Hotel Chains Bet on New Ways of Selling to Corporate Travelers

Skift Take

Hotel chains are quietly planning to shift their distribution strategies, aiming to bypass traditional intermediaries and boost direct bookings from corporate travel buyers. But with billions at stake, expect fights from legacy players.

Sean O’Neill

Hotel chains are quietly developing plans to bypass traditional booking intermediaries, aiming to increase direct bookings from corporations and businesses.

Why it matters: This move could disrupt how business travel is sold today, potentially squeezing out traditional travel management companies and online travel agencies.

Why hotels are pushing for change: Some hotel executives believe they can woo more business travelers to book directly if they provide more interesting offers that can’t be found via third parties. So, they’re working on technology upgrades to provide distinctive offers.

Hotels Unbundle the Hotel Room

Major hotel chains like IHG, Choice Hotels, Marriott, and Hilton are testing a new pricing and booking process called attribute-based booking.

• Attribute-based booking is a bit like the “Build a Bear” toy concept. A traveler may pick from things they want in a room — such as a queen-size bed or a corner room — à la carte. Travelers bundle their choices and get a “custom” price.

• The business travel twist is that hotel groups are now working on versions of attribute-based booking relevant to road warriors. If successful, this could significantly trim hotels’ distribution costs.

• “I believe that in the next two to three years, adoption is going to skyrocket,” said Abhijit Patel, vice president of revenue management and global distribution at Choice Hotels.

Direct Bookings Cut Hotel Costs

Hotels are motivated to drive more direct distribution to save money by sparing middlemen’s fees.

• Today, most corporations use travel management companies to curate what employees can book for business travel. These companies source much of their hotel (and flight) content via third parties, which charge hotels (and other suppliers) commissions.

• Small- and medium-sized businesses may let employees book on their own through online travel agencies.

• “For hotels, the costs of distributing through traditional TMCs [travel management companies] and OTAs [online travel agencies] is pretty high, so we obviously have an incentive to push this conversation,” Patel said.

Some Players Push for Reform

Some corporate travel buyers are hungry for change, seeking improved analytics and reporting.

• “We’re ready for change,” said Bryan Bachra, vice president, lodging, and ground partnerships at Salesforce, where his team helps arrange the travel program of Salesforce employees. “But we need to make sure that, obviously, our hotel, our technology, and our TMC [travel management company] partners, are ready for it as well.”

Hotel executives argue that the attribute-based booking platforms they’re working on will help corporations better understand their travel spending than the middlemen’s legacy systems.

• “Existing distribution platforms don’t let a hotel effectively able to tell their story and differentiate themself from the one down the street because they only offer 80 characters of text or whatever the limit is,” said Rita Visser, director global travel sourcing at Oracle.

In interviews, Navan and HRS said they want to work with hotel groups to adopt the new workflows. These smaller players claim to be seeing interest from corporations looking to adopt more modern technologies. Some hotel executives also hear from corporate buyers seeking change.

• “There are some very large managed accounts at Choice Hotels that are moving towards better user experience by shifting from traditional TMCs [travel management companies] to newer players,” Patel said. “They’re going for lower cost, better payment integrations, and better reporting. That will pressure the big legacy players to catch up.”

Tech Challenges

The transition faces several hurdles. One is a lack of industry-wide standards for attribute-based booking.

• Some industry observers question how the fragmented hotel sector, which uses various systems, could implement new distribution methods without an industry body setting shared standards.

• Without a standardized code for, say, a particular type of room upgrade, how will different systems in different countries recognize the upgrade and price it correctly?

• However, some industry bodies, such as HEDNA (Hotel Electronic Distribution Network Association), are working on this issue.

• “Even if the standards don’t come together, new technology players will figure out a way to aggregate and normalize the data using generative AI and machine learning to work around that challenge,” Patel said.

Other Uncertainties

If hotels want to roll out attribute-based booking, they need to revamp their technology to sync smoothly with the often outdated software used by travel managers.

• Advocates argue that the changes are more technical than procedural. “Attribute-based booking will formalize some existing negotiation practices,” said Ryan Pierce of Salesforce.

• Today, travel managers for large corporations ask hotel groups to provide perks, such as guaranteed last-minute refundability, when they haggle for preferential rates as a kind of volume discount.

• The new tech will just do this within the software without sending RFPs (requests for proposals) back and forth.

Potential Industry Pushback

One uncertainty is whether corporate travel managers will like learning new processes. Mastering attribute-based booking would require a learning curve.

• Travel managers need to balance road warrior preferences for perks like nicer rooms with program goals of managing costs. However, hotels might split the savings of skipping middlemen commissions by offering the best available rates exclusively through their direct channels.

• However, hotel executives claim attribute-based booking could help solve so-called leakage issues in corporate travel programs. Many employees book travel outside approved channels today, expensing the costs as a workaround. Leakage is a bane of corporations trying to track, manage, and predict costs and ensure fairness.

• Hotels also argue that their revamped system would offer more personalized options, encouraging workers to stay within policy. Hotel groups may only offer generic rates to third parties, making those channels less appealing.

The Bottom Line

Hotel groups are betting that offering more personalized options through direct channels will win over business travelers and corporate clients, potentially reshaping the travel booking landscape.