Accor Group's Digital Transformation: Exploring Benefits of OTA's for A - Essay Sample

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Accor group has been trying to provide excellent customer service and reduce its reliance on online travel agencies (OTA’s). To achieve these goals, Accor has embarked on digital transformation. The current case study analyses on the issues facing Accord group as it progresses its digital footprint. Currently, Accord group has 14 brands throughout the world. The current case study will analyse the benefits of OTA’s for Accord, assess their distribution means, investigate the marketing issues faced by Accor and whether forming a partnership with Room Key will be beneficial. Recommendations will then be provided on the best course of action.

IntroductionCompetition in the hotel sector has been increasing steadily and many traditional hotel groups, for example, Accor, has faced so much competition from the likes of Airbnb. Companies such as Airbnb are have digitally disrupted the market and traditional hotels have had to embrace digitization and e-commerce to have a competitive edge over their competitors. Consumers can access a vast volume of information online and they can easily view the prices of different hotels and compare them. Moreover, customers like sharing their experiences and post them on the internet, and other customers can read such reviews and decide which hotels to avoid and which ones to go to. The ease in availability of information has sidelined hotel groups such as Accord. According to Dubois David (2017), in 2015 alone, hotels in New York lost more than $450 million to Airbnb.

Online travel agencies (OTAs) are now hugely popular since they help in marketing the hotels. Nonetheless, they charge a commission and this reduces the hotel's income (Carrow and Siguaw 2003). According to Ackermann (2016), when OTA’s were developed, although hotels were not so sure about them, they still welcomed them since they acted as channels of distribution in the clearance of distressed inventory. As time went by, it became clear that OTA’s distribution strategy was winning against that of traditional hotels. According to Shahara and Liu (2016), the reason for their success is that they knew consumers’ preferences and demands were changing and people were embracing IT to reduce the journey process of the customer.

ChallengeAlthough Accor has been growing, it still faces stiff competition from old and emerging competitors such as Airbnb. According to a report by Morgan Stanley, 42% of users (both young and old) no longer book hotels such as Accor, instead, they go for Airbnb properties (Bearne 2018). OTA’s charge lower costs thus attracting more customers. Accor’s profitability has also been affected by hotel booking shares of OTA’s such as Trivago and Booking.com.

OpportunityTo gain a competitive edge over its competitors in the hotel and travel industry, Accor can partner with Room Key, a hotel metasearch engine. An evaluation should be conducted if Room Key can be an intermediator between customers and the hotel and whether the partnership can improve the current distribution framework. Lastly, a partnership also offers a channel of removing OTA’s intermediaries and other competitors. One of the ways through which Accor group can gain a competitive edge over their competitors is by partnering with Room Key. However, this partnership can either be beneficial or not, therefore, an analysis should be done to establish whether the partnership will improve Accor’s distribution channels and whether it will eliminate the need to incorporate OTA’s I think you should revise this paraphrasing, you didn’t fully paraphrasing the sample meaning. Thanks.

Room Key provides a platform for reusing and diverting customer traffic from its official website to the original website of their partner hotels. As such, a partnership with Room Key would be beneficial to Accor in several ways. First, it would reduce distribution costs, improve the strategic positioning of the company, and making it easier for customers to have direct contact with the hotel.

Should Accor Group Partner with Room Key?Before partnering with Room Key, Accor should conduct a detailed quantitative analysis to establish whether the partnership is beneficial. Several indicators show the partnership would not be beneficial. Room Key websites connect customers to more than 2 million rooms (2,056,766 rooms to be exact) and Accor would need to pay a commission of about 10-15% to Room Key. The total investment cost would be about $20 million which is quite high. As can be observed, the partnership may not be beneficial.

The internet has revolutionized businesses and customers use the internet to search for almost everything. Moreover, many are members of several OTAs and other loyalty programs. Before customers make any booking, they conduct thorough research and are aware of the marketing techniques used by OTAs and hoteliers (Ady 2015). Room Key is a new entrant and before customers fully know and embrace it, it would require more exposure and marketing by other customers. Moreover, although there are no hidden fees incurred by a customer who books a room through Room Key, the price difference is not that high (a 10% discount).

