F E AT U R E A R T I C L E
AMAZON
The sleeping hotel giant
By Laura Daquino, for the Australian & NZ Revenue Management Association
IF THERE ever was an industry that made its presence felt on
so many streets and avenues, the hotel industry would be it.
B
ut with our maps now expanding to include more and
more virtual streets and avenues, there is the view that if
you aren’t online, the customers will stop forming a line.
Amazon was one of the first to recognise this, setting
itself up in 1994 as a revolutionary company that changed
the way consumer goods and services were distributed.
It has taken more than ten years – a decade defined by
growing customer data from a pond to a pool and now an
ocean – but the ecommerce giant is rumoured to finally have
its sights set on opening doors for consumers in the hotel
distribution and booking space.
And its foray could prove to be one of the biggest
industry disruptions of 2015, in light of the online travel
industry estimated to accrue $278 billion worth of sales last
year alone.
This is an industry in a state of consolidation, with the
Australian market currently being the eye due to Expedia’s
(NASDAQ: EXPE) $703 million acquisition of Brisbanebased Wotif.com Holdings (ASX: WTF) last November.
Expedia and Priceline now hold 85 per cent of the
Australian market – which from an analytical standpoint –
begs for a shakeup.
Accommodation Association of Australia (AAoA) CEO
Richard Munro says the more new entries into the market,
the better it is for the industry from all perspectives.
“It makes the industry more competitive because the
bottom line is, the players who give the lowest commission
rate will probably get the most inventory,” says Munro.
“There are plenty of major players in the market already
and I don’t think Amazon will be the last one to enter.”
Tony Gothard, Director of Revenue, Sales & Marketing at
Wyndham Hotel Group South Pacific, says Amazon’s entry
has the potential to change revenue models for the better
across the board through the company’s worldwide clout.
“It’s a very exciting time for the industry,” says Gothard.
“The majority of Amazon’s database is outside Australia
and in the US and UK, markets which have been quite
neutral to Australia for the past few years but are now
slowly bouncing back.
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Better Revenue I Better Industry I AUS & NZ
“For us, this means we could only capture more markets,
adding to our revenue as opposed to taking away because
the way we get that business now is generally through
inbound wholesale operators working on 25 to 30 per cent
commission.”
Amazon is still declining to make an official statement
on the matter, but a number of hoteliers in the United States
have come forward saying Amazon representatives have
been approaching since September last year.
As a result, any commission model is still yet to be
confirmed. Speculation suggests it would be between 10 to
15 per cent based on marketplace assessment – but nothing
can be certain.
“Wotif were our protection in Australia because their
commission structure was pretty much the lowest in the
world,” says Gothard.
“It set an average of 12 to 15 per cent and this forced
a lot of the big players like Expedia and Booking.com to
enter our market with lower commissions, while it was
commonplace for overseas counterparts pushed out 20 to
25 per cent commissions.
“I guess it’s a matter of watching this space.”
There are rumours Expedia will be pushing up its
commission model, but to that AAoA CEO Richard Munro
has a firm conclusion.
“The industry responds to an offering that has large
distribution, reasonable rates and is competitive,” says Munro.
“Pushing commissions up is extremely anti-competiti ٔ)