Travel firms to direct contract or to connect?

Pandemic has accelerated a long term trend for travel companies sourcing their accommodation. When it comes to the word ‘direct’ in relation to sourcing hotel accommodation, as many of you may know ‘contracting’ is not quite the same as ‘connecting’.

Before the pandemic hit, tour operators, OTAs and wholesalers were increasingly linking to hotels via direct, dynamic connections such as channel managers and switches – and moving away from the more
traditional method of securing direct, negotiated contracts with individual properties.

This was initiated by hotel industry people as they used new technologies and looked to reduce the complexity of managing direct contract pacts. But will this trend continue to roll now the pandemic is largely over?

If anything the recent pandemic has led to an acceleration of this trend for direct connections as both demand and supply of this type of agreements have increased.

But why? Firstly, both the travel companies and the hotels have found themselves in a position where they no longer have the resources to manage and maintain a complex relationship due to resources possibly being reduced due to the pandemic.

Direct contracting can be labour intensive from loading as well as maintenance as new rates and offers are released. And if you need to consider multiple markets, brands and channels then the effort increases proportionately.

Meanwhile, channel managers and switches have the technology to connect travel companies to hotels accessing similar products and commercials but with less resource and effort, while allowing them to retain the direct relationship with the hoteliers.

Secondly, tour operators, OTAs and wholesalers want to be more flexible and have had to react quickly to changing conditions. As the pandemic evolved, travel companies found themselves having to make strategic decisions around destinations and hotel chains.What we know for sure is that channel managers and switches can link to relevant properties worldwide quickly and efficiently, giving the travel companies the flexibility they need. This trend is likely to continue, as travel companies look at how they can help drive efficiencies, increase productivity and reduce operational costs. The great news is that people are ready to travel again. Tour operators and OTAs need to be ready and have the flexibility, so that they can maximise this opportunity.

Direct contracting still has a role to play, particularly for travel companies that have a smaller portfolio, or where they drive high volume to a selection of properties. Being able to negotiate bespoken agreements that match the operator’s demographic and that work for the hotel can unlock genuine value for all parties. In that respect the necessary simplification of a channel manager connection will not offer many more such possibilities.