Hotel Aggregators: A Revolution for Budget Hotels

You might be aware of the term ‘Hotel aggregators’. This concept hit the hospitality industry in around 2015.

It provided hotels with an opportunity to increase their sales, while travellers reaped benefits by booking rooms at huge discounts. It was a revolution in the hospitality and travel industry.

But recently, aggregators have become a topic of discussion. There’s a tug of war going on between hotel aggregators vs independent hotels.

In this blog, I will tell you about the aggregators, and why they are moving out of this partnership despite all the benefits they receive.

What are hotel aggregators?

The hotel aggregator (aggregation) is a business model to rent hotels on lease, and take over their operational and marketing aspects.

The aggregators get the properties under an agreement, which are then rebranded and facelifted as per SOPs (Standard Operating Procedures).

To elaborate simply, hotel consolidators have introduced a standardised set of offerings and services to budget hotels.

Do not confuse this with the franchise model. Both work differently.

How do hotel aggregators work?

It may sound complicated, but the hotel aggregators business model is pretty simple to understand. Here’s how it works.

To start with, a dedicated team studies about budget hotels and their business statistics. Properties are selected based on certain criterias, such as:

Low annual turnover
Negligible online presence
Poor online reputation
Mismanaged operations

In the next step, the team schedules a meeting with the hotel owners. Here, they learn about potential revenue their properties can generate.

The aggregators propose to achieve those numbers by modifying various aspects of the properties. These include:

Refurbishing the properties (rooms, banquet, restaurant and other areas)
Streamlining operations
Deploying hotel technologies (PMS, channel manager, reputation management tool and others)
Training the staff

If hotels find the aggregator model interesting and profitable, the agreement is signed; considering the lease for the entire property or for a fixed room inventory.

Why do hoteliers opt for an aggregator model?

The profits of tying up with hotel consolidators are quite staggering. And, they ensure that properties receive the promised benefits.

Soon, hoteliers started welcoming these aggregators. Properties under the aggregators have an enormous inflow of bookings everyday.

Let’s understand the benefits hotels avail while working with the aggregators.

1. Hotels earn a fixed monthly revenue

As per the agreement, the aggregators pay hoteliers a fixed revenue every month. This amount is calculated on the basis of certain factors, such as:

Inventory leased out (Number of rooms to be managed)
Property location (That would give the revenue generation capacity of the hotel)
Condition of the property (Aggregators renovate the hotels to provide a standardised experience to guests)

This fixed amount is irrespective of the actual volume of sales and the occupancy season.

However, these payments are low in the initial days when the properties are under renovation and maintenance.

2. No stress about managing online presence

In this digital era, hotels NEED to have an online presence. But, managing it is easier said than done. This includes various verticals:

Creating listings across various hotel booking sites
Inventory management
Maintaining rate parity
Online reputation management

Well, aggregators solve these problems. They list the hotels on Google and other relevant OTAs to ensure their visibility to travelers.

Infact, many aggregators have their own portal to generate direct bookings for properties.

3. Standardised quality of services

Following SOPs helps in maintaining a uniformity in the service quality of every hotel. It’s important for every staff member to work according to them.

Even aggregators have certain SOPs that are incorporated in all the hotels, to deliver guests with the same experience.

4. Perks for hotel staff

When the property is leased, the staff members are either replaced or trained.

The staff is upgraded in every aspect. They get an opportunity for learning and development (This was helpful for hotels located in remote areas). Each member is trained to handle every kind of situation.

Gradually, better salaries and allowance improved their lifestyle. Moreover, it was mandatory for them to wear proper uniforms and safety gears whenever required.

This helped in organising and streamlining operations of budget hotels.

Why are hotels moving from aggregators to independent properties?

Because the benefits aggregators provided were remarkable, they became the talk of the town. Every hotel was looking forward to working with them.

But, as they say – Nothing lasts forever. In the last few years, many hotels have moved from under the aggregators to being independent properties.

A few of our customers that went through this shift and shared their experiences with us. Let’s take a look at them.

1. Delay in payments

One thing that everybody hates is delayed payments. Even hotels have strict credit policies.

Over time, aggregators joined forces with a majority of budget hotels. As the inventory increased, so did the booking flow.

But, providing heavy discounts to guests proved fatal for aggregators. They soon became victims of a financial crisis. Not to mention, the business expansion affected the quality of services.

As a result, aggregators had to deal with refund episodes (from unsatisfied guests) and booking cancellations daily.

This caused a delay in payments, which irked the hoteliers.

2. Cases of dual OTA listings

Aggregators handle and optimize the properties’ online presence. For that reason, they create a new listing for properties on every booking portal.

This caused problems for hotels already listed and for the ones working on partial inventory.

How? Let me explain.

#MyExperience: I was working for an OTA a couple of years ago. My team handled cases of hotel booking aggregators. Every day, they used to send us mails to create new listings or modify the existing ones. But, after the alterations, we faced many issues.

The transactions on the modified listings were processed in the aggregators’ accounts. This enraged many hotels, as they didn’t receive payments for bookings on time.

Owing to the new listings created, travelers saw two properties at the same address. One was managed by original management and another by aggregators.

This led to guests getting confused and choosing another property to book

3. Irregular changes in policies

Hotels update their policies periodically owing to change in circumstances and market situations.

The aggregators were not strangers to this practice. They often changed policies pertaining to commission structure, payment cycles, agreement clauses, and more without prior information to hotels.

