“The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn and relearn,”Alvin Toffler, Future Shock, 1970
If the Covid pandemic has taught us one thing, it is not to take anything for granted – not even what we know and what we may need to relearn!
The start of a new year has made me reflect on the rapidly evolving world of distribution and wonder where we are heading and what we should be better prepared for.
Many years ago, revenue management (RM) was considered “the dark art”. Everyone talked about RM, but few understood it, and even fewer people applied it effectively in their hotels. But with the advent of time, improved capabilities, and newer plug-and-play RM technology solutions for hotels, “the dark art” of RM is now more accessible, easier to understand and more effective to apply.
Is it now the turn of distribution to go through this cycle in the hotel industry? It seems to me that many people talk about hotel distribution but do not really understand what it really does, why it is important, what its scope is and where it really sits within the commercial organisation. Is it part of sales, RM, marketing, or some other area? Or should it be a stand-alone function? What specific skills does it need? And finally, why has it suddenly become so much more important?
And what are the distribution trends for 2023 and beyond that may influence some of these considerations?
I started out by looking at some of the numbers for context.
- In 2019, the Travel & Tourism sector contributed 10.3% to global GDP. This went down to 5.3% in 2020 and rose slightly to 6.1% in 2021. (WTTC)
- International arrivals rose from 900 million to more than 1.3 billion in the last decade. Although the pandemic has slowed continued growth, recent data from the World Travel and Tourism Council (WTTC), cited by Hospitality Insights, says the hospitality industry would have contributed $ 8.6 trillion to the global economy in 2022.
- The market size of the hotel and resort sector worldwide peaked at 1.52 trillion U.S. dollars in 2019. Post-pandemic, the market size in 2022 was forecast to reach 1.06 trillion U.S. dollars. (Statista)
- Revenue in the Hotels segment is projected to reach US$362.90bn in 2022. And a market volume of US$483.40bn by 2027. (Statista)
- In the Hotels segment, 81% of total revenue will be generated through online sales by 2027. (Statista)
- The global online travel booking service market size was valued at USD 519.1 billion in 2021 and is expected to expand at a compound annual growth rate (CAGR) of 9.0% from 2022 to 2030. (Grand View Research)
This reconfirms to me that distribution should be at the heart of our travel and hotel business. It is the ecosystem, the pipes, the conduits and all the lesser known “under the bonnet stuff” that requires a curious mindset and broad know-how of the industry – it is high time we put distribution at the centre of the commercial conversation!
At the centre of all distribution trends – the booker journey
The way travellers use the internet to make bookings continues to change, creating new opportunities and challenges and impacting the distribution ecosystem. Costs and economics have become more critical – as have geopolitics. Source markets and destinations are changing rapidly, as is the nature of travel and booking behaviour.
Research phase: The research at the start of many booking processes is increasingly voice-driven with the increasing sophistication of chatbots and related technologies. A more accessible product/experience via augmented reality (AR) and virtual reality (VR) on social media allows potential bookers to better imagine the experience.
Pre-booking phase: “Try-before-you-buy” is increasingly becoming a possibility. Hotelverse aims to provide an immersive booking experience with its “Digital Twin”, a hyper-realistic 3D model that gives customers the right to choose their room and design their stay. Phocuswright article here
Booking phase: The importance of mobile for bookers continues to grow. Use of a mobile device for travel bookings was 31% in 2019, rising to 37% in 2020. In 2021, mobile travel booking rates jumped to 41 % (Salecycle).
Larger brands also continue to embrace app-based bookings as it allows them to access data and provide opportunities for personalisation. However, it remains a challenge to provide compelling reasons for customers to keep coming back to the app.
Wyndham’s Trip Planner app has received great feedback – and is the first hotel chain to launch a tool that allows travellers to plan their road trip and book it with just a few clicks.
Booking.com has adopted an app-first approach, which now accounts for the majority of mobile bookings. Sensor Tower estimated that in Europe, travel apps are forecasted to surpass 130 million downloads in Q2 2022, up 56 percent year-over-year.
