Hotels are commodities to some and unique, service-oriented escapes to others. In light of this, hoteliers must carefully weigh the growing needs of intelligent distribution and revenue management with the demands and desires of partners and guests.

　　Hotels are commodities to some and unique, service-oriented escapes to others. In light of this, hoteliers must carefully weigh the growing needs of intelligent distribution and revenue management with the demands and desires of partners and guests.

　　That was the central message Monday during a panel discussing the question “Are hotels commodities?” at the Master Innholders’ 21st Annual Hotel General Managers’ Conference.

　　"If hotels are trading on price, then, yes, hotels are segmented commodities, but if you add to your offering what is unique and special about any property or destination, then it’s possible to get away from full-on commoditization,” said Mark Lewis, managing director of hotel representation company HotelREZ.

　　The panelists agreed that the sector must embrace all possible distribution channels.

　　"We have to be very careful at the luxury end. Now at the 3- and 4-star level, we are seeing commoditization, especially in fast-moving hotel companies in which the guest basically gets a box and then seemingly has to buy soap, towels, Wi-Fi and service, et cetera,” said Stuart Johnson, general manager of luxury London property Brown’s Hotel.

　　"To draw a comparison, major airlines already treat you like a commodity. The Ryanairs and easyJets certainly do, but so do others such as British Airways in some areas of their service. It could very well become so in the hotel industry,” Johnson said.

　　Assets, not hotels

　　While hoteliers and other professionals in the industry might push against commoditization, trophy hotel owners, large mixed-asset portfolio managers and sovereign wealth funds might see such concerns as quaint and petty.

　　Russell Kett, chairman of HVS London and moderator of the panel, said hotels have become an asset class and thus are open to being commoditized.

　　"It depends on the owner. If the owner is an investor of some size, commoditization is likely as they expect hotels to perform to their expectations. They will not care how its (earnings before interest tax, depreciation and amortization) is produced. You see this in other spheres, too, especially of late in (United Kingdom soccer) clubs,” Kett said.

　　Will inscrutable asset managers and online travel agencies rule the roost, or will the improving economy swing things back the way of hotels?

　　"Ultimately, it is supply and demand, pure economics. Right now it has to be a win-win situation, with the hotels prepared to increasingly put on the table value-added options,” said David Taylor, sales director of meetings management company Grass Roots HBI.

　　"There is a lot of data out there that gives us an incredible amount of information about what is happening for when we go into negotiations. It is about value-adds, terms and conditions and other components,” said Imogen Furness, head of supply chain at finance and advisory company Morgan Stanley.

　　OTAs to stay

　　The pressure to commoditize, panelists said, might be more urgent in the United Kingdom’s provinces, rather than in London, but all hoteliers have to embrace revenue management and related technology as overall competition gets fiercer.

　　"In secondary destinations, hotels might have to focus more on price to win market share, and of course that just results in reduced margins and inevitably a downward spiral. Smart hotels are asking how they can differentiate and on what basis it is that customers chose them,” Lewis said.

　　"A hotel must draw as many clients as possible to its lowest-cost distribution channel,” Johnson added. “Usually, that will be its website.”

　　"Hotels need greater efficiencies, and the need to reduce costs has to be in parallel with the level of service and offering you wish to give and convey. The right balance will help deter commoditization,” Taylor said.

　　"Independents have to work so much harder than brands to convey their points of difference and the value they’re bringing. They do this by engaging with the right, key people,” Taylor added.

　　"We are all in a very competitive marketplace, so we rely on online travel agencies among other channels, especially to fill room stock in times of low demand times, but this is when we flirt most with commoditization,” Johnson said.

　　"But we do have to careful this does not all run away with us, as it is the channel that shouts the loudest that often gets the commission, and with OTAs, the sky seems to be the limit,” he added.

　　Lewis said even though he agreed the economy is stronger, he believes the market is still fragmented.

　　"Despite the economy being better, I do not necessarily think OTAs will immediately lower their commissions. There is more conversation going on, though,” he said.

　　Meetings and training

　　Meetings—experiencing a spend increase of late, according to panelists—are the hotel offering that has become most commoditized, but destinations with unique offerings do have room to maneuver.

　　"There never has been so much focus internally on cost (within companies) as there is now. Travel and entertainment is so visible and sits up highest in terms of the potential to cut costs, but that just means that there are opportunities for partners who are willing to be flexible,” Furness said. “All sides need to be as open as possible.”

　　"Five years ago, everyone thought that meetings business would all go online, but this has not happened, although training programs, now far more international in focus than ever, have essentially moved to that space,” Taylor said.