Webinar: Hotels 101

Thank you to hospitality expert Stephen Fitzgerald of Garner for joining us today to help us understand the good, the bad and the ugly of booking and paying for hotels for work. The recording and transcript are here for you.

Some quick hit highlights, followed by the transcript:

I put down a card when I booked, why do I have to present a card at checkin and pay with that card?

Short answer: it's financial. Stephen says: "The primary answer is: non-swiped cards [that you provided at booking] cost the hotel a lot more money in credit card fees than swiped cards [presented at checkin], so the hotel would rather swipe your card and save a percentage or two. And [requiring a card] also prevents fraud."

... But! Actionable advice: join the loyalty program!

If you're a loyalty member, hotels are far more likely to take the card you put down at booking (or you can use that card when you checkin on the hotel brand app).

True or false: booking with an OTA like Expedia or Booking.com means you get a worse room? 

False! Stephen says: "That's a long-held myth. It is potentially true at some properties, but the vast majority of people at the front desk don't care, they just want to get you out of the way. The trick is: be nice to the front desk, and you'll generally get the same advantages that any other customer will (with the exception of any high-level loyalty members who always get the best inventory)."

Why are folios so hard to get?

Because folios are in the PMS, or property management system, which is largely inaccessible to the outside world. Hotels sell bookings (up until checkin) using a CRS or central reservation system that's accessible to third-party systems like your corporate travel platform, but everything after checkin and on-property (including the folio) is in the PMS. The PMS isn't connected to your corporate travel platform, so the folio isn't either.

... But! More actionable advice: join the loyalty program!

Stephen points out that several brands including Marriott and Hilton allow loyalty members to retrieve a folio online themselves if they book with their loyalty number applied (including booking through their corporate travel platform).

Is there a "new distribution capability" coming to improve hotel shopping, booking and payment?

Sadly no. Stephen says: "No, not for a while. The airlines are monolithic, fortunately for them they don't have this degree of fragmentation, fortunately for them they have a huge amount of volume compared to hotels, they've got a lot of leverage. So there's not an NDC hotels happening for hotels any time soon."

Glossary:

Cache: In computing, a cache is a store of pre-computed data (in this case pre-computed hotel prices) assembled so that future requests for that data can be served faster. The major problem with caches is that the data is pre-computed, not live, so often inaccurate as prices change.

OTA: Online travel agencies like Expedia, Booking.com, Travelocity. Websites that allow travelers (primarily traveling for personal reasons, not business) to shop and book flights, hotels and car rentals. Not to be confused with metasearch platforms like Trivago, Kayak, Google Flights/Hotels, Skyscanner and Hipmunk (RIP – remember them?) who shop across OTAs and airlines/hotels/car rental suppliers directly then redirect users to those OTA or supplier sites to finish booking.

GDS: Global distribution system (Sabre, Amadeus, Travelport, Apollo, Worldspan, etc.), the behind-the-scenes tech system that allows travel agents and travel sellers to shop, book, store and change bookings across airlines, hotels and car rentals.

PMS: Property management system, the reservation system for active (checked-in) reservations that the front desk accesses, where charges are added to your folio and where you retrieve your folio. Connected to the CRS to intake reservations but PMSs are generally inaccessible to anyone outside the hotel. And different properties within a brand can run on different PMSs, so not all Hiltons for example run on one common PMS.

CRS: Central reservation system that allows third-parties – agencies using GDSs, OTAs, etc. – to shop, book and change hotel reservations, ultimately feeding the reservation into the PMS for the guest to check in. Generally all properties within a given brand run on the same PMS.

Transcript:

Elliott McNamee
Welcome everybody to AmTrav's latest webinar on hotel payment & distribution, Hotels 101. My name is Elliott McNamee, I work on marketing here at AmTrav. Today we are really excited to be joined by Stephen Fitzgerald. He is a travel industry and Ecommerce, digital marketing and distribution expert who covers a whole array of areas, specializing in hospitality. Right now he is consulting along with our good friend Cory Garner at Garner Advisory. Prior to that he served as Vice President of Global Distribution and Ecommerce for G6 hospitality, Vice President of OTA and Wholesale for Hilton Hotels, he led sales and revenue generation for a digital marketing agency. He's been at Travelocity, he's been at Sabre. So he's got that really good background that we look for when we're bringing somebody in to share with our customers, share with folks who are aware of AmTrav, help us educate the industry. So Stephen, welcome, and I'm going to hand it over to you.

