Intermediaries driving innovation in hotel industry

Hotel industry's digital disruptors encourage greater price transparency for consumers


201805  Concept  Online Travel Industry 

The entry of disruptive intermediaries into the hotel value chain poses a major threat to the sector’s smaller accommodation providers, the Head of Strategy and Transformation at InterContinental Hotels Group (IHG) has warned.

Gavin Flynn said the emergence of new players like and Expedia had increased the speed of innovation and driven hotel companies to give consumers greater choice and price transparency.

“The hotel industry has been, until very recently, really quite horrible about controlling pricing. You could find the hotel rooms at wildly different prices in different channels,” Flynn said.

“And so when an Expedia or a says ‘we’re the cheapest’, it’s actually quite hard to challenge.

“Now in recent times, we and other hotel companies have tried to drive very consistent pricing across the channels and make sure that actually when you book direct you’re not disadvantaged and ideally it’s even a little cheaper than booking on an intermediary.”

Flynn's comments appear in the latest episode of the London Business School Review (LBSR) podcast series, Digital Transformation Briefings. The episode, which looks at how companies respond to business model innovation in their industry, also features Keyvan Vakili, LBS's Assistant Professor of Strategy and Entrepreneurship.

Flynn said that while innovation within the hotel industry was not a new phenomena, the new business landscape would prove challenging for smaller players in the market.

“The innovation has always been there. I think the scale and pace is just much, much higher now,” Flynn said.

“You’ve got multi-billion-dollar companies playing in these spaces, whereas historically it might have been much smaller travel agencies or meeting brokers and it forces companies to innovate and you have to be at scale to innovate.

“As we look at the hotel industry, I think it bifurcates. Big companies with strong brands and deep pockets can co-exist with these new and disruptive players. A small company that can’t afford to offer the loyalty benefits, build out a digital app or an ecosystem, doesn't have the brand portfolio it might need to attract those customers – that is really going to struggle,” Flynn said.

Hosted by Julian Birkinshaw, Professor of Strategy and Entrepreneurship at London Business School (LBS) and Academic Director of the School’s Institute of Innovation and Entrepreneurship, the Digital Transformation Briefings series brings together experts from academia and the corporate community to discuss the consequences of the digital revolution for businesses around the world. Previous episodes have discussed how data science can boost business and the influence of robo-advisors.

To find out more about how the hotel industry is responding to disruptive business models and listen to the episode in full, visit LBS's dedicated digital disruption podcasts hub.

LBSR podcasts are available from Soundcloud, Pocket Casts, Stitcher and iTunes.