Customer is King – Hotels Going Direct

Customer is King – Hotels Going Direct

We all know the forces of the past decade – search, social, mobile, Amazon – are changing every industry.  But consumer-facing commerce has been at the tip of the spear, as empowered consumers are now in the driver’s seat and forcing brands and service providers to change quickly and dramatically to keep up.  Forrester research calls this era the “Age of the Customer”, and encourages B2C companies to not just become customer centric but “customer-obsessed.”

Traditional business models in B2C have normally required aggregators.  Department stores carrying a host of apparel brands.  Travel agents or travel booking sites aggregating airlines and hotel options.  Cable channels aggregating shows created and made by 3rd party production companies.

Music was the first industry to unbundle in this new era, where consumers could buy just the songs they wanted and not the whole album.  E-commerce led the next wave of brands building a direct-to-consumer business in parallel, and often in tension, with their wholesale relationships.  Direct-to-consumer is expensive and requires brands to build new infrastructure and intelligence to be successful.  In travel, hotels and airlines went direct when online booking emerged, but the aggregator sites really stole the show with Expedia, Travelocity, Kayak, and Priceline emerging as the main destination for travelers.

In travel, hotels were the fattest margins for these online aggregators.  Priceline’s financial and stock market outperformance has been largely driven by its European hotel booking arm.  A report comes out today, however, in the Wall Street Journal, that hotels are making a new push to go direct.  Using the loyalty programs they have built up over a long period of time, they are targeting their best customers with deals to “cut out the middle man.”

What’s emerging in the new world, is that owning the customer is king.  Brands, in travel or retail or media, are seeing aggregators as frenemies much more than ever in the past – when the aggregators were THE customer.  Forrester argues that companies, to thrive in the new world, must refashion themselves with the customer at the center, and indoctrinate customer intelligence across every part of the organization.

In addition to technology eating (or upending) the enterprise on its own, the need to transform a consumer-facing company requires a rewiring of systems, data, and processes so companies enter a continuous learning loop with their customers to deepen their understanding and turn those insights into better customer experiences.

 

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