Stephen Fitzgerald 
Let's go, off to the races. In the interest of time, Elliott warned me ahead of time to take only 20 minutes for this session, so let's kick this off and roll along. The purpose of today's call is really to give you guys some insight as to why common problems like rate parity, lack of the ability to take payment flexibility, and commission issues happen around hotels. There are both connectivity and structural reasons why those issues happen sometimes. We’ll touch on both of those. 

So think back to the ‘50s and ‘60s, hotel distribution and airline distribution was really inefficient. This is a HilCron reservation system on the left hand side. It took American Airlines, as an example, in this time period, 90 minutes to process a reservation. It was crazily inefficient, error-prone, manual, terrible experience for the customer and for the airline, super expensive. And then the advent of the electronic CRS, central reservation system for airlines happened in the early ‘60s, Sabres was switched on in ‘64, other airlines followed shortly, Deltamatic obviously was one of them as well. 

Now the problem with the picture on the right hand side, aside from its terrible stereotypes, the other problem, we all know this: airlines and hotels really don't want to talk to their customers. It’s really expensive to pay someone to answer the phone and to pay the charges was just really a huge part of the reservation, so they would rather not talk to you. And actually the entire structure of hotel distribution, and airline distribution for that matter, is based on not talking to the customer and trying to automate processes and make it more efficient. So that's sort of the nature of what we're talking about today. 

So here's an early online example of hotel distribution. Now, what happened was airlines rolled out their CRSs in the ‘60s, in the ‘70s airlines including American went ‘hey, wait a minute, why are we paying our employees to answer phone calls when we can have the travel agent do the data entry and save a lot of money that way?’ So when you think from that perspective it made sense to push Sabre as an example, and all of the GDSs into the travel agent shops, and let the travel agent bang away at the keyboard and process the reservation, saves [airlines] a ton of labor. And it also gives travel agency a bit more flexibility. 

So flip forward to the modern world for a second. Corporate travel booking tools are kind of the same thing. Now agencies today have the customer actually book their own reservation on their corporate travel tool, they’re offloading the labor from you to them, that’s the same exercise, but with a common cost control element to that. 

So the other part of the cost is talking to people, and that is what pushing these systems into agency offices accomplished. And it worked quite well. So the structure for GDS inventory for hotels really persists to this day. There was a company in Dallas, created called THISCO in ‘81, roughly, guy called John Davis who's still around, quite a character, he talked 16 hotel chains, including the major ones that you see here, some of which are long gone, into kicking $100,000 a piece into a company called THISCO, the hotel switch company. And the job behind THISCO was to get the hotel CRS inventory translated into the various GDS formats so that hotels could sell their products on the GDSs. It worked pretty well. A similar effort was put in place for a company called Wiscom, which handled rental car inventory as well. So by the ‘80s and into the ‘90s it's a pretty well developed technology for a hotel chain to be available through the GDS and have travel agents sell air, car and hotel on the same screen. So pretty effective and it really offloaded a lot of labor for an airline standpoint. 

What does it look like today? Well, quite different in complexity. A couple key points here. One is that the GDS structure that we just talked about earlier is still in place. And so you’ve still got the major chains connecting through a switch in some cases through GDSs, a lot of times this intermediary connectivity has been replaced by a direct connect between the hotel company and the GDS. So that is that that structure is still pretty much in place, and is what facilitates the majority of corporate bookings today. Sabre as an example when I was there, around 2010 to 2015, was 75% corporate negotiated rates, 25% public, that's what they do, they're pretty good at it. 

But think about 2000, 2001, the OTAs come along into the game and they really grew dramatically after 9/11 when there was a ton of supply and not a ton of demand. So Expedia, Booking.com. And the OTAs of the world grew up and grew and grew rapidly. 

And so part of the problems that we experienced we'll talk about later, is that there are millions of shoppers on Expedia, hotel CRSs are not designed to handle that type of load. So there's a cache put in between the OTA and the GDS, which allows OTA to shop without actually hitting the system. And that creates some of the side issues that we'll touch on later on. But think of this as sort of three or four concurrent pieces already together. 

You have the old GDS structure still in place. You have the newer OTA components here that communicate with the CRSs for hotels to cache, and then you have the rise of the wholesalers. 

