Alex Gisbert, CEO at Fastpayhotels, explains dynamic distribution models for hotels and some of the latest developments in hotel distribution technologies.
Prior to establishing Fastpayhotels, Alex Gisbert was COO at Lowcost Travel Group and Director in online partner marketing at Expedia. He founded Fastpayhotels in 2015 as a B2B platform for hotels and travel agencies, using dynamic rates to fill hotel rooms on a non-refundable basis at a low cost of distribution.
PACE Dimensions: Your supply base at the moment is largely mid-scale European hotel chains, are you working with any larger-scale hotel groups?
Alex Gisbert: Yes, perhaps the fastest-growing part of what we do is the global hotel chains.
As more hotel chains are moving to intelligent revenue management, eliminating old school paper-based static contracting, we’re seeing more hotels looking to work with dynamic rates, whether that’s net or retail.
We take net rates from our partners, but we can see that mentality about intelligent and automated revenue management expanding from European cities and into Asia and the US. We’re seeing increasingly numbers of US properties sign up for this.
PACE Dimensions: Which business needs are hotels using Fastpayhotels for at the moment? Is it largely selling distressed inventory, or selling holiday season for business hotels?
Alex Gisbert: We can see that leisure hotels are using us to drive early demand. When I say early, I mean 60 to 90 days out; hotels are looking to drive and revenue-manage demand on a non-refundable basis early on, making sure that they have a minimum amount of rooms filled. After that we see the other spike for arrivals within seven days. In fact, looking at April data, 8% of our bookings were for the same day, which is common on web direct but incremental for B2B channels.
Traditionally wholesalers have been very bad at driving same day or very late bookings. Given that we are working on all rates, our rooms are non-refundable and we are using dynamic connectivity, many hotels are beginning to open up their last rooms to us. Traditionally, hotels have been using some really good companies, like HotelTonight or Booking.com, or they’ve been using their own website to sell that very last minute inventory. They haven’t previously had any kind of partner that’s been able to support them on the same day or next day, or in two days time, in the B2B space.
Because of the nature of our model and of our technology, we seem to have been able to unlock demand from travel agents for immediate travel, and that’s worked out well. We got some really good feedback from hotels in Dubai and New York for example, in the course of the last month.
PACE Dimensions: We can see the appeal with the business model, but what do think stops existing travel agencies from replicating this for hotel suppliers?
Alex Gisbert: We have a very low cost of distribution, we have an incredibly agile business that’s been built from the bottom up to run a certain and bespoke model. It’s difficult for others to adapt to it.
Not all businesses benefit from the right technology, from a low cost base and from a global approach from day one. Fastpayhotels has quite a unique approach that is built from the bottom up.
PACE Dimensions: Which unique capabilities are you bringing to the table at the moment?
Alex Gisbert: Without giving too much away, it’s our ability to deliver and our ability to unlock rates. Our travel agent customers are receiving rate plans from us that they don’t receive from other wholesalers in the market. Our customers are putting hotels live faster and more efficiently than perhaps some of our competitors are doing.
I also think our ability to help our hotel partners prescribe and target the right demand that they need for their right time is something that perhaps the others cannot do.
Some of our key partners are now coming to us saying: “I have issues in this booking window and this destination, from this nationality, from these source markets”, and Fastpayhotels is able to move its machinery and technology around to be able to support and pinpoint, tactically, what hotels are looking for.
PACE Dimensions: What are the areas where you anticipate where the business will grow? Whether it’s new geographic markets or whether it’s selling other inventory beyond hotels, how do you imagine it will continue?
Alex Gisbert: We’re quite purist about that; we’re interested purely in selling accommodation in the broader sense for the foreseeable future, that’s what we do best.
The business has around 16,000 hotels on sale. We anticipate that number will get to around 40,000 by the end of the year. I would say it will be the mid and large hotel chains that are going to grow with us in the short term.
On the demand side, geographically we’re making a big push into Latin America, which is already our number one source market. That will continue to grow in a very fragmented demand market.
What we’d like to see over the next 18 months is more Asia Pacific demand growing, generally. We want to get that right. We’re successfully on-boarding hotels there, but we want to drive more demand within this region.
