The Phocuswright Conference in Los Angeles was marked by a proliferation of third-party distribution services and apps for hotels, air tickets and in-destination activities. As a result, the largest U.S. online travel agencies (OTAs), once the young guns, found themselves among the old guard. Still, such experience has given travel-technology veterans such as Henrik Kjellberg, president of Expedia's Hotwire division, and Chris Soder, CEO of Priceline Group's Priceline.com brand, a valuable perspective on which technologies may fly and which may be challenged. Hotels editor Danny King spoke with both separately at the conference, asking them the same set of questions.
Q: What does the new batch of travel-technology products tell us about the state of the industry right now?
Kjellberg: There are very few ideas which have the potential to become large. I haven't seen anything truly innovative since Airbnb: That, to me, is the one big thing over the past five years. It's a new model, it's peer-to-peer and it works.
Soder: There are always a bunch of new darlings that come up, and most of them don't end up amounting to much. But there are a couple of areas which are obviously big trends, and the first one is mobile, which is becoming a big part of the business because it's such a natural fit.
Q: How many levels of distribution can the travel industry really support?
Kjellberg: My question is more about, how many horizontal levels can you have? On the vertical level, you have a few airline providers, the hotel chains in the U.S. are pretty controlled with what they do with pricing, and a few OTAs emerging, though the distinction between OTAs and meta is starting to blur. Then, you have the consumer. Now, if you look at it horizontally, you have people specializing in things like weekend travel -- it could be HotelTonight, it could be Hotwire. There are a lot of players trying to carve out very small niches at that level. And people can monetize with a very small niche.
Soder: Markets over time tend to go to three or four players, so I think this will shake out over time. If you're a hotel, you have a tremendous number of players coming to you saying, "I've got a discounted way for you to move your inventory that's different from the other guys." It's become such an explosion that's far beyond the industry's need or capacity.
Q: One recurring theme at the conference appears to be dynamic pricing, and the ability for many of these new products to seek out lower prices after a reservation has been made. What kind of future is there for that kind of product, and do you think hotels will get stricter with their cancellation policies?
Kjellberg: We're seeing tons of deals, mobile deals, last-minute deals, and we're seeing a lot more of that than a few years back. I think the industry is going to push back on some of that because, ultimately, it's not conducive to their revenue management.
Soder: The hotels are not a big fan of those kinds of models because they eviscerate revenue management. Our models are more supplier-friendly. Name Your Own Price is the most protective, and it's in real time, so we don't undermine what the hotels are trying to accomplish. ... I hear about those models where you can book an airline ticket, and if a lower price becomes available, the product will help you understand the [cancellation] policies and cancel the ticket. But I think you're treading on very thin ice there relative to the integrity of the distributor-supplier relationship.
Q: So how does a more established entity like yours compete and maintain or increase distribution market share amid the additional distribution levels?
Kjellberg: We still get way better deals than those [products]. We truly provide a service to the hotel chains. We safeguard their brand name, we protect their pricing picture and we're an extremely good last-minute channel for them to get rid of distressed rooms. And we still have better prices. So while I'm a bit worried about increased competition, I still see us as having a very unique position when it comes to the type of inventory and pricing we get.
Soder: The guy with the best content wins. The Internet's a very efficient mechanism for exposing that, so obviously, how good your path is and the information you provide is important. But you can't overcome that if you don't have the best product, so we work very hard at having great supplier relationships. We keep delivering the best price. There are a lot of other versions of how to get there, but if we keep delivering it, we'll survive in the long haul. That's why our business continues to grow.
Q: How will the rapid growth of the private-accommodations market represented by companies such as Airbnb and HomeAway affect you?
Kjellberg: In the long term, it could affect us, but it will likely affect other players and hoteliers within a certain type of sector way sooner. Ask me in 10 years. We have so much to do in terms of executing on hotels and cars. I don't see any of that impact for us, given where we are in the pricing chain.
Soder: Airbnb has become quite large, but at the same time, our business has continued to grow quite strongly, and other OTAs continue to grow. Clearly, it's competitive, and probably more among the price-sensitive travelers. But I've not seen Airbnb have a visible impact on our business.