These guys are really interesting over here. You got Tourico and Hotelbeds, all one company now, GTA swallowed up but by Hotelbeds as well by the consolidation in the industry. And what they do is their job is to get inventory, oftentimes from hotels directly. I've created a green line here to show that actually the sales office in this example hotel is supplying inventory to Hotelbeds, and then Hotelbeds and other wholesalers actually buy and sell inventory to me, it’s like a spaghetti nest of connections between these guys. They all buy each others’ inventory. They also go through intermediaries, sometimes as many as two or three before the final customer or before the final sale, and the problem with this is, here (Hotelbeds) these guys are pretty interested in maintaining whatever parity rate the hotel gives them, but by the time it goes through a couple intermediaries you end up with somebody in a different region of the world who’s a lot less interested in following the rules. And so they'll show a price point that is oftentimes different from what it should be, and in this case you've got a hotel, let's say in Paris, let's provide the inventory directly to Hotelbeds, it goes through two intermediaries, shows up in Agoda, who chooses to ignore the markup rules and actually cuts their markup to provide a lower price point – a very common problem, huge industry issue. And major chains are really interested in trying to fix that quickly. So the key point here is the sales office of the hotel provides this inventory to wholesalers. So the cool part – well, not cool – what happens is the property sales office pushes inventory at the price point they want, they may or may not talk to the chain revenue management office. So you end up with different price points at times, sales views all sales as a channel to get inventory moved, make their targets, earn their bonuses, and sort of dust off and get out of the way, and so the two inventory sources oftentimes collide from a pricing standpoint. 

And then finally here you've got what we call meta channel, sites like Kayak and Trivago, their job is to find price differences that are present for a given hotel and present those to consumers, they're very good at it. So if there is a momentary price difference or a transient difference or real difference that persists for a period of time, they will find, they will present it to consumers. This perpetuates the consumer belief that hotel pricing is radically different from channel to channel when it's not necessarily so. 

Anyway, this is a very simplified version of the inventory and systems flow today. Here at Garner we actually took a snapshot of the actual hotel distribution landscape as of yesterday, and this is what it looks like. 

So those are some connectivity reasons why problems occur. Let's look at structural issues as well across how hotels operate. 

When you think about a given hotel, any property, pick your hotel, there are really four entities that are involved in that property. One is the chain, so is it a Marriott or Hilton. Those guys provide marketing, sales, support services for various brands. So the brand is for example Courtyard, Residence Inn, Embassy Suites, Hilton Garden Inn, Homewood suites. Those are all brands within specific chains. They have their own operating standards, they have their own personnel, they have their own infrastructure which may vary by brand. So you've got to think about who's the parent company, what is the brand, and then who is the owner? There are many institutional owners like Park Hotels like Host Hotels, there are also individuals who have properties, maybe one or two mom-and-pop operators, radical differences in the ownership group and their capabilities and their goals, frankly. And then finally, who's gonna manage the property? It could be the owner as an operator, or it could be that they hire a management company like Remington Hotels, Aimbridge or Highgate to manage the property. So that the management company actually operates the property, hires the employees, and installs the revenue management systems, controls the pricing and basically operates the property on behalf of the owner. So any given hotel has these four players involved, that's certainly quite a degree of fractionalization in the industry. 

So then within the hotel you've got a couple different systems that are important, that are radically different. You've got the property management system, the PMS, that actually keeps track of the guest’s bill. So when a customer checks into the property, the PMS selects the room that's available, checks the customer into that room, and then starts their bill basically. And when you need a copy of the guest folio post-stay, if you lose it, there are some chains like Marriott and Hilton that have provided a way to get that through their loyalty program, but other chains you’ve got to call the hotel directly and have them pull it up and send it to you, which is terribly inefficient. But of course you got a central res system for the chain. In this case Hilton’s is Hilstar, that’s the system of record for availability, rates and inventory for all their hotels, typically a year out. PMS is not publicly accessible, only driven by the front desk. The CRS is accessible in the sense that you can make a reservation, cancel reservations and see the rules, etc. And so have limited visibility to it that way. 

