There is a fascinating article in the FT this weekend by Adam Thomson regards the hotel group, Accor. In essence the piece is around Accor’s distribution strategy and protection of commission in what are challenging market conditions.
Accor recognise the role of an online travel agent aka: OTA’s but it sounds like they don’t really adore working with them, at least thats what I get from Thomson’s article. Accor, like all business, want bookings to come direct to them and thus avoiding any commission payments to third parties generating bookings.
Can a business always cut out all but direct distribution? seems brave to me but those ‘asset heavy’ businesses are pursuing direct bookings and such strategies.
Also, the accommodation (both business and leisure) market itself is seeing structural changes with regards the shared economy and the rise of AirBnB, Housetrip and many more in this arena. As Bazin (CEO Accor Group) recognises, the new part of the industry will not go away, it will grow over the coming years.
Yet more competition and threat to commission to deal with. Interestingly, Accor seem to be avoiding the asset light model and moving towards being asset heavy for want of a better term. I think this is a smart move.
Those who actually have assets can at least control prices and in theory, can control prices of their product through third party distribution. On paper this means that those with assets can charge lower prices to the customers who book via direct channels than those who book via third parties. I state ‘on paper’ because enforcing such control is easier said than done.
Nonetheless, it does seem to me, any retailers without assets in the traditional (hotel and flight) industry might well face challenging times in the coming years as those who own assets push harder and harder to cut out middle men and women. One solution for asset light businesses is scale.
The third parties can de-risk reliance on any given product by intruding more products and scaling up but again, this is much easier said than done and present significant challenges from a technical, commercial and marketing point of view.
Accor’s strategy and performance will be interesting to watch, Bazin has only been in charge for one year and has already made significant progress. All things considered, the ongoing market changes make for fascinating times.