Norwegian hotel chains joining the battle against online travel agencies
A new master’s thesis from NHH shows what Norwegian hotel chains do when digital platforms become intermediaries between the customer and the hotel.
The thesis shows that it is possible for the hotels to renegotiate the commission paid to the platforms. When the digital platforms charge a lower price, the hotels are left with a bigger share of the profit.
About the thesis
- The thesis Hva nordiske hotellkjeder gjør for å holde seg konkurransedyktige i markedet med Online Travel Agencies (‘What Nordic hotel chains do to stay competitive in a market with online travel agencies’) was written by Marita Sagebø and Vilde Sol Vabø. Professor Jon Iden supervised the former NHH students.
- The thesis is based on qualitative interviews with Scandic Hotels Group, Thon Hotels and Radisson Hotel Group.
- It describes how the chains position themselves in a market where digital platforms have gained significant market power.
Taking a big piece of the pie
‘The challenge for hotels arises when a large proportion of the guests pay using digital platforms, and the platforms charge a sizeable amount for the share of the sale that is made through their pages,’ says Professor Jon Iden at NHH’s Department of Strategy and Management. Iden was the students’ supervisor.
Former NHH students Marita Sagebø (26) and Vilde Sol Vabø (27) wrote their thesis on how hotel chains can stay competitive in a market that also includes online platforms.
Vabø and Sagebø have looked at how three of Norway’s biggest hotel chains meet the digital competition.
Better services and lower commission
Hotel chains have improved their digital presence to get more customers to book stays directly with them. Better websites, or dedicated apps, shall make it easier for guests to bypass digital platforms.
‘Hotels focus on the whole customer journey. They treat their guests like customers from before they arrive until after they have left,’ says Marita Sagebø.
The former NHH students explain that, in order to stay competitive, hotel chains focus on loyalty programmes and personalised services.
‘This means that customers can opt out of breakfast, pay for fast check-in or other additional services,’ says Sagebø.
More than a travel agency
Professor Jon Iden explains that using travel agencies to find the right hotel is not a new trend. Digital platforms also make it easier for guests to find the right hotel and to compare their options.
‘The challenge for hotels arises when a large proportion of the guests pay using digital platforms, and the platforms charge a sizeable amount for the share of the sale that is made through their pages,’ says Iden.
He adds that, when a sale is made through the platform, it is the platform that retains the customer data. This information makes it easier for the platform to maintain the customer relationship.
Chains have negotiation power
Vabø and Sagebø expected it to be more difficult for the hotels to compete with digital platforms.
‘In theory, we could be looking at a trend whereby hotels only provide the hotel rooms, while the digital platforms sell them,’ says Vilde Sol Vabø.
The hotel chains the students have studied are major players in the Norwegian market, which means they have greater negotiation power than their smaller competitors.
‘We found that the chains exploited their market power. They pay lower commission in areas with high market shares than in areas with low market shares,’ says Vabø.
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Major international players
Iden explains that the topic of their thesis is relevant for an increasing number of industries. Both businesses and consumers have to deal with various digital platforms to an increasing extent.
‘The platforms are gaining in popularity. It is important that we, as consumers, understand what it means when we use these platforms, and what other options we have,’ says Iden.
For businesses, it is difficult to compete with major international players. They have a lot of money and the ability to dominate the markets they operate in. This makes it important for businesses to find out how to position themselves in the market.
‘The good news is that this thesis shows that it is possible to negotiate the commission rates in this industry.’