Alternative DecisionAccor Group has been embracing new distribution strategies to enable them to compete with other hotels and OTAs. These strategies include branding their websites (14 of them), creating a central corporate portal, and launching a mobile application that promotes indirect online distribution. In instances where a company can adopt several strategies that will provide them with a competitive advantage, businesses have to make complex and hard choices. The main benefit of having several strategies is that a company can select the best which works for them (Sebastian and Jorg 2014). For the Accor group, there are three main ways through which they can embrace digital transformation and be successful. Accor should focus on enhancing its brand awareness and thus have direct contact with all its customers through developing the hotel’s loyalty program ‘Le Club Accor Hotels.’

As explained above, OTAs have many advantages including enabling a company to gain new global customers thus increasing the customer base. However, they charge a high commission and if there is a way through which these commissions can be eliminated, that should be done. Rather than just depending on OTA’s and Room Key, the Accor group should develop loyalty programs.

RecommendationsDigital transformation is the integration of new technologies in a company to optimize processes, add value to customers, and improve competitiveness. It is the realignment of technology, business models, and processes, aimed at delivering greater value to customers and employees to compete in the digital economy. Digital transformation rebuilds the dynamics of organizations to adapt them to the needs of the present and the future. Digitization offers enormous potential to gain competitiveness in an increasingly technological world. Incorporating digitization in all company processes generates competitive advantages in the short and long term. It improves the efficiency of processes, promotes collaborative work and internal communication, provides fast responsiveness in a changing environment, and improves customer experience and relationship with the brand.

The main focus of Accor should be on digital marketing, advertisement, and promotions, and increase brand awareness and prominence among customers. By using the methods mentioned above, Accor will generate more sales because they will be able to reach a larger audience, especially through its mobile application which up to now has generated 12% of Accor’s web sales. By embarking on digital transformation, Accor will increase its customer base and continue enlarging the base (Please show that it still has potential to increase…) . Accor should also embrace the use of loyalty programs that will provide a pathway through which customers book rooms directly and get additional benefits such as free extra days. Such benefits increase brand loyalty. These recommendations would help Accor achieve and exceed its digital strategic objectives. The investment money that would have been incurred by partnering with Room Key could be used to invest in the hotel’s digital hospitality program.

References

Accor, 2020. Our History. Accessed online from https://group.accor.com/en/group/who-we-are/our-history

Ackermann, A., 2016. The History of Direct Bookings – Infographic. Retrieved from http://www.triptease.com/history-direct-bookings/

Ady, M., 2015. How Do Consumers Want to Read Travel Reviews? Retrieved May 21, 2020, from https://www.tnooz.com/article/trustyou-how-do-consumers-readtravel-reviews/

Avery, J., Dev, C.S. and O'Connor, P., 2015. Accor: Strengthening the Brand with Digital Marketing. Harvard Business School Case, pp. 315-138. https://www.hbs.edu/faculty/Pages/item.aspx?num=49261

Bearne, S. 2018. Airbnb is forcing everyone to up their game: how hotels are changing tack. Retrieved from www.theguardian.com/business-to-business/2018/apr/11/airbnb-is-forcing-everyone-to-up-their-game-how-hotels-are-changing-tack

Carroll, B. and Siguaw, J., 2003. The evolution of electronic distribution: Effects on hotels and intermediaries. Cornell Hotel and Restaurant Administration Quarterly, 44(4), pp.38-50. https://scholarship.sha.cornell.edu/cgi/viewcontent.cgi?article=1062&context=articles

Dubois, D., 2017. Digital and social strategies for luxury brands. In Luxury market management (pp. 327-337). Springer Gabler, Wiesbaden. Retrieved from https://faculty.insead.edu/david-dubois/documents/23_%20Dubois%202017.pdf

ReviewPro Guest Intelligence, 2016. Hotel Marketing Trends You Need to Know for 2016.

Retrieved May 21, 2020, from. https://www.reviewpro.com/resources/webinarkey-trends-strategies-for-hotel-marketers-in-2016/

Sharara, H., and Liu, P., 2016. How Can Hotel Groups Win in a Changing World? Retrieved

May 21, 2020, from. http://www.egonzehnder.com/files/egon_zehnder_global_hospitality_study_1.pdf