Just a couple key points. If you want a copy of the bill, use the self-serve option on Marriott or Hilton.com or call the hotel directly. For those of you that need to let the hotel know the traveler will be arriving late, call the hotel directly, make sure you're talking to the actual hotel. A lot of properties have the brand operate call centers for them. That automatically rolls over so it sounds like you're calling the Marriott Courtyard Dallas when in fact you're calling Washington D.C., the central office. If you need to get a message to the front desk for a guest who's arriving late, make sure that you verify you're talking to the front desk at that property. And then finally, this is a big deal, to change or cancel reservation make sure it's what's in the same system that you booked in. If you booked in Sabre, cancel it in Sabre, and if you booked directly in the hotel CRS, cancel it in the CRS, otherwise those actions won’t always jibe. And you might end up with a different result than you expected.

Elliott McNamee
But what if what if the traveler’s already checked in? Does that go from CRS to PMS? Is it no longer accessible through the CRS and the GDS? A lot of three letter acronyms here, folks, we apologize.

Stephen Fitzgerald
It depends on the chain, but generally speaking once the guest checks in, it’s the purview of the front desk to control that reservation. A lot of times the record is set because of the chain. There's a problem with some hotels where the CRS will cancel and the guests will remain in the room and that creates a problem, but most major chains with decent systems will turn that reservation over to the PMS and you lose control to CRS.

So why can't the industry be more flexible with payments? Well, here's the rationale. Again, for every hotel, there's a brand, a chain, someone managing it, and an owner. So the top row as an example: Courtyard Marriott is a Marriott property obviously, Marriott Courtyard is the brand. It's managed by Aimbridge. And they actually manage a bunch of these. And it's owned by Park Hotels, which used to be Hilton’s ownership group. And this middle example, Holiday Inn Crowne Plaza is a brand of the Intercontinental Hotel Group, which that property may be managed by Pyramid, and it's owned by Host Hotels and Resorts which used to be Marriott. So crazy combination here, and finally a budget property like Motel Six, you know, the parent company's brand is G6 hospitality, but it might be literally individually owned, the same family bought the hotel, they run it. 

So the problem is why can't they just be more flexible with payments? Well, all these parties have to agree on accepting a payment system, and these guys can agree to do it, but they gotta check with the owner to make sure that the discount they get or whatever it costs him is acceptable. There's one barrier. Systems have to be arranged here to make that happen. And then this guy who's owning and operating the property has got to figure out if he even has time to stop doing the laundry and check guests in, to update his payment. So this fragmentation really slows down the pace of innovation within the industry. 

Then let’s look at rate parity issues. One of the primary reasons that we found, I've seen this at Hilton and at G6 Hospitality as well. First of all, the property could offer a lower rate temporarily to Expedia as an example to drive more business than they got from brand.com. And so in that case, Expedia is one of those wholesalers – about a third of the business from Expedia and Booking.com comes from actually a wholesale activity. So that rate may make its way to the wholesale channels and create a price difference. And wholesaler controls. A lot of chains have problems policing the two or three layer-down final price point that chooses to violate the rate plans, it’s tough to figure out who that is, and it's a real problem. Third, I know from experience, Sabre is super difficult among the GDSs to set up the proper negotiated rates while the tables involved, so not setting up that rate properly in Sabre will ensure that your negotiated rates for that customer does not does not show up on their side. And then finally, cache. We talked about how the current hotel CRS is not able to handle the load imposed by millions of OTA shoppers, so they use a cache to present pricing and help reduce the load on the CRS. That cache is updated periodically. If it's not updated recently, Kayak will figure that out and show that price, and if that rate is sold by Expedia then that will sell through to the end CRS and you get a price difference there. That combination of cache, system delays and meta channels will create some problems as well. 

So we talked a little bit about this, Elliott, we do see some hope in this area, it’s not really technology-driven. Marriott and Expedia got together a couple of years ago, Expedia took on all the wholesale inventory for Marriott. So in theory, every bit of wholesale inventory used to be controlled by the hotels in that slide that I showed you is now run by Expedia. They have extraordinarily sensitive pricing tools that they use to make sure they have the best rates in every region, every point of sale, they're able to track down that miscreant price point pretty quickly and shut it down. It's actually been a pretty good success between those two companies. Wholesalers as a portion of the industry are shrinking. There's tremendous pressure on those guys financially now because the chains don't like them. They don't like the end products, the price points they sell. So financial pressures are definitely squeezing that group of wholesalers, and making them a smaller part of the overall mix. Then finally, it's cheaper and easier for chains to buy monitoring, price point monitoring across the various distribution channels to understand more effectively where problems are occurring and shut them down. So that Hilton as an example, when I was there running wholesale distribution and OTAs, that was roughly 2016-2018, we spent probably ten million bucks a year on various types of pricing monitoring tools. At G6 we spent $50,000 a year because a lot of companies are doing that now and that type of service is getting quite a bit cheaper. 

