The most influential Megatrends set to shape the world through 2030, identified by Euromonitor International, help businesses better anticipate market developments and lead change for their industries.Learn More
Euromonitor International is pleased to present an interview examining the nuts and bolts of hotel distribution. The second instalment features my conversation with Keith Cotton, Senior Vice President of Global Business at DerbySoft, Inc, about issues within hotel distribution methods. DerbySoft is a technology company, founded in 2002, that builds software to connect hotel companies’ central reservation systems to distributors, such as online travel agencies and tour operators. The first instalment on backend hotel distribution can be read here.
DerbySoft was one of the first in the hotel industry to create a cache on behalf of the hotels for the OTAs to search for hotel information when it connected Hilton to Booking.com in 2006. Many OTAs prefer the “push” message model, but not all hotel companies have the technology and/or desire to implement a push messaging model to connect to the OTAs, so they often turn to us. In these cases, DerbySoft establishes a “pull” connection with the hotel’s CRS to build its cache and then DerbySoft pushes the ARI data from that cache to the OTA’s system. Once DerbySoft has created a cache of a hotel CRS, it pushes ARI update messages to a multitude of distribution systems, or allows the distribution systems to shop the DerbySoft cache, saving the hotel CRS from dealing with all of the shopping traffic that could negatively impact its system. In some cases, hotel companies prefer to invest in their own technology to support direct connections to their major distributors, but for some of their secondary distribution systems or booking agents, they turn to third parties like us.
As I mentioned earlier, our SmartCache software greatly reduces the number of queries required to maintain high accuracy between the CRS and the cache, and as more hotel companies adopt a change discovery service, this will also help to minimise the difference. If and when the cache does become out of date, there may be some situations in which a traveller books a room at a rate or date period that is no longer available. In the rare instance when this occurs, and assuming the hotel company has agreed to this business practice, the booking is confirmed regardless and the hotel CRS is willing to honour the booking as it was made. In the hotel industry, this is referred to as a “forced booking” or “force sell,” and creates a potential overbooking situation. The hotel company and the distribution system will negotiate an agreed upon acceptable error rate for this type of situation and it is typically managed by the hotels. Frankly, this is just one of the small deficiencies a hotel company must sometimes accept in order to compensate for not having all of the shopping volume associated with seamless connections. However, the acceptance of occasional errors that occur in a caching environment is usually much more acceptable than the ramifications resulting from potentially millions of additional messages being sent directly to the hotel CRS.
Well, the rise of meta-search engines has been good for DerbySoft’s business! We’re in a great position to be one of the few technology providers that can help both the hotel companies and the meta-search sites.
But, I’d say it’s most important to note how the rise of meta-search engines is impacting the hotel industry. The upside is that the meta-search engines can potentially bring more direct bookings to the hotels’ own websites, which ultimately are less expensive bookings for the hotels.
The downside of the rise of meta-search engines is that the hotel CRSs can get hit with a much greater volume of shopping messages, which is exactly what the hotel companies have been trying to avoid and resolve for years. But, of course, this creates opportunity and business for third parties like DerbySoft.
To help both hotels and the meta-search engines, we offer a solution that allows the meta-search engines to shop the DerbySoft cache of hotel information as an alternative to directly shopping the hotel CRSs. As discussed earlier, this also helps the hotel companies because DerbySoft’s cache absorbs those hits for them. We also offer a powerful front-end software called MetaSearch Manager that the hotel companies can use to manage their online marketing efforts and optimise their presence within the meta-search engines.
For example, our MetaSearch Manager incorporates the management of Google’s Hotel Price Ads (HPA) program. Today, hotel companies send data and bid on sponsored price listings that appear throughout Google’s various applications: Google Hotel Finder, Google+ Local, Google Maps and the traditional search engine results pages (SERPs). For Google Hotel Finder, there are four slots on the page that display hotel options for the consumer to book, based on the consumer’s search. The DerbySoft Google HPA bidding engine helps hotel companies’ optimise their bidding with Google to determine their placement preference and help them determine how much to bid in order to ensure they are displayed in one of the four slots on the first page of the search results. This software also allows them to completely optimise their presence on Google, as well as manage their online advertising spend in a growing number of other meta-search engines now connected to DerbySoft.
The hotel industry is just now evaluating and understanding the advertising bidding model as an alternative to the traditional commission model for bookings that come from meta-search engines, but the transition appears to be taking hold as more hotels and more meta-search companies consider this as a viable distribution/booking payment method. It can often be a less expensive total spend than the commission model, if managed properly through a system such as ours.