Choice Hotels International in late May created a new executive position to oversee the company's global distribution, including revenue management, global sales, e-commerce, channel partner relations and development of Choice's proprietary channels. To fill the position, Choice
called in an airline industry veteran: former United Airlines managing director of distribution and e-commerce Robert McDowell. He and I spoke Wednesday about the company's distribution strategy. With less than a month on the job, McDowell would not yet speak to such specific agreements as Choice's direct-connect agreements with Expedia and Concur, but he did hint as to the type of agreements and developments Choice is eyeing in the near future. [more]
Robert McDowell
Baker: What was Choice's impetus in creating this position, and what are your initial priorities?
McDowell: It's getting better focus on the channel mix, how we're distributing our products, what's the cost of distributing those products through each of those channels, then, ultimately, from a high-level perspective, what's the best channel mix for Choice and its franchisees in the distribution space: the hotel direct, ChoiceHotels .com, the central reservations system and some of the intermediaries, which are sort of the other piece of that distribution pie. It's to bring these disciplines together, get a feel of how we distribute our product and put out a road map on how we can grow our proprietary channels. We typically get a much higher average daily rate through those channels.
Baker: How much focus is Choice putting on its mobile strategy, and do you think corporate rates eventually will be available through mobile devices?
McDowell: We were one of the first to roll out an iPhone app, so mobile will play a key piece in this going forward. We'll also continue to focus on business and corporate travel as it continues to rebound. Mobile right now is an offshoot of the e-commerce team, and we look at developing future apps and what the future of the mobile platform will look like for Choice and the rest of the industry. Not knowing off the top of my head what these folks are doing, I can't imagine it will be long before some of the travel agencies or Concur goes mobile [in allowing booking with corporate rates]. In terms of distribution in general, you want to be able to offer your product where your customers are. More of your customers will be on handheld devices, whether an iPad, iPhone or Android, and you need to be positioned there no differently that you would be positioned on the Internet.
Baker: Some companies like InterContinental and Best Western allow you to access corporate rates directly through their websites. Is that something Choice is looking to do?
McDowell: It's something we don't do today, but it's a customer segment we obviously want to capitalize on. We should be able to make those rates available through ChoiceHotels .com.
Baker: How do you see the hotel/OTA relationship evolving over the next few years?
McDowell: Obviously, our ultimate goal is to connect to customers through our proprietary distribution channels, be it ChoiceHotels .com, the mobile app or our central reservation system. The OTA relationship will evolve over time. We have to strike a fine balance between distributing in all the OTAs, what those economic terms and conditions are and how to make those partnerships productive, not only on behalf of Choice Hotels but our franchisees. It's obviously kind of clear that the airlines drive a lot of volume to the OTAs, but given the cost structure of the agreements, they don't drive a lot of the profits. Those are coming out of the hotels. The margins on those are pretty high, and there's probably some opportunity to look at what that cost structure is and figure out between ChoiceHotels .com and the OTAs where the value proposition is for Choice and the franchise owners. We need to strike good relationships with the OTAs, but if there are ways to distribute products through an XML that is more efficient, we're obviously more interested in doing that.
Baker: Are global distribution fees as big of an issue for hotels as they are for airlines?
McDowell: In this environment, every expense should be looked at. The size and scope of it obviously is not as large, given the airlines' volume that goes through a GDS. Ultimately, it's the scope of the volume that's being pumped through specific channels that drives the magnitude of the cost problem the airlines have with the GDS. The airline disputes are less about costs now and more about this ancillary discussion and them being able to understand who the customer is and be able to provide the products back to the customer in terms of merchandizing. It's not necessarily a cost driver for the airlines at the moment and is more about customer ownership, taking a page from the Amazons of the world and retailing directly to a consumer.