improving hotel attachment and driving down leakage means pulling many strings together – providing access to full content and descriptions so that travelers understand the value of what they’re booking and trust that their management program is offering the best rates.

Optimizing the shopping experience

At the same time, it needs to account for ability to deliver this content to the traveler at the right time and through their channel of choice. It should not take the agent an unrealistic amount of time to find, suggest and describe the right hotel to the customer and to not have to spend even more time scouring the internet and third party/supplier sites to find the best price.

From a self-service perspective, this is exactly what is needed even through the CBT – where the traveler should be able to compare hotel properties and descriptions and find exclusive rates, in policy that they would not be able to get anywhere else.

Enabling this front-end experience by cost effectively bringing in a combination of chain and bed bank content, with rich descriptions, policy integration, and special rates across self-serve and agent-led systems TMCs can ensure more travelers are brought into the fold. This leads to positive implications for the TMC and corporate travel buyer in terms of meeting hotel provider commitments and receiving better, exclusive rates from these content providers.