Can you just elaborate a bit more about when you mentioned that hotels are 10, 15 years behind the airline industry and what that means, from a value chain and this intermediation perspective?

This is my personal experience, so I’m not saying this is the truth, but what I’ve seen. I started working at an airline, in the late 90s, which was still owned by the government – Iberia Airlines. Airlines, in many cases, were still owned by governments, in Europe and, in some cases, governments still have a significant stake, like Air France or others. Why do I say this? This is a very 19th or 20th century approach, when governments were holding the key assets of a country.

Then liberalization came along. Different phases; earlier in the US, later in Europe and the skies were open and something happened. The magic happened. The LCC model, the low-cost carrier model came along. Think about Southwest in the US, think about EasyJet or Ryanair, in Europe. That completely revolutionized the airline space and air travel and travel, in general. Why did that happen? Because they changed the rules of the game, upside down.

Travel had always been very, very intermediated. You had the travel agencies, the wholesalers, the tour operators. In the airline world, you would have the GDS, the global distribution systems and the travel agencies selling the tickets and airline companies would have a beautiful ticketing office, in the center of the cities, in the most premium locations. Some of them still have them; if you go to London, to the West End, you see some of the Asian carriers, with beautiful offices, in very premium locations. That was because the cost structure allowed that. I remember the days when, for a business class ticket, you would get a 10% commission. That’s unheard of today. That doesn’t happen. You don’t even get 1%.

Any agent in the world, selling for that airline, if you had the planes and you sold a full ticket, you would get 10%. All of that changed. But the point is, airlines had to reinvent themselves, because the rules of the game changed completely, from distribution to a business model, to fuel costs, to crew costs. As a result, they developed the skills and capacities to sell much more, via the web. Think about EasyJet, when they first flew. They painted the aircraft with the telephone number that you needed to call, to make the booking. That was the only way to book. There was no availability on the GDS or the travel agency. You would have to call that orange-painted number.

As a result, all of the airlines followed suit. The so-called traditional carriers, the flag carriers or legacy carriers, had to follow that, because the pressure they were getting from the LCCs, from the low-cost carriers, was so extreme, that they had to become low cost themselves, even though they were legacy carriers. As a result, they developed great websites, they developed a very aggressive pricing strategy, which is even more important than having a beautiful website. They were trying to fight Expedia, which had a very beautiful website and a very good brand. American Airlines, it took them a while to develop a website that was as usable, as beautiful, as nice as Expedia, but then they started breaking the price parity agreements and so forth. Everyone now understands that, if you want to get the absolute cheapest fare for an airline, you should go to the airline website. At least, in many countries or in many cases, that is the case.

Hotels are far behind, in this perspective. Hotels are still heavily intermediated. Many companies, like the one for which I am working now, are still reliant – not dependent, but reliant – on great partnerships with tour operators, OTAs and so on. We haven’t broken the mold like the airlines did, in the past. This is also because the business dynamics are different. It’s the same for pricing, for example. Airlines have been very aggressive in revenue management, for the last 30 years. As a result of all these changes that happened in that ecosystem, they were obliged to charge a different fee or a different fare, for every single seat on the plane and everyone understands that and no one complains. We know that the price is volatile and they are constantly adjusting.

Hotels are starting to price in the same way, especially city hotels, like London, New York and the Chicagos of the world. But there is still a long way to go.

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