PACE Dimensions: Which hotel technologies do you think are the most interesting? And which will have the greatest impact on distribution in the near future?
Alex Gisbert: I have a lot of respect for the RMS (revenue management) systems that are coming to the market. There are some really smart operators, like the Duettos and the IDeaS etc. When I see hotels creating intelligent and automated approaches to revenue management, that’s really interesting.
“Customers are booking in different ways, on different devices, and in different locations today than they were five years ago; there’s no way that the distribution strategy a hotel had five years ago is the right one in today´s environment.” – Alex Gisbert, CEO, Fastpayhotels
All the technology and analysis that is beginning to allow hotels to work out their fully end-to-end net cost of distribution is providing a more global vision of what each booking is costing – in terms of distribution, in terms of cancellation, in terms of managing stop sales etc. It feels to me that we’re going into a revisionist period, academically, in the way hotels manage distribution. It feels like lots of hotels are quite openly rethinking what they want distribution to look like. As a result, we are seeing more and more hotels now opt towards net rate parity strategy, as opposed to sell rate parity strategy. This is a good example of how innovation, tech and good data is changing how hotels plan and execute new distribution strategies.
If customers are booking in different ways, on different devices, and in different locations today than they were five years ago, there’s no way that the distribution strategy a hotel had five years ago is the right one in today´s environment.
Any technology from companies with that revisionist approach to hotel distribution is interesting, in my view. So, the onset of channel managers, direct booking, the ability to work out your fully net cost, anything that reduces the cost of how payments are made and received – there’s so much innovation in all of the different parts of the value chain and the distribution channels.
The cost of technology, servers and the barriers of technology are coming down, and that makes it very easy for rates, prices, and availability to navigate around the world at record light speed. Thousands of hotel rates are being moved around from one country to another, from one intermediary or one wholesaler or one OTA or one tour operator to another with very little control at the hotel.
I think that hotels are facing a real uphill battle on understanding where their consumer starts, where their consumer is looking, and through which channels, because clearly technology is making it very easy for rates and availability to move around the world. That’s the only downside of all this new technology for our hotel partners. That is the feedback we get daily.
PACE Dimensions: With private equity companies buying up and consolidating some of the bed bank business, what is your view on the long-term sustainability for Fastpay?
Alex Gisbert: We’re in good shape because the business has been built with a lower cost base in mind, with a high degree of automation. We were born to live with a low cost base and a low margin approach and we are religious about maintaining that.
“Every hotel has needs, every hotel has Sunday nights that need filling, or Januarys that are suffering, or post-Christmas periods that need help” – Alex Gisbert, CEO, Fastpayhotels
If you look at the old school intermediary businesses, people are looking for economies of scale and they are looking at mergers and acquisitions, because everyone’s feeling a high level of margin pressure as hotels are standardising the take that they’re able to share with their customers. That take is not only being standardised but also coming down gradually.
There is a series of pretty enormous intermediaries that continue to have large cost bases and they will suffer as a result of margins coming down. That will only accelerate as hotels drive more of their sales direct.
To give you direct examples of that, unlike some of its competitors, Fastpayhotels doesn’t have a building with hundreds of customer service operators on a phone and it certainly doesn’t have hundreds of people who are manually loading contracts and offers and stop sales etc. It is just not efficient to work that way anymore, frankly.
In a world where technology allows you to eliminate that cost base, Fastpayhotels has taken on that technology and endorsed it and embraced it, where perhaps some of the older school intermediaries continue to have large teams with expensive costs in lots of offices around the world. At this end of the day this all feeds through to the cost of distribution they charge hotels.
At the same time, its key that we add value to our hotel partners by targeting demand. We think that’s a really important part of what we do. Every hotel has needs, every hotel has Sunday nights that need filling, or Januarys that are suffering, or post-Christmas periods that need help – even pre-Christmas periods in the hotels located in areas like the Caribbean.
What Fastpayhotels is able to do is marry hotel need periods with demand quite effectively and dynamically and that represents value at a fair price. If we can continue to do that, it does provide for a sustainable model going forward.