Expedia's new hybrid OTA model

Last week, Expedia announce an agreement with InterContinental Hotels Group "under which consumers can now book IHG hotels on Expedia® sites globally." As we all know, IHG stopped distributing via Expedia about 3 years ago when Hotels.com was yield managing cities and killing rate parity. Hotels were checking hotels.com to set their "rate of the day".

But now the largest OTA and the largest hotel group have kissed and made up. And they have given birth to a new hybrid. From Expedia's press release:

"IHG is participating as the launch partner for Expedia, Inc.'s new media-based pricing model. The dynamic, two-part economic model will blend transaction pricing with media pricing based on clicks on specific IHG properties in Expedia.com and hotels.com search results. Expedia and IHG collaboratively developed this innovative approach to distribution marketing -- a first in online travel -- where IHG will receive significant benefits from value-added media placement throughout the Expedia network in addition to the bookings they receive from Expedia."

This is about as clear as mud. I am not clear what this means from an implementation perspective. It sound a lot like the restatement of Expedia's "Marketing budget recontribution" in which 2% or so of the commission from the hotel is put back into a Marketing kitty so that you can use it to boost your presence in Expedia's own site. This is of course going to direct people to booking your hotel on Expedia still and hence contribute back to Expedia.
Markus Busch from Hotelmarketing.com offers an explanation:

"The media pricing element is part of a dynamic, two-part economic model that blends transaction pricing with media pricing based on clicks on specific IHG properties in Expedia and Hotels.com search results.

When a customer clicks on a hotel in the Expedia or Hotels.com search results, they are taken to that individual hotel’s customized info-site that contains not only rates and availability and the ability to make a reservation, but also rich and deep content, such as traveler opinions, virtual tours and photos of the property.

IHG hotels will be shown just like all the other hotels on Exepdia, but the agreement differs from other partnerships in that the compensation structure accounts not only for the bookings IHG receives through Expedia, but also for the clicks on IHG properties in the hotel search results on Expedia and Hotels.com sites."

Hmm.... it still sounds like a different cut of the marketing contribution kick back. Expedia is incentivized to promote IHG properties and will collect commission. I do not think that is much of a significant change for most of us at this point, but yes, it is a hybrid model and it remains to be seen whether Expedia is a good as Google in list IHG in relevant searches (not!)

What is significant and unsaid, however, are the commercial terms of this deal. Expedia has been courting IHG for years, and IHG's hotels have been pushing Eric Pearson's department to do a deal as well. IHG would not accept any commissions unless it was around 10-15% (or less!), whereas a typical Expedia commission ranges from (18-25%). Expedia then tries to make up the revenue difference by getting on the PPC bandwagon; and in exchange IHG gets increased brand exposure on Expedia networks.

Hopefully, this opens the doors for the rest of us hotel groups to DECREASE our commissionable rates with Expedia. HOORAY!!!!!

eCommerce & Revenue Management

In the Who Is Who In Hospitality (wiwih.com) forum, there is a group called Hotel Department Group that is meant for hoteliers in the various departments. There are groups like General Managers Group, and Sales & Marketing Managers Group. There is one group is called eCommerce & Revenue Managers Group.

My first thought (and I have posted most of the below in this forum) was "Why was eCommerce & Revenue Management placed in the same group?"


At Millennium & Copthorne Corporate, both teams fall under Global Distribution & Revenue Management, which in turn comes under Global Sales & Marketing. eCommerce is categorized as a sales channel. I think in Hilton both fall under a larger group of Revenue Management and Distribution as well. Marriott seems to put eCommerce under Sales & Marketing and includes "Reservations, Inventory, and Distribution" under eCommerce too. So there does not seem to be a right or wrong way.

It is not uncommon that Revenue Managers have moved into eCommerce or have taken that additional responsibility/role - not unlike the move of Reservations Management into Revenue Management. But the move from Reservations into Revenue Management seems to be more complementary...

Reservations managers have:

• Familiarity with the tools and interfaces to control rates
• An idea of the business mix and seasonality of a property
• One could argue that this is the natural evolution, or career progression for Reservations Managers.
  

However eCommerce role requires three competencies that are not necessary found in Revenue Managers:

• General understanding of technology platform (hardware/software - which is IT's domain)
• General understanding of web technologies (which is more web development domain)
• Good knowledge of the online marketplace (which is a sales/marketing domain)

What is complementary is the fact that Revenue Management are numerate and analytical. Something that is extremely important in the eCommerce field and a mindset that is not always found in Reservations Managers.

I am curious to find out:

1. How many people have made the move from Revenue Management into eCommerce?
2. How many people are doing two roles at the same time?
3. Since Revenue Managers tend to report directly to the General Manager, how has that helped push out eCommerce initiatives?
4. What difficulties you have encountered moving into this role and how have they been overcome? (that's a big question, but hey you might be helping someone else!)
5. And lastly, does anyone disagree with anything that I have mentioned above? What are other views?

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The above only generated one reply which is why I am posting this in the greater marketplace as wiwih.com is members only and the Hotel Departments Groups are only for hoteliers.

The reply that did come in was by an Area Revenue Manager of a very large hotel group and he pointed out:

"What you pictured is an example of how the role of Revenue Managers can be seen from different perspectives and how often the position of a Revenue Mangers might be confused with a yield/distribution manager... Room revenue is impacted more and more by on-line distribution but should a revenue manager stop at room revenue? As you know total hotel revenue is the optimal/most profitable combination of Room, Conference & Banqueting and Food & Beverage revenue. The role of a revenue manager is much more complex and in my view must covering all hotel's revenue generating area's."

What he says is very valid and also points out that the role of a Revenue Manager is already quite complex. And there is an overlap as explained in this article? But can you realistically place the additional role of eCommerce onto these people's shoulder?

If successful, would you end up with something like this?


Here's one for the Revenue Managers reading this: Will Your Next CEO Be A Revenue Manager?