Just as its hotel partners had to pivot to domestic during the pandemic,
so did WebBeds as it re-deployed resources towards domestic content,
closed its Taiwan office and ramped up its domestic distribution
network, working with local travel agents.
Kok
Sheng Sun, president, APAC, for WebBeds, speaks to Yeoh Siew Hoon about
what changes the bedbank has seen in the hospitality distribution
landscape and the emergence of new social channels in some markets like
Indonesia, and how it sees the new world.
Q: Webjet Limited, your parent company, returned to profit in
2H22. Similarly with WebBeds, which was profitable 2H22 driven by North
American and European markets. How is APAC tracking currently?
We have started seeing significant effects of the opening of Asia
(Australia and South-east Asia) in April, business have come back
strongly. There is a great improvement in this quarter from April to
June, as compared to previous quarter. Keeping in mind that one of our
largest markets, China, which accounts for a significant portion of APAC
business, is still not open, so there is good potential ahead. Even
though China has not opened, destinations that have reopened are moving
to near pre-Covid levels, and some markets like Australia have exceeded
pre-Covid levels.
Q:
What signs of recovery are you seeing, and what key trends are you
seeing in terms of booking patterns? Any discernible change in customer
behaviour?
I think in the next few months, there will be some transitioning of
trends. There’s a big change in the landscape, travel now depends on
border restrictions, how easy is it to get there, and availability.
During the pandemic, everything was last minute and domestic. In this
initial stage of reopening, it’s still very much the same because of the
extra documentation needed for travel, but people are booking further
ahead. We are seeing long lead time booking especially for peak periods –
there is very strong demand for December. In fact, capacity is not
catching up with pent-up demand for some destinations.
Things
will continue to be erratic for a while. If China opens, it will
disrupt the trend quite dramatically. And then there’s Japan – we are
seeing bookings even though its borders are not fully opened at the
moment, so we are expecting a rush when their borders fully open.
For
us, the strategy is about making sure we have enough supply – whether
for last-minute or advance bookings – and match supply to the demand.
The advantage we have is being able to spot a trend – for example, we
are seeing strong demand from India and the Middle East for July, and we
want to help our hotels gear up for that.
Q: How much of your inventory is direct contract?
Of the 400,000+ hotels we supply to clients, we are directly
contracted to over 30,000+ hotels. Though majority of our trading volume
is through direct contracts, we see value in third-party distributors –
they connect us to places that are out of reach for us.
Sun: “I don’t think rate leakage will be eradicated totally. If you want to sell your product at volume, there will be some imperfections.”
Q: Traditionally, bedbanks like WebBeds relied on inbound and
outbound business. During Covid, that stopped and domestic came into
play. How did that impact you and what changes have you made to the
business – are you now deeper into domestic? And how does that change
inventory sourcing and management?
Covid has been an opportunity to work with domestic specialists.
Pre-pandemic, domestic was about 11% of our business. During the
pandemic, we pivoted our resources towards domestic. We changed the role
of some team members – from sales to contracting more products for the
domestic market. We went to Tier 2 and Tier 3 cities and approached
boutique hotels that appealed to the domestic market.
Current domestic sales are around 37% of our business and with travel
recovering, we are helping these partners expand their business to
international inbound. For example, in Indonesia, some domestic agents
are now our top international sellers.
In terms of staff cuts, our workforce was reduced by 22% at group
level. For WebBeds APAC, we closed our office in Taiwan and are managing
our clients and hotel partners out of the Hong Kong and Singapore
offices. (Currently, its team in APAC is about 250 strong.)
Q: An age-old challenge is rate parity across different
channels – did that get worse during the pandemic? And is it even worse
now with recovery and hotels anxious to recoup?
It hasn’t gotten worse. During the pandemic, rate parity issues are
minimal due to the low booking volume. Most hotels still value rate
parity – how they distribute their rates and according to their rules.
Over the past few years, we have improved the way we manage this – how
we segment the clients, how we distribute, and now have better control.
Hotels acknowledge and appreciate the effort and have more trust in us
now.
Q: But there is still leakage though – wholesale rates appearing where they should not be.
