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Are Hotel Representation Companies Becoming Obsolete?

Albert BarraAugust 13, 2018 · 3 min read
THE IDEA

Explore how hotel representation companies have evolved to meet the hospitality industry’s changing needs and leverage online distribution opportunities. Understand the advantages and challenges they face as hotels seek greater control over their sales and distribution strategy.

Are Hotel Representation Companies Becoming Obsolete?
The role of hotel representatives, sales companies or distribution firms has continually reinvented itself in line with the needs of the sector and, consequently, of the companies themselves, year after year. These companies emerged years ago alongside the growth of GDSs and Central Reservation Systems, when GDSs truly were Global Distribution Systems. Today, as GDSs become increasingly less global, thanks to—or because of—the Internet, hotel representatives have begun to reinvent themselves by offering Internet connectivity and distribution services. Naturally, the Internet represented a major asset for those representatives that knew how to leverage this channel at the time, as well as for the online channels themselves, which recognised the significant advantage of entering into a single product agreement through a sales company in order to instantly access extensive online inventory. At the time, all of this was presented as an opportunity for hoteliers, who saw that, without having to do anything other than pay their intermediary costs—whether commissions, fees, etc.—they received a greater number of guests through their sales companies. So far, everyone was happy. Online agencies grew, representatives grew, and independent hoteliers continued to see customers coming through their doors. Then one day, online agencies themselves realised that they were gaining an ever-greater market share at the expense of traditional agencies, and were therefore no longer satisfied with the commissions they received through their existing agreements with representatives and sales companies. So they decided to embark on the path of direct contracting. It is a difficult and laborious path, but one that, based on historical data, can be highly beneficial and, of course, profitable for the online agency. Hotels themselves are now familiar with the Internet environment and accustomed to managing their planning in a distributed manner. They know their customers better and understand which online agencies bring valuable guests and which do not. They realise they can go it alone and, consequently, have learned not to depend on their representatives. They know when they can offer higher commissions, and to whom, in order to stimulate demand and strengthen their positioning. What is left for the hotel representative?
  • Continue looking for new and alternative distribution channels? Channels that, in periods of low demand such as the current one, are barely profitable, if at all.
  • Try to reach the end customer and, consequently, attempt to intermediate sales that a hotel could already be making directly?
  • Unjustifiably increase intermediary costs?
It is clear that today, when profitability must be closely assessed booking by booking and guest by guest, hotels want to have the greatest possible control over each and every sale. I very much doubt that representatives can contribute much at present to meeting hotels’ needs, as they do not have mechanisms to stimulate demand. Some companies face a difficult outlook as they see their hotel clients preferring to invest their intermediation and distribution costs in initiatives that offer greater returns and control.
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