In the booking phase, payments are another area where much has changed. Younger bookers seem to be gravitating towards Buy Now, Pay Later (BNPL) products. Founded in 2015, Fly Now Pay Later offers travellers a new and more flexible way to finance trips, adventures and short breaks. The company received €11.5 million in Series A funding in May 2021, following €39 million in Series A funding in 2020. Travel booking startup Hopper closed a follow-on investment of US$96 million, bringing the company’s total funding to US$740 million. Hopper has focused on its Price Freeze products.
The start-up Selfbook aims to help hotels maximise conversions by integrating digital wallets into the booking flow.
Travel phase: Travellers want travel to be easier, and there is growing evidence that this is happening. Companies like Flightpath are working with airlines to provide a fun and helpful experience while travelling. More and more travel companies are using AR to provide travellers with a more immersive experience during their journey and when they arrive at their destination.
The dream of a “fully connected journey”, as articulated by Booking.com, still seems a long way off. Neoke takes a fresh look at how to avoid or minimise the frictions that still prevent us from addressing some of the issues. Their focus is on a new global identity network for travel, based on a blockchain-based, self-sovereign ID.
Stay phase: The theme of ease of travel also extends to hotel stays. Most guests checking in are more than willing to skip the wait at reception – especially on a busy day. The same goes for the interaction with the hotel teams during the stay and when checking out.
Spotting trends feels like a gamble at the best of times – do you look at trends with a fresh pair of eyes or with the eyes of someone who can’t unlearn? And with all the uncertainty we’ve experienced in recent years, it seems even more of a gamble now. However, I’m optimistic that there are patterns to be discovered and explored. And I love to connect the dots (or patterns!)
My recipe is as follows: the first four in somewhat equal measure and the last just a pinch…
- Observing the changes in the way travellers use the internet to make their bookings, and the constant disruption and change this brings
- Following the money and funding – with the clues it provides
- Learning from search trends
- Watching the evolution of distribution solutions from new and existing companies in this space that are trying to solve problems and seize opportunities
- And finally, one’s own view of the complex world of hotel distribution – whether this can be called bias or not is for other distribution enthusiasts to judge…
Having explained my recipe, here is my list of the 18 most important trends that will significantly influence hotel distribution in 2023 and beyond – in three categories:
Trend 1 ↗
Post-Covid, the blending of business and leisure travel is evolving to a whole new level
The regulatory environment grows in ambition, capability, and complexity
Cybersecurity is more important than ever and distribution infrastructure can be the weak link
Trend 4 ↗
The path to more direct bookings and true loyalty continues to be challenging and intriguing
Trend 5 ↗
The extended stay and short-term rental sector (STR) is on the rise despite regulatory challenges
Trend 6 ↗
Tightening of venture capital (VC) is pushing for better start-ups in the industry
Trend 7 ↗
Sustainability paints a mixed picture in the distribution landscape
Trend 8 ↗
The challenging labour market situation in most sectors remains a major concern, with no immediate solution in sight
High-Impact Technology Infrastructure
Trend 10 ↗
Voice and chatbot commerce are starting to make an impact
Trend 11 ↗
Artificial intelligence (AI) as a service and AI-driven marketing offers new potential
Trend 12 ↗
Legacy distribution technologies are being challenged by new players, but they still have a long way to go
Trend 13 ↗
A whole new set of marketplace models that connect supply and demand, especially with long tail
Trend 14 ↗
Content distribution beyond Availability, Rates & Inventory (ARI) is still lagging but there is hope on the horizon
Trend 15 ↗
Companies are trying to gain an edge with new types of travel booking platforms
Trend 16 ↗
There are early signs (but only early signs!) of change in online group booking tools
Trend 17 ↗
Property Management Systems (PMS) are looking to conquer new frontiers
Trend 18 ↗
The availability of actionable data insights is improving despite the fragmented nature of distribution ecosystems