The Reality of Hotel Direct Connects

By Mike Kistner President, Chief Executive Officer & Chairman of the Board, Pegasus Solutions | July 31, 2011

Hotels need distributions channels – a simple and seemingly obvious statement that encompasses one of the most important aspects of selling and merchandising a hotel's products. How to reach consumers in the most efficient, cost-effective way and stay ahead of the proliferation of distribution opportunities and their ever-increasing demands for information?

Twenty years ago, The Hotel Industry Switch Company, also known as THISCO was created at the direction of 16 hotel companies. The hotel companies operated in a world of seven global distribution systems (GDS) and were taxed with having to maintain direct connections to the GDS. Hotels wanted lower development costs, simpler maintenance and the ease of one place to conduct and convey their business. Accordingly, THISCO was formed, and electronic distribution as we know it was introduced. This historic move was made to avoid a total of 112 direct connects across 16 companies.

Imagine that conundrum today. Yes, the seven GDS have consolidated to four, but they have been compounded with hundreds, even thousands of online distribution points. In the last 20 years, the Web has emerged as a major force in the way hotels are sold, redefining electronic distribution to include both GDS and alternative distribution systems (ADS), also known as online channels. The GDS consists today of mostly business travel bookings, while the ADS has emerged as a mostly leisure channel where aggressive shopping and bargain hunting prevail.

Managing electronic channels effectively has never been so important. Looked at from the perspective of the distribution channels, there's a wealth of descriptive content, images and real-time availability information available. The challenge of the distributors is to get hold of the information when they need it, quickly and efficiently. As the rapid pace of technology evolution and adoption continues around the world, consumers expect access to comprehensive information from every entry point, whether that is browsing and online travel agency (OTA) Web site, using a mobile application or through social media.

On the supplier side of the pictures, hotels must be able to consistently merchandise and distribute their products through the widest community of channels, while at the same time retaining control and minimizing the impact on their technology infrastructure and resources.

If managing 112 direct connects with this information was overwhelming more than 20 years ago, which more simply means that seven direct connects were challenging then for major hotel chains with resources, then what does that mean today? In our case alone, we connect around 65 hotel chains and suppliers to about 110 distributors directly, including the GDS, making the total of distribution points approximately 114. That translates to 7410 direct connects that would need to be made (and maintained) to conduct the same amount of business we manage as a transactional intermediary.

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