How hotels and travel agencies can prepare for a post-pandemic future

At the time, the impact of 9/11 and the Icelandic ash cloud on global travel was considered "unprecedented."

The first saw a ban on all civil air traffic from entering U.S. air space for three days. The second resulted in 95,000 flights being cancelled over five days. But that was BC (before COVID-19).

Now we know what real economic damage looks like for travel, everything else pales in comparison.

COVID-19 has ripped through the travel industry like a tsunami, grounding airlines, emptying hotels, halting rail and putting a stop to almost all business and leisure travel for several months.

The World Travel and Tourism Council predicts 100.8 million industry jobs and could be lost in 2020, as well as a GDP loss of of $2.7 trillion. International visitor spending in the U.K. alone is estimated to plunge by 78%, with a loss of £22 billion.

Booking Holdings, which owns Booking.com and Kayak among others, reported a 51% drop in bookings in Q1 and 91% in Q2 year-over-year, while Expedia Group, saw revenues sink 82% in Q2, and recent McKinsey research suggests that the U.S. hotel industry’s recovery to pre-COVID-19 levels could take until 2023 – or later.

At the peak of the pandemic, travel tech specialist HotelRunner saw occupancies in Covid-affected countries drop to less than 5%.

Doom-mongering aside, business is – albeit cautiously – picking up as governments ease lockdown measures and reopen borders. However, the threat of local lockdowns, ever-changing air bridge agreements and enforced quarantining presents uncertainty for hoteliers, preventing them from – among other things – forecasting 2021 performance or planning for new investments.

In order to be fit for a future post-COVID, hotels must continue to manage cancellations effectively, encourage and facilitate rebookings, cut costs and increase their discoverability, availability and "bookability" in real time.

The great hotel supply and demand mismatch

Beyond COVID, another huge issue affecting the future success and profitability of the hotel is the mismatch between supply and demand.

Of the 15 million items of accommodation worldwide, 14 million (93%) are not available to book online in real time, which means hoteliers, online travel agents (OTA) and guests are all missing out.

How hotels are missing out

Without an online presence, those 14 million accommodations have limited visibility and discoverability, particularly beyond their local market. For millions, their rates and availability are managed manually and not in real time and they are not benefiting from instant, last minute and long-term bookings.

Last year, Euromonitor International predicted 44% of travel bookings would be digital in 2020 and 80% of 2019 hotel bookings by travellers under 30 were made online. Hotels must start leveraging technology to grow.

The challenge they face is a very fragmented tech market – solutions are complex, expensive, not scalable and not connected – which is why transitioning to managing and accepting real time online payments worldwide remains a huge problem.

How OTAs are missing out

The hotel supply/demand mismatch causes equally frustrating challenges for OTAs. A lack of inventory, compared to global availability, reduces choice for travellers and means OTAs are competing for customers with the same, relatively small, product offering.

Plus, 70% of the inventory on the world’s biggest OTAs – Booking.com, Expedia, etc. – is still not connected in real time, despite statistics proving that connected properties drive the best revenues.

On average, 70% of an OTA’s revenue comes from its connected properties, which account for just 30% of its inventory, and revenue from those connected properties can be 500% more than from unconnected ones.

So why don’t OTAs simply add more inventory to their offering? The economics of visiting long-tail properties for acquisition, especially in emerging markets, just doesn’t stack up. And, even when they do contract small properties, it can be difficult to engage and manage them without the right automation and tech stack.

How guests are missing out

Customers are losing out through lack of choice, convenience and information – aka online booking anxiety. Travellers don’t always want to stay with big chains or corporate hotels, they may prefer places that reflect the local area, and these properties are difficult to find and book online.

There are often price and information discrepancies between the OTAs and the hotels that are online, which can lead to confusion and mistrust among guests.

Plus, paying online isn’t always possible as many hotels are unable to accept real time online payments through their own websites.

Is there a dating app for OTAs and hotels?

So, what’s the answer? Simply, OTAs need to be able to find hotels and hotels need to be able to find OTAs because sustainable and scalable supply acquisition, distribution and engagement drives incremental revenue growth for both.

Of course, it’s not that simple, because the booking chain is very crowded and there are many intermediaries slashing away at profit margins from both sides.

Listed by Wired magazine as one of Europe’s 100 Hottest Startups two years in a row, travel tech startup HotelRunner is a VC-backed, global sales management and distribution platform for OTAs, hotels and payment providers to "find, contract, connect, and transact with each other."

Operating a freemium business model, it’s the first peer to peer networked marketplace for the sector with over 40,000 accommodation providers registered on the platform in 193 countries: a bit like a dating app for hotels and OTAs.

Alongside connectivity services, HotelRunner provides all types of accommodations with a hotel website, built-in themes, integrated booking engine, property management, call centre, rate intelligence, mobile app, guest relationship and online payment management tools, as well as property management systems integrations.

HotelRunner is also a Booking.com Premier Connectivity Partner, Booking.com Top Connectivity Performer for 2018, Airbnb Software Partner, Agoda Innovative Supplier, Oracle Gold, Hotelbeds Strategic Partner and Google Hotel Ads Partner.

What’s in it for hotels?

With the ability to plug hotels into OTAs and creating their online presence – including website and booking engine – within seven minutes using its self-service platform, HotelRunner has been helping 40,000 independent hotels and chains to survive COVID-19 and combat the supply and demand mismatch by increasing their visibility.