So that's the end of the presentation, more of less stayed within Elliott's 20 minute guideline, happy to take any questions or discussion. 

Elliott McNamee
Awesome. Thank you, Stephen. Yeah, we did ruin the Garner surprise there with the live look. Okay. The number one question we got in the registration was “I put my credit card down when I booked, why when I show up at the hotel can't I just use that card for payment?”

Stephen Fitzgerald
The primary answer is: non-swiped cards [that you provided at booking] cost the hotel a lot more money in the credit card fee than a swiped card [presented at checkin], so the hotel would rather swipe your card and save a percentage or two. There's really two kinds of conditions driving that, one of them is they need to know who you are, there's more and more regulation in various countries about “is this the correct guest” and validating you as the person checking into the room. That’s part of it. And part of it is that they pay a percent and a half more for that transaction for not swiping the card. Those are two big drivers for that problem.

Elliott McNamee 
So say it's a $1,000 week-long stay they're faced with an extra $15. So their policy is make sure that you get the card.

Stephen Fitzgerald
You got it. And it also prevents fraud.

Elliott McNamee
Do they sometimes waive that? They say “do you want us to use the AMEX on file” – but that's the exception and not reliable.

Stephen Fitzgerald
They do that for their loyalty program members. So if you're a Hilton Honors member, for example, or Bonvoy member, you get special treatment, and what they've done is they’ve validated you through various other methods through enrollment, you’ve also bought a lot of the rooms over the years, you're a top tier customer, and they will waive that for you – but only for those guys and gals.

Elliott McNamee
Alright folks, there's our actionable advice for the day: join the loyalty program and put it in when you book. Does it have anything to do with the CRS where the booking is made versus the PMS where the card is run?

Stephen Fitzgerald
It does. All the major chains have one CRS but they have multiple PMSs. They grow by acquiring, so as an example Hilton acquired Promus Hotels in the early or mid-’90s. Promus was Embassy Suites and Homewood Suites and other brands like that. They're still running on the old PMS because they don't want to make the franchisee pay for a PMS upgrade. So a lot of it has to do with the fact that a given chain may have four or five PMSs and only one CRS. So again, you're back to the lowest common denominator across all PMSs, which is a credit card typically. 

Elliott McNamee
Of the issues that you mentioned with rate parity – wholesalers, meta search, OTA caches – are those pretty evenly responsible for the price differences that you find online or are some of them worse than others? 

Stephen Fitzgerald
It really depends. So as an example, at Hilton our problems were wholesaler driven and property actions. At G6 Hospitality our differences were driven by GDS and metasearch issues. So, depending on the chains, their system and the degree of control they have over wholesalers, the rationale, one of these four, will vary by chain. There's not typically just one cause, there's a mix of causes behind this unfortunately.

Elliott McNamee
Sticking with shopping, why is it so hard to shop by amenities like room features and hotel features? Why is it so hard to find truly refundable rates, why isn't that standardized in some sort of way to make it easier?

Stephen Fitzgerald
Yeah, it really isn't. The OTAs did a great job to filter rooms that way as third party. The brands, I don't believe they do. They want to start with a room first, pictures of the room, and then oh yeah, add other information. So I think the OTAs are ahead of major brands in terms of the way that they present rooms, allowing you to filter by attributes. Now that being said, when I was at Travelocity, of our searchers, our search volume, only about 5-6% of searches actually use those filters so they're not terribly popular – most people don't use them. And brands aren’t going to spend a lot of time investing in that capability unless there's a larger number of users who actually want to shop that way.

Elliott McNamee
Looking at some of the questions that have come in, somebody asks, “Prices with airlines vary by point of sale – you pay one price if you're coming out of Israel and a different price if you're coming out of the United States for that Newark to Tel Aviv flight – does that happen with hotels or with OTAs and point of sale?

