The channel challenge

As the 2015 Travel Technology Europe show kicks off in London this week, Kevin O’Sullivan, CEO of Open Destinations, explains why he believes tour operators risk losing out if they don’t adapt their systems for channel managers.

"As a technology supplier, we have seen a rapid growth in demand for integrations with channel managers, particularly over the last 12 – 18 months. This software was designed for hoteliers to easily distribute their rates and availability, by connecting their pricing systems to their main customers’ systems using XML. Many hotels have started demanding that tour operators take their rates electronically through channel managers, if they want to continue to use them.

The introduction of channel managers is starting to cause issues for tour operators, as they struggle to adapt their system to this ever-changing landscape. Tour operators that fail to integrate with channel managers in their supply chain are starting to lose out, and new entrants with more technological agility are rapidly gaining market share.

We have worked with tour operators for over 15 years now, and we have seen the travel technology landscape change dramatically. For many years, tour operators have perfected their processes for managing their hotel suppliers, by contracting and loading their hotel rates on an annual basis. Their contracting staff would happily visit hotels around the world and force their suppliers to sharpen their pencils to extract the most competitive rates. These rates were then fed into their reservations systems and would later appear in their brochures and websites.

Over the last few years, this familiar pattern has been severely disrupted. Hoteliers have woken up to the fact that they need to have more control over their pricing if they want to maximise their revenue. They have observed how yield management in the airline industry has made a science out of a pricing strategy. They have recognised that the internet has given them a much closer relationship with their customers.

The rise of the OTAs and wholesale travel companies has also resulted in more transparency, when it comes to knowing which hotel rate is available, and to whom. The price conscious end-consumer is used to shopping around, and the operators with the best rates are the ones winning the business.

Another disruption to this pattern has come with hotels introducing the concept of Best Available Rates (BAR) into the marketplace. These tactical rates are designed to be the lowest rates that a consumer facing website can sell to the customer. Historically, hotels have distributed these rates by email and through the tour operators’ supplier extranet systems, but they are becoming more reluctant to do so because of the work involved.

In the future, it is hard to see how any medium sized tour operator needing up-to-date hotel rates can survive without adapting their systems for channel managers. They will definitely struggle to keep their rates competitive. The winners here seem to be the hotels and the end consumer. For the tour operator, this change will mean a continual investment in technology over the long term."

Open Destinations will be exhibiting at Travel Technology Europe on February 25-26 at Stand T316.