The only thing certain about online distribution in the travel sector is the likelihood of change. You only have to look back a few years on this relatively new industry to see that already it looks nothing like it did when we started.

So what will online distribution look like five years from today and what should accommodation providers be thinking about to prepare for the changes?

The most dynamic changes appear to involve the number, type and ownership of the plethora of Online Travel Agents (OTA’s). The list of OTA’s continue to grow with a couple of predictable trends. The first is the old 80/20 rule where the overwhelming number of room nights are coming from the smallest number of sites. Analysis of the booking data from almost any accommodation provider will reveal the majority of reservations coming from the top four or five usual providers. Typically, the remainder will comprise of small numbers of reservations coming from a smattering of lower profile OTA's.

The other trend we are seeing is the rationalisation of the industry where any OTA that starts to gain any traction gets gobbled up by one of the juggernauts. The two heavyweights, Priceline and Expedia, continue to dominate online travel and between them have acquired a number of competing brands. Most recently, Expedia have announced plans to take over Orbitz. Poised to give these two a run for their money are TripAdvisor as they move to a standard commission model, and AirBnB who have gone from relative obscurity to online booking powerhouse overnight. Google Hotel Ads is still an unknown factor but given their opportunity to get first bite of the internet searcher’s attention, it seems unimaginable that they won’t achieve phenomenal success.

These two trends are effecting the way accommodation providers are mounting their online distribution campaigns. Operators are becoming discerning regarding which OTA's they choose to connect with. We recently surveyed our customers in an attempt to determine user sentiment on this issue; A small percentage stated their preference to be listed on as many channels as possible to optimise visibility and opportunity to book every possible room night. However, the overwhelming number of respondents took the position that they would prefer to only distribute to OTA's that were producing reasonable or significant results. Their reasons included the burden of maintaining up-to-date property profiles, payment issues and increases in administration against diminishing returns.When the channel management industry began not too long ago, it was a somewhat imperfect science. It relied heavily on key stroke emulation and screen scrapping as OTA's were yet to develop reliable API's. Matters were made worse by the fact that many of the OTA's, perhaps aiming to be the only game in town, considered the concept of channel management as a threat.

At first, we considered it as a good case for best of breed. Leave it to those that specialise in that sector and let us get on with our knitting. As a result, we integrated with a selection of channel managers. Some of those have gone by the wayside, some for now have prospered.

Since those early days the landscape has fundamentally changed. OTA's now embrace the concept of channel management and realise that a future without connection to channel managers would be a hard row to hoe. The OTA's who previously refused to take calls or return emails were suddenly beating a path to the doors of the channel managers armed with Open Travel Alliance compliant API's.

These game changing events have raised a question in my mind; who owns the concept of channel management? Most Property Management System (PMS) vendors have tied their boat to external companies to provide channel management services to their mutual clients. Standalone channel management companies don’t have an advantage over PMS vendors when it comes to making connections but the opposite is certainly true. A channel management system can only operate successfully in the smallest of properties without being connected to the inventory, rates and availability provided by the PMS.

Those channel managers that seek global domination are compelled to build and maintain connections to a vast array of OTA's. Not just the major players but also those channels that enjoy a strong regional presence.

PMS vendors have the advantage of being far more nimble and need only connect to the high performing channels in the regions in which they support their products. All of this is in addition to the clear advantages of eliminating an extra and unnecessary layer of technology. Accommodation providers also gain the extra advantage of reduced costs and the efficiency of dealing with a single company.

It’s hard to predict the future, but it’s even harder to imagine how standalone channel managers can survive. As more PMS vendors connect directly to the channels their clients need and the rationalisation of the online travel industry continues, standalone channel managers must become irrelevant. The bigger they are - the harder they will fall.

The second group of players likely to feel the heat over the next five years are those PMS vendors that have taken the easy route to distribution. Many vendors have chosen not to develop direct connections at all. They have elected to link themselves inextricably to third party companies to deliver online distribution. What becomes of them in five years’ time when their competitors are offering an end to end solution and they still rely on others?

I suspect that down the track we will see key channel managers and PMS companies either merge or consume each other. The latter is more likely, as those channel managers that have integrated with multiple PMS vendors would place themselves in an intolerable position should they attempt to write their own PMS. It would place them in direct competition to the partners that provide their lifeblood.   

As I said at the start of this blog; the only certainty in this space is change and it is good to live in exciting times.

RMS is a full featured, web based PMS offering inbuilt channel management and online booking systems.

Dave Jones has worked for RMS for 12 years and has a lifetimes experience in the travel, hospitality and accommodation industries.