Hotels of any size are invited to join the platform for free, paying just 1% commission on bookings and this affordability has proven critical, says co-founder and managing partner Arden Agopyan, as hotels look to cut costs but still reach customers in the face of the pandemic.

“We’ve never been busier we help the global hotel economy fight back,” he says. “Hotels urgently need to manage overheads and, as most of our software is free – website, booking engine and part of the channel manager – we’ve become a go-to provider for them. We’ve been onboarding hundreds of new hotels from all over the world, from Mexico to Indonesia, and even more infected areas like Italy and Spain.”

With hotels and travel agencies currently dealing with an influx of cancellations, HotelRunner is also helping to simplify this process by allowing hotels to manage cancellations and take advantage of the uptick for long-term bookings and the rising interest in domestic holidays.

A huge plus for hoteliers is the ability to use HotelRunner to connect to multiple channels/booking extranets through one central solution, allowing them to manage their inventory, availability, reservations and payments in real time, often leading to improved customer experience, trust, reviews and sales.

Hoteliers also have access to a mobile app to manage the business on-the-go as managers of small properties are frequently multi-taskers.

What’s in it for OTAs?

For OTAs, HotelRunner offers an affordable, scalable solution to adding real time, global inventory to their online offering, HotelRunner Connect, which has proven popular among leading global OTAs including Booking.com, Agoda, Hotelbeds and Ostrovok for several years.

“We’ve been a trusted advisor to OTAs for many years, including sitting on the Booking.com Connectivity Advisory Board for Hotels since 2018,” says Agopyan. “In that time, we’ve shared our insights, innovations and tactics to overcome industry challenges and this has shaped many innovations to better support our own customers.”

Viewing itself as a platform and network rather than a software provider, HotelRunner provides OTAs with a direct connection to reach out to an eco-system of hotels that would not be economical for them to find themselves.

In the past, the team has even connected OTAs to hotels in their home cities and countries. It has also recently acquired a company in Turkey (RateFor), which is part of its strategy to offer a complete tech stack for hotels, including property management and rate intelligence and comparison.

Keen to stress that HotelRunner is not just for leisure travel, Arden points out that the 50+ strong team is also working with corporate travel agencies and B2C players and can manage both B2C and B2C rates for suppliers. The startup is also in discussion with offline travel agencies.

“The number of offline travel agents has dropped rapidly over the years as online bookings have soared, and Covid has accelerated that decline,” says Agopyan. “I predict that many of them will die - and soon - unless they act now and digitise. We are already piloting technology that will help and intend to launch our offline travel agency support this year.”

What does HotelRunner offer guests?

Further down the eco chain, HotelRunner offers choice, convenience and reassurance to travellers.

“When guests see “Powered by HotelRunner” on a hotel’s booking engine or website, it’s reassuring and instils trust: it means the hotel is managing its rates and availability and that it processes payments securely,” explains co-founder and managing partner Ali Beklen.

“There is also the added convenience of access to long term availability, reassurance there are no rate or information discrepancies with the OTAs, and minimised double-booking and over-booking risks. HotelRunner hotel websites and booking engines have also been designed to display the Covid-19 related precautions and measures hotels are taking, which is so critical right now.”

What’s the future for hotels?

With the coronavirus pandemic still very prevalent (the first reinfection case was recently reported in China), the outlook for the hotel – and travel – industry is difficult to call. Many believe it will depend on if (or when) we are hit with a second wave as well as the availability of a vaccine, which is unlikely to happen in 2020.

In the short-term, the travel industry has seen many workers laid off or furloughed (537,990 according to Global Travel Barometer), and many seasonal workers who don’t qualify for furlough will face uncertainties over future employment.

However, Beklen believes the industry has the ability to recover, with tech playing a key role: “Furloughs and lay-offs are very common in travel as many businesses (even unicorns) tackle cash flow challenges.

"However, we are optimistic that recovery will happen quickly, and we are currently hiring on a global scale,” he says.

“Once Covid is under control, a new travel industry will emerge, albeit with reduced business travel and some concern remaining about overseas travel. We will continue to see an increase in digital bookings and hotels will be encouraged to introduce more flexible booking policies. In the near future, we believe people will continue to favour domestic travel and be more hesitant about travelling internationally for the rest of the year.

It will be the hotels that improve their guest communication and experience with Guest Relationship Management (GRM) and Extras Management that will stay one step ahead, claims Beklen.

“Just like many other hotel management software providers, our main opportunities this year include increasing accommodation sales performance with autonomous features, and onboarding and engagement with seamless integration experience, auto-payment processing, PMS, contactless and mobile applications.

"The next step is to increase our total transaction value by connecting with more unconnected properties. And finally, hotel management software providers must increase their content quality through their certified partner ecosystem because, no matter how good you are at what you are doing, you need to be able to present it well.

“We provide scalable zero-touch direct contracting and connectivity for the long-tail which helps the industry to unlock new revenue streams that are desperately needed especially after COVID-19, and in five years from now, we will be working with at least 1 million accommodations, will be known throughout the travel industry as the go-to supply network, and (assuming it’s open) will have processed the first booking for the first hotel on Mars.”

* Check these two clips featuring HotelRunner from The Phocuswright Conference 2019 in Florida. The company's pitch for the Launch competition and its interview in the PhocusWire Studio.