Germany-based Hotel Reservation Service has struck a deal to provide access to its hotel database through Sabre Travel Network's global distribution system. HRS in April announced a similar deal for Sabre's corporate booking tool GetThere. HRS CEO Tobias Ragge told The Beat here during an Association of Corporate Travel Executives conference that he expects distribution through Sabre's GDS to be operational in six to nine months. HRS since 2012 has been distributing through Amadeus, and talks with Travelport are understood to be at an advanced stage.
HRS is emerging as an increasingly important player in both corporate and leisure hotel distribution. It simultaneously competes and cooperates with several different parts of the supply chain, including GDSs, travel management companies, online travel agencies (it retails directly through its own website and has a controlling interest in hotel.de and hotel.info) and hotel representation companies.
Described by Ragge as "the biggest independent hotel chain in the world," HRS claims to handle accommodation, conferences and group travel directly for 35,000 corporate clients. HRS does not charge customers booking fees, instead making its money from hotels. Ragge said HRS during the past two years has been moving its remuneration model to a flat commission of 15 percent of the room rate__effectively covering the commission a hotel would otherwise pay to an agent or TMC plus the fees it would pay to a GDS, hotel representation company or other intermediary. When HRS partners with a GDS, TMC or booking tool, it shares the 15 percent commission with that partner.
Ragge noted that his company does not have marketing agreements with hotels and claimed other distribution channels cost hotels up to 30 percent.
As an exception to its standard rate of 15 percent, HRS distributes rates negotiated directly by corporate clients for no commission, provided the client's rate is lower than any HRS may have negotiated with the same property. Asked why his company would connect hotels to corporate customers for free, Ragge noted a "blended calculation" based on an assumption that most of the rates it sells generate a commission of 15 percent commission.
However, HRS vice president for international corporate solutions Jason Long claimed an increasing number of corporate clients are moving away from privately negotiated rates, concluding it is no longer worth the ordeal of annual hotel program negotiations when they instead can rely on the buying power of HRS. "Bigger clients won't give up all their hotel relationships," he said. "They'll retain the most important ones and leave the long tail to us."
In spite of the numerous direct corporate relationships HRS claims, Ragge believes TMCs and GDSs will continue to prosper if they partner with specialist distributors. "Fragmentation in this market is enormous, so everyone needs a more open mind," he said. "GDSs can attempt to do what we do, or they can partner with us."
The message about having a more open mind applies to HRS too. In the past the company published self-promotional surveys that have been critical of TMCs. Now it is happy with any channel that distributes its claimed inventory of 250,000 hotels. However, Ragge cast doubt on the use of hotel representation companies by independent hotels as an outlet for achieving GDS distribution. "This is very expensive for independent hotels," he said. "They will leave unless the hotel representation companies change their model."
HRS has a lower profile in the United States than in Europe or Asia (its top two markets are Germany and China) for the simple reason that the United States has a much lower proportion of independent hotels. Asked if he plans to expand in the world's largest business travel market, Ragge said: "We are an intermediary. The more fragmented the market, the more value an intermediary has, so the U.S. is less important, but we have 40,000 hotels there integrated into our system. We are trying to leverage the Sabre relationship to talk to the corporate and TMC communities. We will deploy a more indirect strategy in that market."