▪ Traditional national receptive operators are trying to understand whether they are hotel providers or service providers. Since they cannot compete for the rates offered by bed banks and OTAs, they compete through creativity and client service in hopes that these make up for hotel rate differences.
▪ Reported bookings for 2015 are mixed with the German speaking market either flat or down between 3-10 percent. Those who have relied on Brazil for their growth the past four years found that business was off between 20-30 percent, especially if Brazil had not been their major focus. Others, whose main niche is Brazilian MICE business, even reported growth this year by offering creative new products. Bookings from Japan are off between 5-10 percent while bookings from China were up 7-10 percent, but at lower price points.
▪ MICE groups are continuing to send requests for quotations, but conversions are lower as they shift to less expensive destinations.
▪Where are the lower airfares? While Latin American carriers have slashed prices in many cases by 66 percent, European fares to the U.S. have remained stubbornly high.
▪ The once-robust Brazilian market that many receptive operators expanded into during the past five years has cooled considerably in light of the Real devaluation on side and ADR increases imposed by hotels who are now enjoying the highest rates in 10 years as domestic corporate business continues to see strong growth.
▪The phenomenon of pre-bought “Permanent Room Blocks” (PRBs): RTOs in major cities, in order to be able to guarantee available continues, but many hotels are reducing the allotments when operators are asking for more.
▪ Growth opportunities are in Africa, China and India, which has just approved an increase in the validity period for tourist visas to visit the USA to 10 years.
▪ For intensely competitive International leisure and MICE groups, the RTOs told us that their biggest competitors are not other RTOs but the sales agents for the major hotel chain’s who are able to quote rates without the receptive making a mark-up by bundling the hotel rate with additional services. In many cases, the International corporate sales person or the GSA has no connection with the individual properties that are being requested where RTO’s believe they can obtain a better rate through their relationships.
▪ For the hotel brokers–Tourico, Hotelbeds and GTA—the common challenges are:
- Rate parity, i.e. guaranteed lowest rates which are being forced on the hotels by Expedia and Booking.com, are also imposed on the RTO’s who cannot control who their clients resell the room to. Hotels now have software that can identify the source of rate parity violations and impose penalties or cancel contracts altogether.
- OTAs are now selling directly to international wholesalers: Expedia and Booking.com have begun selling their inventory of 750,000 hotels to wholesalers, who are willing to accept a 5-7 lower margin than they would receive from RTOs in exchange for providing access to so in some cases 10 times the inventory.
- They are all trying to extend their distribution networks by finding new markets to find new clients their competitors have yet to reach.
▪ Anticipating reduced volume from Europe, several operators have reducing expenses by cutting staff.
▪ One of the primary challenges RTOs face is the lack of upward mobility among the younger generation of employees. If one peruses Glassdoor.com, where employees are able to review their companies anonymously, with a few notable exceptions, the comments generally describe the atmosphere as follows:
a) Pros: Great travel opportunities
b) Cons: poor communication, an expectation of work beyond business hours at poor pay, and advancement opportunities are few.
c) Ambitious employees either jump for advancement or use their contacts to start their own receptive company offering superior service and attention to clients.
- More on Rate Parity—“Parity” is in the eye of the subjugated: Hotels are under contract to comply with rate parity—a.k.a. Best Available Rate (BAR)—by OTAs such as Booking.com and Expedia in order to preclude any direct selling to consumers at lower prices. Receptive operators are under contact by individual properties to ensure that their international clients do not sell to consumers below BAR and are fined penalty fees when it happens. Many hotel chains now have forensic specialists researching the arcane websites that feature their franchisee rates below BAR to the consumer. The digital trail leads them back to the receptive, who has no way of knowing which client resold the rooms or to whom.
- The shrinking size of groups—Hotels are becoming more generous with the definition of “group” proves the value of relationships. RTO’s report that groups are getting smaller: in some cases groups originally estimated for 20 have dwindled down to five passengers, due to the appreciation of the U.S. dollar, but RTOs with strong relationships with hoteliers are able to operate groups as low as five.