Stephen Fitzgerald
That’s not supposed to happen with OTAs, though it does. Hotels don't follow that practice, either. It's not commonly done in the hotel industry. Now where you will see some differences are currency fluctuations, so translating the currency from dollars to Euros as an example, they cost a different amount depending on how they calculate it. And then I've seen some resort properties do this and some Vegas hotels do this as well: they'll charge more for a LA customer driving over and charge less for a European customer who’s gonna spend a long time there. But as a rule it's not generally done that way across the hospitality industry, but with a few exceptions.

Elliott McNamee
Somebody else asks: “Is it true that hotels provide guests lower-quality or less-desirable rooms when they book through OTAs versus direct or perhaps through the GDS?

Stephen Fitzgerald
That's a long-held myth. It is potentially true at some properties, but the vast majority of people at the front desk don't care, they just want to get you out of the way. The trick is: be nice to the front desk, and you'll generally get the same advantages that any other customer will (with the exception of any high-level loyalty members who always get the best inventory). So my rule of thumb is check OTAs – I've been at an OTA twice, Travelocity and Expedia – then book direct. That's the best way to solve both of these, to understand all the hotels that are there and what they want, and then when you book direct, you've solved the problem of having the front desk potentially look bad, so do that. [AmTrav note: or just book through AmTrav, get all the inventory and your points.]

Elliott McNamee
Amber asks: “Why aren't there more prepaid and pay-now rates?” She says: “I hate that we have to submit so many hotel authorizations because many hotels don't accept them like they're not very well handled. So why aren't there more prepaid or pay now rates?”

Stephen Fitzgerald
Yeah, there certainly are some available out there. That depends on the channel: on brand.com you'll generally find them and on the OTAs, but on the GDSs you will not. Hotels from a priority standpoint are more interested in showing a membership program rate to their loyalty members regardless of channels, so you’ll typically find a lower membership program rate than you'll find prepaid rates, but in general it just hasn't been a big focus. Now one thing that the hotels are finally waking up to is: ‘Hey, can I have a better “deal” on my direct channel, without upsetting Expedia?’ So if a deal includes the same price point, that's good, but it includes the ability to join a membership program while you're booking, then further on down the booking process you get a discount that way, they'll do it. Or if it involves early chicken or later checkout, that’s an example, or it involves adding an amenity to the room, keeping the same price point – you're gonna see more of that over time. So you will see hotels beginning to follow the airlines’ example of making it more comfortable for a direct booking than for travelers who book indirectly or through the GDS, you will see that trend.

Elliott McNamee
This came up a few years ago when Marriott was pushing hard for direct bookings, Expedia released a report that said “hey, it costs hotels just as much to sell rooms through marriott.com as it does through Expedia.” Is there any truth to that?

Stephen Fitzgerald
There is. So for a loyalty program member it's actually quite expensive for the hotel to pay for that fee. Loyalty programs are not funded by the brand, they're funded by the hotels for each room night the guest stays. So as an example of a big chain hotel, I'm not going to call out anyone in particular, but for a large brand like that, for an individual staying in a high-end room, it might cost that property $10 or $12 to pay for the loyalty program benefits that customers are getting. And when you look at the fact that the major chains were pretty successful in driving down OTA margins over time, so the margins now for the OTAs are now dropping to the point where a loyalty program customer is about the same. If you’re not in the program you’re still going to have a lower cost to the hotel, but they have gotten to the point where their programs are now roughly, in some cases equivalent to an OTA margin, which is quite interesting.

Elliott McNamee
I wonder, maybe Marriott would say, or the chain would say ‘we have better pricing power because you know, you're not just getting the cheapest customer, you're not getting the customer who's looking for the cheapest rate from Expedia,’ – but now we're getting even further into the distribution.

Couple questions. Somebody says, “Can you explain credit card authorization forms which are commonly faxed,” and the same person says “if hotels get paid less for a card not present, why do they accept a hotel authorization?” Does that piece of paper with the card image qualify as a card present? Does that save the hotel point or a point and a half in credit card fees? 

Stephen Fitzgerald
It might, but I’m not a payment expert. So I can speak to the structural reasons why there are differences in card rates across swipe, card president or card not present, so I really can't speak to the details involved in that type of question. So shoot me a note, I’m happy to look it up for whoever said that to get an answer later, but I don't have an answer immediately for that.

Elliott McNamee
That's all right. 