Yes, some amount of leakage is inevitable even with stringent checks
and controls. But to be frank, yes, rate parity is high on hotels’
agenda but it’s not the highest. The highest item on the agenda is the
resource crunch – manpower to turn around rooms, to restore capacity. I
was in Malaysia and hotels there were telling me of the problems they
have with getting staff and staff costs.
Q: Do you ever see the rate parity issue being solved?
It depends how hotels strategise their business. If you look 10
years’ back, rate parity wasn’t a thing. But online distribution changed
all that and rates became open and transparent. Agent partners are also
expanding channels to sell – Instagram social commerce is huge in
Indonesia. In South Korea, you see increasing distribution through
online and e-commerce players like Naver and Tmon.
I don’t think rate leakage will be eradicated totally. If you want to
sell your product at volume, there will be some imperfections.
Q: I see you have signed a partnership with AirAsia superapp. Are you looking to work with e-commerce platforms like Lazada?
Wholesale and retail are coming back strongly, their recovery is as strong as ours, and they are also evolving and using social channels to be in contact with their customers.– Kok Sheng Sun, president, APAC, WebBeds
We are not working with e-commerce platforms yet, but we are always
exploring new channels to sell to consumers. We can work with any
business that can distribute the product. On the back end, we have to
make sure we segment the products that we have, distribute the right
product to the right channel.
Online (including social media) is part of the business but wholesale
and retail are still growing. In fact, wholesale and retail are coming
back strongly, their recovery is as strong as ours, and they are also
evolving and using social channels to be in contact with their
customers.
Q:
Another key issue with bedbanks and hotels is credit – and the pandemic
was rough on cash flow. How has the pandemic impacted credit terms with
hotel partners? What kind of new arrangements are you seeing as each
player in the value chain strive to maximise their cash flow and credit
terms?
For Webjet Limited, when the pandemic hit, it impacted our share
price and we went out to the market to raise AUD346 million (US$235
million). That fund put us in a comfortable position to invest in our
people, our technology, and our business. We were able to trade normally
with our partners which instilled confidence and allowed us to
strengthen relationships.
Before the pandemic, we were trading with the virtual credit card
system. Partners are paid upon check-in, and that hasn’t changed.
Credit control is indeed tighter now, and hotels are not keen on
giving credit. If anything, they are looking out for pre-buy deals – you
pre-buy the rooms, and pay them straight up. They are looking for fixed
security deposits and floating deposits with intermediaries. These are
quite manual in nature, and we prefer the virtual credit card system, as
it’s much more automated.
Q: There is talk that during the pandemic, bookings to hotels
went more direct but with travel recovery, OTA distribution remains as
strong if not stronger. What key trends do you think will influence
hotel distribution in the next three years?
The pandemic washed down some of the players, but those left behind
will come back stronger. The intermediary business is still growing, and
it’s an important part of the ecosystem. The recovery for
intermediaries has been pretty strong – they have low costs, been in
business a long time with strong reputation, they went dormant during
the pandemic, but they are nimble enough to re-start business very
quickly.
Q: There are new startups now that offer hotels the
opportunity of direct connectivity to the customer without having to go
through intermediaries such as OTAs or traditional travel agencies. How
do you think these startups will change the distribution landscape and
how will bedbanks respond?
There is a lot of interest from hotels to explore different ways of
distribution, to see if they can get higher yields. We are monitoring
these developments, but we will focus on what we do well. We address
hotels’ pain point by making use of our technology and data to allow
hotels to access and make better commercial decisions.
Q: In your view, what has the past two years done to travel
technology, distribution and marketing in the different sectors such as
aviation and hospitality? What trends are you watching as a travel
industry leader?
In the past, travel was not that easy. You needed more planning, more
help from travel agents. Technology has helped make things easier and
given more power to the consumer to self-help. The pandemic has moved it
backwards in certain ways. People who are usually confident travellers
had a setback.
From my own experience, I went to Kuala Lumpur recently and it took
me quite a while to download and fill in the local app. Currently
consumers may not be as confident and powerful as they were but as
things normalise, the power will swing back to the consumer.
This trend will influence our strategy, which includes the types of
distribution players we work with. Hotels are our core and will be a
very important accommodation option but there are changing trends such
as alternative accommodation. We are very keen in exploring
opportunities to work with and invest in startups, especially in travel
tech.
Source: WiT