Five star hotels are like legacy airlines, says AirAsia’s marketing boss

Rate parity may sound good but it doesn’t help clear rooms, says Kathleen Tan, vice presdent-marketing for AirAsia, who has been charged with rebuilding and repositioning the low cost airline’s hotel portal, Go Holiday. She tells Yeoh Siew Hoon it’s time for hoteliers to think differently.

Web in Travel-WIT’s recent article on “Rate parity – the elusive dream which just got more elusive” drew a lot of comments from the industry.

It also caught the attention of Kathleen Tan, vice president marketing for AirAsia. “Rate parity? What is that?” she shakes her head in puzzlement. “That’s an ideal hoteliers want. It doesn’t work to clear rooms.”

Tan is having her first brush with the hospitality industry’s standards and practices because she has just been given charge of Go Holiday, AirAsia’s hotel portal, and she is throwing herself into the challenge of rebuilding and repositioning it into a site that will move rooms as fast as it sells air seats on AirAsia, either as flight+hotel or hotel alone.

“We are building a new engine and we will be putting together exciting deals. It will be user friendly. It’s a new area of business and we see demand,” she said.

“Potentially it’s a very exciting business. We want to enhance the guest’s experience on AirAsia – for example, when they are flying to a new destination like Manado and we can offer them destination tips and help with hotels. Plus, it’s also a good time to do it, hotels need to clear inventory.”

She added, “We have a channel to sell rooms. When we have our sale – in our last campaign, we sold 279,000 seats in 24 hours, a record according to Navitaire – we can help hotels with forward sales.”

What she is finding though is resistance from hotels on two levels – the notion of rate parity and the thinking that low cost customers do not stay in five star hotels.

“I think mindsets have to change. One, rate parity does not help to clear rooms – if your rooms are empty, what do you want to do? Why not operate like a low cost carrier – clear your inventory and focus on ancillary revenues?

“Two, the thinking on market segments. Some hotels are still waiting for longhaul customers, groups and meetings but they are not coming. Rooms are empty. Airlines are cutting capacity, this is affecting hotels, especially in Thailand.

“But they tell me they cannot give us special rates and deals even though they are doing single digit occupancy. They say it’s due to rate parity.”

In Langkawi, she invited a general manager of a five star hotel to attend a press conference on the new Singapore-Langkawi flights but was told, ‘low cost carriers are not in synergy with our hotel’.

“Five star hotels are like the legacy airlines,” she said.

“There are 11,000 rooms a day in Langkawi and they are struggling. We have daily flights between Kuala Lumpur and Langkawi and now from Singapore.

“Hoteliers are used to the old way – they work with travel agents, DMCs and wholesalers who block rooms. But they are not looking at the changing demographic profiles of travellers and how they buy travel.

“If you fly to Langkawi from Kuala Lumpur or Singapore, you don’t need a travel agent. They are repeat travellers. Hotels should look deeper into who they want and how to engage with them.

“FITs are an important part of the market now.”

It goes without saying that Go Holiday will have certain advantages over other hotel portals – exclusive access to AirAsia’s flight inventory – and obviously the best deals on AirAsia will be found only here – and insider knowledge on new destinations so that it can forward contract hotels

“We are working with a lot of new hotels, the independents. They are the ones benefiting and they are doing well. We did a promotion with a three star hotel in Langkawi and we contributed 50% of their online sales during that period.”

Go Holiday takes a rate and bundles it and operates on margins. “We are not disrupting the distribution channel, we are helping to sell rooms. We are a new distribution and marketing channel for hotels.”

She added, “It’s okay if some hotels don’t want to work with us. The customer has a choice and we can decide what hotels to sell. It’s like a music store – they decide what CDs they want to sell and put them under New Releases.”

She was also bewildered by why some hotels were against wholesalers setting up websites. “I don’t understand why they would blacklist some sites. They’re shifting volume, why stop them?”

Kathleen Tan will be speaking at WIT*e – Inspiration & Mentoring on August 27 and at Web in Travel-WIT at Suntec, Singapore, Oct 20-23, 2009