Stephen Fitzgerald
I’m a distribution guy, not a payment guy, my apologies. 

Elliott McNamee
Who knew there were so many different flavors of professional in the travel industry? We actually all knew that. 

Going back to the pre-prepared questions, at a high level, what are the differences between brands? Are there any brands doing – you mentioned a few – are there any doing interesting things that give you hope?

Stephen Fitzgerald
Yeah. In general, the bigger the brand, the more budget they have to innovate. So over time you'll see continued pressure on OTAs from the brand to offer more amenities, more stuff, more services perhaps, at the same price point. Again hotels typically follow airlines by about 10 years in terms of revenue management or distribution practices. So airlines have been at this for a while now, hotels are following. Hotels, like the major brands, [would love to] deliver all the room nights for a given hotel directly, that way the brand is super important. You'll feel good about paying your brand fees as an operator, and you have one source of business. The problem is that they just can't do that today. They can't deliver enough room nights to every hotel in their system to allow every hotel to be successful. So they have to allow the OTAs to sell some rooms, to allow wholesalers to sell some rooms, they're just not thrilled about it, it's a necessary evil. But I think over time you'll keep seeing that pressure [with hotels] differentiating branded inventory from third-party, and you'll see those services widen over time.

Elliott McNamee
One of the technologies – admittedly you’re not the payment guy – does contactless payment have any potential? Like you can tap to pay anywhere there's a Toast terminal. Is there that potential with hotels as well?

Stephen Fitzgerald
There might be, that's really the modern equivalent of swipe. Magnetic stripes are going away, chips are becoming the norm, chips have better security around them. So it's really more of a security issue and a convenience issue than it is a cost issue. If you tap a card or you swipe a card you've just proven the card is there at the card location. It's just a more secure way of transmitting information.

Elliott McNamee
And who pays for that new contactless system? Is it the brand, the chain, the owner or the management company?

Stephen Fitzgerald
Great question. So it's the management companies that provide and pay for these services. So these guys contract with a credit card servicing provider that will actually process the cards and deposit money in their accounts. It's done there, with some input from the owner. 

Now, just as a side note, for OTAs, Expedia for example pays the vast majority of their bookings with a credit card at the hotel. Why is that? It's not because they like the cards, it's because the credit card companies pay Expedia to do that. What happens is the hotel pays their credit card fees, then those are shared by the processor back to Expedia, by the card issuer back to Expedia, and actually that's a revenue center for the OTAs. I'm not singling out Expedia: all the OTAs who pay by cards to do this. That’s a revenue source for them. They get another point or two of margin on that product in addition to what they've already charged the consumer on screen. It’s a nice revenue source.

Elliott McNamee
Do the brand.coms do that too? If you pay through the chain, if you book through marriott.com, how does the management company or the owner collect that?

Stephen Fitzgerald
They recommend various ways that are approved by the brand and they try to shoot for the lowest cost.

Elliott McNamee
Getting back to some questions from the audience, Chuck asks: “What's up with resort fees and other annoying extra fees? What's going on with those and is it possible to get around them? Are those a necessary evil or can you negotiate those away?

Stephen Fitzgerald
Well you can certainly negotiate. If you’re sending a lot of customers to a resort, that's great, I'd love to work for your company, that'd be a nice place to stay. At a corporate level, if you have a good relationship with the chain or a sales office, start there with negotiating that fee. The FTC here in the U.S. does not like resort fees, they've made that clear a number of times. So over the last 10 years there have been requirements for more disclosure of those fees, more upfront announcements of those, more of the ability to decline at check in as an example. And I believe there's industry pressure, really government pressure, for those to go away. I mean, the simplest way to make it go away is raise your rate. So if one out of five customers uses your health club, or one out of five uses your spa, raise your rate three or 4%, make the money that way. That ultimately will be where I think we go with a lot of these. But for right now it's a little bit annoying, along with other hotels, for example, that charge for parking. There's miles of parking available for free around the hotel, but they charge you for being on a lot. That's a pet peeve of mine, similar problem.

Elliott McNamee
Man of the people. Serena asks about group bookings, and actually I saw this yesterday BTN published an article on meetings and they said hotels are fixated on meetings. A couple parts here. Is this a pretty big trend? And what potential is there for bringing meetings, whether it's meeting space or room blocks, what potential tool is there for making those easier to book and manage online?

