Industry Update
Opinion Article11 September 2019

Is Amazon Your Next Hotel Distribution Channel?

By Larry Mogelonsky, Managing Director Hotel Mogel Consulting Limited

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Earlier this year, Amazon announced that it has sold its record 100 millionth smart speaker. The allure for such devices as the Amazon Echo, Google Home as a multitude of others entering this space is simple. For the end user, it's convenience. For the mammoth tech company, it's the accrual of more and more data fed into a priority learning algorithm that can then be fed back to the end user for better and better recommendations via the virtual assistant software.


As an intelligent marketing move to promote sales outside of the traditional fourth quarter shopping fest that is Black Friday and Cyber Monday, Amazon has for numerous years now hosted a Prime Day in mid-July, with this latest outing generating over two billion in sales.

There are a few dastardly clever tricks as to how Amazon has squeezed every last drop of lemonade from this summer special, starting first and foremost with how Alexa swiftly moves customers through the purchasing pathway.

It starts with lots of upfront advertising to promote Prime Day, both to subscribers as well as for the nonbelievers yet to install an Amazon-owned listening device in their living room. Starting with the former, all a person needs to do is ask Alexa what the best deals are for that day, then not only does she list them off, but she also immediately asks if you want to place an order.

As you are already a Prime member, your credit card is on file. Thus, a simple 'yes' at this sudden prompt can mean the automatic expenditure of hundreds of dollars depending on what offer Alexa has decided to present to you. And this all happens in under a minute, simultaneously across millions of households worldwide.

Better still, one of the key features that makes Amazon Prime such a worthwhile subscription is that its delivery service has ungodly speed. So, in this initial transaction, not only does Alexa know based on your past purchasing habits roughly what your price elasticity is to thereby not proffer something with any semblance of sticker shock, but you also implicitly know that whatever item you order will be at your doorstep in two days flat.

Such a seamless platform with ostensibly the world's best data-based preference system can mean incredible things for selling hotel rooms. That is, if Amazon decides to enter our vertical.

To my mind, if Amazon enters the travel space it will be like an OTA on meth. The current online search websites still require a lot of work from the customer in that they have to look at a screen (desktop or mobile) then plug in where they want to go and when. Voice is far easier!

With the help of its vast machine learning engine and a host of data that Amazon has gathered from your other non-travel purchases, if you asked Alexa about a good hotel she would be able to quickly come back with a bespoke recommendation that's likely better than what an OTA would display. Moreover, all those other purchases would help to indicate what types of packages or additional amenities you would actually be interested in to help squeeze every last dollar out of you instead of just selling you at BAR on the lowest tier room.

Obviously, there are mountains of integration obstacles to overcome to make this a reality, but as a publicly traded company Amazon must show continual growth. This means that making a play for the hotel business is all but inevitable.

As the hotelier, the key is that you accept that this will happen and prepare accordingly. If Amazon is able to fine hotel travel recommendations and rapidly personalize the initial purchase to anticipate guest needs, how will you adjust your operations accordingly?

Firstly, you need amenities, activities and experiences that can be bundled into value-added packages to entice guests to spend more upfront. Secondly, you must look for new ways to accrue preference data about your guests because the more minutia you know about them the better Alexa will be at selling. Next, and importantly, all this has to be seamlessly integrated so that an external artificial intelligence program can accurately read what your full product range and serve up the best possible offer to a potential customer.

Above all, as hoteliers we must be open to new distribution arrangements. Of course, we will always push for booking direct, but ultimately it's about a healthy channel mix, so make sure you're ready to go with the flow wherever the technology takes us.


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