With over two decades with three of the earliest players in the rise of the global distribution system business, American Airlines, Sabre and IBM, I’ve been hearing that the GDS will vanish for my entire career.
Interactive television, the internet and the rise of online travel, suppliers push for direct business, direct connects, alternate accommodations, among other have all driven the market to predict the demise of the GDS.
Yet, the GDS remains, and bookings are growing.
In 2017, GDS hotel reservations exceeded 68 million, a two million increase over the previous year, according to a study by TravelClick.
Add to that, the GDS deliver some of the most valuable customers for hotels; business travelers, who tend to spend more on premise and pay a higher average daily rate (ADR) than their leisure counterparts.
As a hotelier, this is not news to you. You’re likely on the GDS through an intermediary or a direct connect to one or all the GDSs, Sabre, Amadeus and Travelport.
Many established a direct connection to the GDSs,likely driven by a desire for control and, of course, a belief that it would drive lower distribution costs. But as of late, many hotel connectivity teams are asking themselves if they made the right choice.
As it turns, out the cost and effort of maintaining a direct connect to the GDS may have been more than hotels had bargained for.
Let’s examine a few that of those hidden head-aches:
1) Look-to-book ratios are skyrocketing
Hoteliers may have expected similar look-to-book ratios on 3rd party site as on their brand. But 3rd party distribution is a different world.
Travelers are said to visit 38 websites before making a choice, but a traveler coming to your brand.com likely know what they want and often make the booking right there because of brand loyalty or previous rate comparisons on 3rd party websites.
So, shopping requests are always going to be higher on traffic from 3rd party sites. Even some connections through the GDS, which is typically more efficient, can have very different and less efficient look-to-book.
And, for some, look-to-book ratios can exceed 25,000:1 on these indirect channels.
Why does this matter? First, creating the infrastructure that can handle this traffic is not easy or cheap. Second, unless you have advanced cache functionality, all that traffic hit your CRS which can fail to meet the demand at peak traffic times.
The result? Lost bookings and another hidden cost of your direct connect.
2) Changing connectivity solutions
GDS connectivity for hotels operates on a pull model, which will be a fundamental requirement for personalization on third party channels.
Personalization requires a shift in the volume and types of data being passed between a hotel’s CRS and the third-party point of sale, an OTA or GDS.
There is plenty of research and numerous articles on how personalization drives higher revenue, as well as how travelers have come to expect a certain level of recognition.
So, for the sake of brevity, let’s consider the need for personalization a given. There’s also a huge ecosystem of tools that hoteliers can leverage, such as CRMs and marketing tools, but many forget that the underlying infrastructure must be able to support the requirements of these tools.
To put it bluntly, can your direct connect handle the requirements of personalization?
Because, while successful personalization is a holistic experience approach from shopping, to during stay, to post-stay, it unequivocally includes the shopping and selling phase.
3) Content is leading personalization
While the GDSs have come a long way since their “green screen” days, they do still have to manage around the technological complexity of the breadth of business they were initially built to address.
For example, the industry is still managing around amenity fields with character limitations where there’s just no room to fully describe that amenity, e.g., “GYM” vs. “Spacious recreation facility with state-of-the-art work out equipment.”
These limitations mean that you need to be able to normalize and standardize the field values in order to successfully distribute.
Along with this, you need to be able to do this in a consistent way across all three GDSs, but also across all channels. For the GDSs, this starts with trimming and transforming the content that describes your products, or rooms in this case.
If you have attempted this, you know it’s a labor-intensive and never-ending task without powerful and specialized software at your disposal. But without this step, you’ll never get to the next one, which is to apply content-based filtering.
This is where you match known preferences of a traveler with amenities known or likely to appeal to that traveler or persona.
And let’s not forget about the never-ending task of monitoring and making sure your content is used as you intended it and is consistent across both GDS and other channels.
Because without consistency and the right change management processes, your personalization is likely to fail. Lastly, are you using the shopping data from your direct connect to test and inform your personalization strategy?
This brings me to my last point…
4) Direct can be dumb
While you might have figured out that, yes, I do think a direct connect approach is, often sub-optimal, the “dumb” I am referring to is about business intelligence.
If you’re able to solve for all the obstacles mentioned up until this point, let me congratulate you. Very few have.
But if you’ve played that game of whack-a-mole successfully, have you had time to make your connection both intelligent as well as deriving useful data from it to optimize it?
This is the last mile where hoteliers often fail if they’ve come this far. If you’re personalizing, you’re likely extracting data already from your connection, but are you capturing and analyzing data on the connection itself – in real time?
Do you know when it’s putting to high of a load on your CRS? Can you analyze failures to ensure you capture all bookings?
If you’re going to maintain a direct connect, knowing how it performs is critical to its success. If not, you’re simply putting your hopes and beliefs on that it’s the best approach to connectivity.
Conclusion
For those of you familiar with DHISCO, you may think my opinions to be self-serving. However, the primary point isn’t about whether the decision to pursue direct connects was right or wrong at the time.
It is simply that, as always, the world evolves. With this evolution, we are seeing a renewed interest in technology provider approaches, as opposed to DIY.
Again, there are many drivers behind this: the realization of the costs and complexity of connectivity, the growth in shopping volumes, the requirements of personalization and the data necessary to manage that, and the desire of hotels to focus on what they do best.
None of these are getting easier, and virtually every conversation we have with both hoteliers and demand partners speaks to that reality.
What’s exciting is that we’re on the cusp of another technological revolution in hospitality, and when every party is focusing on their core strength, we are together able to create a fantastic end-to-end, cross-channel experience for the traveler.
And isn’t that what it’s all about?