I recently had the pleasure to attend my first HEDNA conference in New Orleans (14-16 January) as a newly enrolled member, and I came away impressed with the welcoming friendliness of other delegates (seemingly the largest gathering for a while). I was also fascinated at the quality of the Connectivity Group’s presentation around the Push / Pull hotel distribution model that many of the Hoteliers in the room were visibly grappling with. A lot of work has been done by this HEDNA Group to define and explain the many and various options open to hotels to display availability and price data to the fragmented channels that can help them sell their rooms and secure bookings in their Central Reservation Systems (CRS). Essentially the options are pushing Availability, Room, and Inventory (ARI) data out to those consuming systems that need it or pulling in the shopping requests for rooms as they happen.
Obviously each method will have its own plus and minuses. With push, the workload with search requests is offloaded but the data may not be quite as accurate when the booking is executed. While with Pull the hotel can see the shopping traffic but also needs to be able to handle large volumes of shopping messages.
Distributors also need to consider how they want to obtain ARI for their consumers. If the distributor opts for the push method, then it is required to store large amounts of data on its systems. If the distributor opts for the pull method, then it has to go out and get the data – often with a corresponding lag in message response times.
A number of third-party technology companies (such as switches and centralised booking engines) seek to make the process easier for Hotels by offering to act as a buffer from the volume of shopping messages. They see their role as a consolidation point and mapping solution for both supply and distribution. Then there is a hybrid model, where some rates or date periods can be pushed and cached while others are shopped. The ARI decision for hoteliers is a complex one requiring some careful consideration not just of the short-term benefits but also the longer term vision and implications.
Let’s take a closer look at the Push model, which is being favoured by some Hoteliers as a way to address their CRS capacity issues and reduce or delay the need for investment in IT infrastructure and perhaps people. A key driver towards the Push model is that in a Pull system third party direct access distribution channels pulling ARI data are putting heavy look-to-book loads on the Hotel CRS systems. Rather than invest in managing the capacity centrally at the Chain or Hotel level, the solution is to push ARI data out to the direct channels and switches thereby limiting the exposure of the CRS to less common requests (non-cached queries) and the actual bookings made. The short-term benefit this method offers is to alleviate the need for IT investment delivering some immediate savings on the bottom line. Depending on the hotel this can be significant.
Hurray – What a great idea, I hear Hoteliers echo! But in a world where firstly the cost associated with computing power and storage is falling fast and secondly our ability to analyse large data sets to support data-driven business decisions is becoming the norm – is this a case of throwing the baby out with the bath water? To add to the debate I thought I would highlight some points worthy of consideration when making push / pull decisions for the long-term:
1.Live Search Data. Today much of the travel industry’s revenue management systems base their pricing on insight derived from historic bookings data, not the intelligence embedded in real time search data. But this will change soon – and some sectors of the industry such as the Wholesalers and OTAs are already leading the way in applying search based analytics. The travel industry is waking up to the concept of customer personalisation. Amazon was already there years ago. To get close up and personal you have to know your customer. To do that you need data and insight about his preferences. The technology and computing power to get more transaction insight is already here (e.g. Triometric XML analytics). It is possible to use real time search based demand data to drive improved revenue management algorithms and outcomes. But, when a Hotel relinquishes control of visibility into search data to intermediaries by adopting the push model, then the ‘game changing’ competitive advantage embedded in a pricing structure based on live search data is then also lost.
2. Customer Insight. Doesn’t everyone today want a 360 degree view of our customers and how they interact with all our channels so that we can maximize their lifetime value? If Hoteliers only have insight to some channels such as their brand.com website, but not the outsourced pieces of the distribution puzzle then they have a blind spot with some channels and have lost the opportunity to get a clear picture of their entire distribution universe.
3. Distribution Strategies. Many Hotels are challenged with effectively managing their third party distribution channels, such as the GDSs, OTAs and switches, while at the same time taking steps to increase and protect their brand.com penetration. Taking GDSs as an example, a hotels’ visibility into its customer base via this channel is dependent on the insight provided by the GDS and ultimately not very complete. The lesson here is that when an Intermediary controls valuable business intelligence about a hotel brand’s interaction with its own customers or potential customers, then the hotel’s ability to effectively manage those relationships becomes limited. At the same time, the hotel’s negotiating power with the Intermediary is also stifled due to lack of real insight into what is being searched for and how the search is being met.
4. Take a Look at Airlines? Finally, it may be worth the hospitality industry taking a look across the fence to see what is unfolding in the airline business. Airlines’ own brand websites typically have a much higher pulling power penetration when it comes to ticket sales than the hotels generally have achieved. This in spite of the fact that they are historically tightly integrated into the GDS’ who today are still responsible for 60 per cent of airline ticket sales. It is well known that the carriers have long bemoaned the market power and inflexibility of the GDSs, who control how the airline products are distributed through OTAs and travel agents. Seeing the benefits of ancillary sales first engineered by the Low Cost Carriers, full cost legacy carriers are now battling to regain control of the air product distribution channels through an IATA sponsored initiative to open up the ancillary merchandising channels. This initiative known as the New Distribution Capability (NDC) – will see airlines adopting new XML based message standards as the framework for mastering customer personalisation – Amazon style. It occurs to me that while some Hotels seem to be embracing the Push concept, airlines after years of pushing are beginning to turn the corner to move the other way.
Ironically, one of the primary drivers of the rapid increase in look-to-book ratios is the proliferation of travel distribution intermediaries, whose sites are designed to look at inventory through provider websites. As the travel distribution eco system continues to evolve — currently it’s the meta search and travel planning sites that are having their heyday — travel suppliers such as hotels will need to find the right balance of flexibility and functionality to accept the higher costs that increasing look-to-book ratios brings.
Today “information is power”. This is especially true in the quest for personalisation. Before hotel distribution professionals reap the short term savings of push it may be worth considering the longer term impact of doing so with regard to customer relationship management, revenue pricing and channel management.