Stephen Fitzgerald
Great question. So a hotel with meeting space is obviously fixated on meetings. And so there are certain properties that have a lot of meeting rooms alongside the property. They have a large kitchen, large catering department, they need the business – they're definitely fixated on it. That's a whole class of hotels that falls in there. 

But here's the other issue: hotels have been reluctant to put meeting rooms online because they don't want to create another intermediary. From their standpoint they created the OTAs by offering them room inventory. And now if they step in the wrong direction they'll be creating another intermediary for meeting rooms that charges them 20% to book a meeting that they should be getting directly [for free] in their minds – they don't want to do that. So there's been an intentional lack of progress for the last 20 years, I'd argue, around getting meeting rooms online because they just don't want to pay that money. So you’re forced into inefficient processes of calling hotels directly or using an RFP tool like Cvent, for example. But I don't predict you're going to see a lot of technology being thrown at this because hotels just don’t want to pay for it, they don't want to pay that [commission] differential.

Elliott McNamee
One or two last questions to finish. Just curious, we talked about barriers to innovation whether it's card fees or management structures – when innovation does happen, how does that happen? Is it one corporate customer and one brand who get together? Or is it another approach, like it's just something that fits into the lowest common denominator, the credit card like virtual cards. How does that innovation happen, if somebody here wanted to make something happen, how would they do it? 

Stephen Fitzgerald
I’ve thought about this a lot in the last several months. And I think it happens quickly. So for example: OTAs were present and around, but not really a big part of the business until 9/11 happened. Post-9/11, 2002, hotels had a ton of inventory, they couldn't sell it. Hotels.com in Dallas would sell it for 30%-plus margins, there were no controls back then. And that's what galvanized the OTA industry into existence, frankly. So if you think back, we talked a little bit about that cost offset, so airlines and hotels began by answering their own phones on their own CRS. They said ‘wait a minute, let's have the travel agent do that, we'll outsource that expense to the travel agent.’ The travel agent said after a while ‘why are we doing this? Our customers can do this themselves. We still get our incentive fee, it’s still a GDS booking when a traveler books themselves on their own corporate booking tool. Let's offload the labor to them.’ 

So who's further down the chain besides the customer? AI. I know I’m banging the AI drum and I apologize, I don't want to keep doing that like many people are these days – but it makes sense. It's happening. You tell your AI: “I’m going to Houston next week for three days, I need to fly there and get a hotel – let the AI figure it out. So I think that's a very interesting trend that we'll see popping up pretty quickly. You don’t have to touch the remaining tech stack so that AI can do its job, it can use the existing plumbing system and technology. That'd be quite interesting. So do that.

Elliott McNamee
Alright, and then because we're AmTrav I'll finish with: is there an NDC for hotels coming soon?

Stephen Fitzgerald
Nope, not for a while. Airlines are monolithic. Fortunately for them, they don't have this degree of fragmentation. Fortunately for them, they have a huge amount of volume compared to hotels. They have a lot of leverage. So there is not an NDC for hotels happening anytime soon.

Elliott McNamee
Alright. Well, Stephen, thank you so much. I found this incredibly educational. Really appreciate you joining us. I will share your contact info in just a second.

Stephen Fitzgerald 
Please let me know, I'm happy to answer any questions that you guys might have.

Elliott McNamee
A couple things that are coming up from AmTrav: the next Tips & Tricks webinar for our customers is scheduled for next Wednesday covering policies, profiles and settings, those are also posted on our blog if anybody would like to see them. See another live demo of AmTrav in action, that's coming in June. And then we are working right now on a report that takes a close look at how folks want to book, looking at our own data to see how they want to book – online? Do they want to work with a travel agent? We're kind of giving it away with the title, but to play on Tears for Fears: everyone wants to book online. So look forward to that in June or so. 

To reach Stephen, His email is right here. Stephen R. Fitzgerald @gmail.com. He is with Garner. He's also on LinkedIn. If you'd like to reach AmTrav, my colleague Susan Altman would love to hear from you. She's SusanA @amtrav.com. Again, thank you so much, Stephen, really appreciate it. The recording and a transcript of this will be up on the AmTrav blog later today or early tomorrow, we'll email it out, Thank you, Stephen. 

Stephen Fitzgerald 
All right. Take care folks.