To direct contract 
or to connect?

London, 24 May, by Andy Keeley

When it comes to the word ‘direct’ in relation to sourcing hotel accommodation, as many of you may know, ‘contracting’ is not quite the same as ‘connecting’. 

Before the pandemic hit, tour operators, online travel agents (OTAs) and wholesalers were increasingly linking to hotels via direct, dynamic connections such as channel managers and switches – and moving away from the more traditional method of securing direct, negotiated contracts with individual properties.

This was predominantly initiated by hoteliers as they used new technologies and looked to reduce the complexity of managing direct contract agreements. But will this trend continue now the pandemic is largely over?

If anything the recent pandemic climate has led to an acceleration of this trend for direct connections as both the demand and supply of this type of dynamic agreement has increased. 

But why?

Firstly, both the travel companies and the hotels have found themselves in a position where they no longer have the resources to load, manage and maintain a complex relationship, due to resources possibly being reduced due to the pandemic.

Direct contracting can definitely be labour intensive from both the point of loading and ongoing maintenance as new rates and offers are released. And if you need to consider multiple markets, brands and channels then the effort increases proportionately.

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“ Meanwhile channel managers and switches have the technology to connect travel companies to hotels accessing similar products and commercials but with less resource and effort, whilst allowing them to retain the direct relationship with the hoteliers.”

Andy Keeley, Commercial Director of intuitive

Secondly, tour operators, OTAs and wholesalers want to be more flexible and have had to react quickly to changing conditions. As the pandemic evolved, travel companies found themselves having to make strategic decisions around destinations and hotel chains.

What we know for sure is that channel managers and switches can link to relevant properties worldwide quickly and efficiently, giving the travel companies the flexibility they need.

This trend is likely to continue, as travel companies look at how they can help drive efficiencies, increase productivity and reduce operational costs. 

The great news is that people are ready to travel again! Tour operators and OTAs need to be ready and have the flexibility so they can maximise this opportunity. 

Nonetheless, direct contracting still has a role to play, particularly for travel companies who have a smaller portfolio or where they drive high volume to a selection of properties. Being able to negotiate bespoke agreements that match the operator’s demographic and that work for the hotel can unlock genuine value for all parties.

In that respect the necessary simplification of a channel manager connection will not offer such possibilities.

In reality, most travel companies will adopt a mixed approach between bespoke direct contracts, channel manager sourced dynamic rates and product via B2B wholesalers. In some cases the route will be imposed upon them by the hotel, but it will also be based on a balanced analysis of time, resources, value and control available.

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Those travel companies who simplify and streamline via technology will be putting themselves in the best position to navigate this changing landscape. 

Read the article on TravTalk Middle East.

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