Clearly, hoteliers did not accept these amendments. This worked as catalysts in decision making for many hotels to quit on aggregators.

4. Impact on bookings

As I mentioned previously, business expansion led to substandard guest experience. Since, hoteliers were displeased with delayed payments, they began rejecting bookings from aggregators.

This rift between hotels and aggregators affected the booking ratio. Soon enough, guests avoided booking at the aggregator properties.

Hotels urged the guests to make direct reservations at the property. But, guests were frustrated over 3 things:

Their initial bookings were cancelled
They had to wait for a refund to be processed
They had to book another property at higher prices

As a result, hotels lost a considerable amount of bookings, leading to an end in partnership with aggregators.

5. Lower rates

It’s no secret that aggregators offered significant discounts to guests.

Although, the low rates were given for a reason, such tariffs saturated the hospitality industry.

Guests became accustomed to booking hotels at meagre prices from the aggregators. So, they expected such discounts and rates from independent properties as well.

The hotels which quit on aggregators or worked on partial inventory faced similar issues. They couldn’t afford to offer such discounts at the loss of their revenue.

This was the last nail in the coffin, before hotels decided to move out of the aggregator partnerships.

What are the benefits for hotels if they shift to independent properties?

Day by day, the industry is witnessing an increasing number of properties breaking loose from the aggregators and going independent.

But, is this step worth it? Let’s see, what’s in it for hotels to work as an individual property.

1. Brand exposure in the industry

Working with a brand and becoming one are poles apart.

By being an independent property, hotels have an opportunity to establish themselves as a brand. They would have a unique identity, which would ultimately impact guests’ loyalty.

Further, they can also invest in their brand website and acquire direct bookings.

2. Complete control of tariff and inventory

While working as independent properties, hotels have complete control over their rates, availability and their entire online presence.

They can change their tariff, as per the benchmarks set by the hotel associations. The revised rates may not be on the lower side, but will justify any property’s services.

Hotels can also allocate specific inventory to various booking channels. They can choose which OTAs to work with and also decide on the discounts and promotions they want to run.

3. Opportunities to experiment with SOPs

There are no set rules for designing SOPs. Their core purpose is – streamlining the hotel operations and maintaining the service quality.

For instance, some hotels add one spoon of sugar in a cup of tea. While, some properties place sugar cubes for guests to help themselves. Yet, the result is the same - a cup of sweet tea.

Similarly, as an independent property, a hotel can design its own SOPs to achieve the desired result.

However, those should be better than what aggregators offered.

What steps should hotels take after moving from aggregators?

I know, shifting from one management to the other is a hectic and challenging task. Hotels have to make changes to various aspects. Be it facade, room interiors, SOPs, or online presence.

If you make a few amendments and continue your hotel operations, it will hamper your guest experience.

So, start working from the base. If it were me, I would focus on understanding – ‘What guests want?’

That would give me a direction and help me make relevant changes.

1. Eradicate old OTA listings

Hotels need to connect with online booking platforms and get old listings deleted.

There are two major reasons behind it:

A fresh start would bring in new reviews. This would help them identify scopes of improvement.
Because old listings may have a good or bad reputation score. These would impact the property’s booking ratio.

A new listing helps guests to make a booking with fresh expectations and enthusiasm.

2. Focus on revenue management

Millennials always search for discounts while booking any hotel (So do I).

However, it doesn’t imply that hotels can sell rooms at negligible prices. So, how to set the tariff?

‘Market and competitor analysis’ – That’s what hotels need to do.

This activity would give them a tariff range to use. Additionally, hotels can create deals in the form of a one-time discount or run reward programs.

You can promote those deals by showcasing them on the hotel’s brand website.

3. Partner with local vendors for ancillary services

Aggregators have centralised operations. So, they have fixed vendors available for the services offered.

For instance, the amenity kits they provide belong to a specific brand. These kits are available across all the properties they manage.

We recommend having a partnership with local vendors for such ancillary facilities. These could be pick up and drop off services, toiletries and such likes. (Xanax)

4. Train staff to use hotel technology

Once hotels have designed their SOPs, they need to train their staff to follow them.

It’s also necessary for the staff to be technologically updated. We live in a digital era. Every task is now technology-based. Be it creating a booking, checking-in, revenue management and so on.

AI based chatbots are the best example in this case. They can easily converse with guests and assist them with bookings.

Hence, hotel staff should be thorough with using gadgets and hotel technology for an enhanced guest experience. Infact, there are numerous hotel tech giants in providing tools to easily manage such tasks.

5. Improvise your marketing techniques

After all the operational changes, it’s time to move to the marketing aspect.

Gone are the days, when hotels had to rely on word of mouth marketing to attract guests.

With the dawn of the internet era, one can know about any hotel located in a country miles away. Moreover, social media has brought closer the world to us.

It introduced a new angle of hotel marketing. It gave marketers an opportunity to reach out to millions of guests across the world.

If you are looking for some fruitful marketing technique, here’s a must read for you - TOP 11 DIGITAL MARKETING TECHNIQUES

Conclusion

Aggregators brought a new revolution in the hospitality industry. It paved a way for budget hotels to increase their room sales.

But, too many cooks spoil the broth. Similarly, when aggregators started managing higher inventory, it affected the quality of services.

I am not saying that hotel consolidators are bad. But, they are like a double-edged sword.

With the above scenarios, I’ve listed all the pros and cons. Now, it’s upon you to decide whether to work with hotel aggregators or be an independent property.

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