GETTING THE BALANCE RIGHT-

MAXIMISING YIELD THROUGH

CHANNEL MANAGEMENT

ROBERT HENKE

OPERATIONS MANAGER

YHA LTD

The Backpacker Industry

Relationship between OTAs and

Operators

How YHA Manages Distribution

Channels

OVERVIEW

BACKPACKERS:

WHO ARE THEY?

WHY DO THEY COME?

WORK!

Every year more than 200,000 young travelers come to

Australia on a Working Holiday Visa

Stay longer, spend more money, & help our farmers in

process!

Hostels form core of ‘backpacking experience’

They like to get around!

Australia has a network of about 450 backpacker hostels

Low-cost accommodation & communal facilities

WHERE DO THEY STAY?

Alternative accommodation styles

90 19 42 23

Many small independents

No recent industry data on occupancy,

revenue etc available

Lifestyle choice for some owners

HOSTEL INDUSTRY

Fractured industry

Word of

Mouth

Walk-Ins

Guide

Books

Own

Website

Online

Travel

Agents

BUSINESS MAINLY B2C

HOSTEL

GROWTH OF YHA.COM.AU

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

$16,000,000

$18,000,000

THE RISE OF OTAS

CLICK TO

ACCEPT

CONTROVERSIAL TERMS

Toughening up on rate parity

Availability parity INCLUDING last bed availability on

own website

Authorise brand pay-per-click (PPC) advertising

Indemnification from responsibility of taxes

WHAT DID THEY SAY?

INTERNET

FORUMS

YHA NEW

ZEALAND

ARGENTINA

CHAMBER OF

HOSTELS

AUSTRALIAN

TOURISM EXPORT

COUNCIL

BACKPACKER

NETWORK

GERMANY

INDEPENDENT

HOLIDAY HOSTELS OF

IRELAND

BACKPACKER

TRADE NEWS

HOSTELMANAGEMENT.COM

TRAVELTRENDS

VICTORIAN

TOURISM

INDUSTRY

COUNCIL

CHILE

ROME

LONDON

BERLIN

Indemnification for the responsibility of OTA for all taxes was

removed (but liability for GST or similar still with the operator)

Completely removed rate parity

Availability parity only required where “operationally practical”

and does not apply to accommodation only available on

Licensee’s own website

PPC advertising – OTA will not do brand advertising if the

operator notifies OTA in writing not to do so

WHAT WAS THE RESULT?

Business Partner & Competitor at the same time

A CHALLENGING RELATIONSHIP

Operators need to reclaim their products and customers, and

effectively manage relationship with all OTAs

Reset the relationship between operators and OTAs which over

time has become less and less commercially balanced

Adoption of Sydney Declaration

WORLD YOUTH TRAVEL CONFERENCE

(WYSTC) IN SEPTEMBER 2013 IN SYDNEY

OTAs and accommodation operators are mutually dependent

but operators are the ultimate providers of the product; they

alone should determine where it is sold and at what price

SYDNEY DECLARATION Agreements between OTAs and youth travel accommodation operators

should not contain clauses that:

1. Allow the use of property or brand names in online advertising, unless

specifically authorised;

2. Require rate parity;

3. Enforce mandatory availability parity (either via last room availability or

minimum allocations);

4. Allow for agreements to be terminated at short notice (without a

compelling cause); with no consultation and without being signed by both

parties;

5. Are not written in plain English (and are not translated into the main

official language of the operator);

6. Conflict with national or international trade, competition, or consumer

laws;

7. Require operators to indemnify OTAs for tax obligations on commissions;

8. Allow the OTAs to be opaque in how they display default search results

(including the use of spurious “recommended” terms that are designed

to mislead consumers, when the basis of the recommendation is the %

commission paid or the availability given to the OTA);

9. Result in commissions being paid on no shows or any other unrealised

turnover; and

10.Discriminate against an operator based on size or location.

The code of practice represents a constructive and balanced approach to

resetting the relationship between OTAs and youth accommodation

operators. Its adoption will result in a better deal for consumers and will

promote genuine competition.

SYDNEY DECLARATION

YHA’S DISTRIBUTION STRATEGY

In its most recent Strategic Plan, YHA

set itself a clear goal:

No more than 20% of internet bookings

to come from OTAs

At least 80% of internet bookings to

come from yha.com.au

MANAGING DISTRIBUTION

Ongoing investment in yha.com.au

Absolute best rate guarantee for direct

bookings

Channel management training for the

managers of our hostels

Improve the channel management

tools at the disposal of local managers

eNights system - Fully automated direct hostel-to-hostel

booking tool, including automated weekly funds settlement

PMS Channel Manager – Manages all internal channels and

allows Managers to manipulate rates and change availability

to OTAs by controlling what is passed to Siteminder

Siteminder - Manages OTA rates and availability and is

interfaced with the property management system through the

PMS Channel Manager.

CHANNEL MANAGEMENT TOOLS

% OF ONLINE REVENUE GENERATED

THROUGH OTAS

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

2006 2007 2008 2009 2010 2011 2012 2013 2014

(projected)

PARTNER COMPETITION