default logo

German hotel booking giant HRS leans more towards business travel

This summer is a turning point for HRS, Germany’s largest online travel agency and specialist in corporate hotel reservations.

In July, the new HRS head office, next to Cologne main station, is due to be completed. The new building will enable the company with 1,500 employees to increase its workforce in Cologne.

The new hire will reflect a rebalanced set of priorities.

In the German-speaking world, HRS is best known as a consumer reservations brand, with one in three online hotel reservations in Germany made through its portals. But the online travel agency division is only a small part of the private company’s global operations.

It’s also a division that’s under pressure, according to industry experts. The percentage contribution of the consumer business to the company’s revenue is expected to decline each year as the brand faces a fierce marketing battle against Amsterdam-based Booking.com and headquartered Expedia. in the USA.

Respond to tariff parity bans

The backstory: For about a decade, HRS and Booking.com benefited from rate parity contractual clauses that required hotels to offer online travel agencies the best rates from the hotels they also offered on their own websites. .

But German government decisions in 2015 banned such clauses.

Since November 2016, HRS has adapted to the new landscape by adding the Expedia Affiliate Network (EAN) inventory to its lists. He sees this as a way to address some of the pricing and availability gaps that hotels don’t offer directly to HRS.

The company plans to offer its users rates and availability from multiple sources, signaling a slight departure from a “pure” online travel agency model, where HRS has purchased all rooms directly from hotels.

Unlike meta-search brands like Trivago, HRS does not outsource guests to third-party bookings. Instead, travelers continue to book through HRS sites as usual.

In the case of reservations originating from EAN, however, Expedia Inc. gets a share of each transaction. Additionally, if any issues arise with the transaction, HRS should work with the third party to help travelers resolve the issues.

The private company is not disclosing any figures. It is therefore not clear to what extent regulatory changes or Booking.com’s marketing spend put more pressure on the company’s consumption model. But the rate parity changes are to blame for the move to a new “multi-source model”.

Overall, the tensions in HRS’s mainstream business appear to be prompting the company to diversify its revenue streams.

Globally, HRS is best known as a giant in business travel services, with more than 40,000 companies using its various services.

Its managing director, Tobias Ragge, tried to develop this activity, which specializes in hotel reservations.

To find out more, Skift spoke to Ragge during his recent visit to New York.

A CEO changes direction

Ragge, CEO of the company since 2008, talks about his big goals.

He says his company is doing fairly well compared to its competition on its consumer-oriented online travel sites. “Our consumer game is a marketing game confined mainly to the German-speaking markets. It’s about delivering better content and being better at “retaining” customers to create loyal customers. “

But Ragge is much more eager to talk about other areas of the business. “Our core business is not leisure travel,” he emphasizes. “Our core business is business travel. We will sell leisure products when they want to, but that is not our primary focus.

Considering its primary business purpose, why doesn’t HRS sell its brands to consumers?

Ragge laughs and says, “Well, why not? Yeah. We could. I mean, in business, a sale is always a possibility. But we generally have the prospect that we are already running our leisure and corporate activities as independent businesses. There is no real need to say that we have to sell one to focus on the other because A is not distracting from B.

Ragge adds, “In fact, our online travel agency business generates the majority of its bookings with business travelers in small and medium-sized businesses. So there is a huge spillover between these two business models, as the knowledge we get from observing the traveler in small businesses also allows us to create our business-to-business services for large businesses. They go hand in hand, complement each other.

Providing guest technology to hotels

In a separate effort, HRS also wants to grow its global business by offering software services to independent and mid-sized hotels and small chains.

In 2014, Ragge attended a conference at the European Business School and spoke with the founder of a Berlin startup called Conichi. This hotel smartphone app development company believes electronic sensors can help hotels identify guests faster for faster and more personalized check-in and check-out.

HRS quickly made an investment “a hefty seven-figure”. Conichi, founded three years ago, says its mobile hotel app is used in around 250 European hotels. To participate, hotels must install beacons (or receivers based on a Bluetooth signal) to recognize guests when they arrive or depart from a property.

HRS promotes the app, which has been downloaded “several hundred thousand times,” says Conichi. Frequent travelers can use the app to create a profile with their preferences, such as preferred pillow size and room type, and store personal and business credit cards, for use regardless of hotel chain. or the reservation channel used to make the reservation.

When a guest arrives at a property, sensors recognize them and notify reception computers. Front desk workers will see some of the forms they need to fill out automatically populated with relevant customer information.

The Conichi app also allows guests to bypass the need to go to reception for check-out, allowing them to use the app instead to note items consumed in the minibar or other expenses incurred and to request an email receipt.

Focus on the company

Over the past two years, HRS has accelerated its growth in North America. In 2015, HRS opened its first office in the United States. Last year it tripled to 3,000 the number of companies on behalf of which it manages procurement processes. He says he’s helped businesses book 12 million room nights.

Last May, it announced an agreement with Altour to be one of its back-end hotel inventory providers for its corporate clients.

The HRS offering enables companies to reserve rooms in more than 350,000 hotels, many of which do not participate in traditional booking channels, at their own negotiated rates and at discounted rates exclusive to HRS companies.

Try to stand out

Ragge believes HRS can differentiate itself by having the largest inventory of independent hotel properties – an area that more chain-oriented competitors have underestimated but which accounts for three-quarters of the global hotel supply. HRS claims to have 210,000 independent properties available for booking, up from 180,000 a year ago.

More broadly, HRS faces a challenge as content and reservation technology becomes more mainstreamed in the travel management space – with everyone from small startups to billionaire companies taking on the challenge. to parts of the problem.

There are rumors that HRS is trying to gain market share through aggressive pricing. Is HRS going to go to travel management companies and offer them to get their hotels for free?

Ragge says there are a lot of misconceptions out there. HRS works with travel management companies (TMCs) in a number of ways.

Some have free access to hotel content and at exclusive rates, he says. “For some TMCs, we have strategic partnerships where the TMC is basically saying, ‘Why don’t you just become our hotel partner and take care of it, because it’s way too complex for us or we don’t want it. To do ? “‘”

He explains, “In those cases if a TMC says, ‘Well, I’m willing to outsource my entire process to you for a particular hotel that a guest uses regularly,’ then we can do the sourcing as well. for them for free – but only in these cases. If they don’t, we don’t, and then we only have content agreements where they consume our content.

Generally speaking, Ragge says that HRS sets itself apart by offering “an end-to-end process, which means we’ll do the hotel research, we’ll do the hotel negotiation, we’ll make sure the rates are right. automatically low without the customer having to do so. let’s take action, and we’ll make that content bookable across all kinds of channels to appeal to how different types of travelers like to book, and ultimately we’ll deliver the highest savings at the lowest possible costs for customers. .

Ragge says there is a clear market opportunity for HRS when it comes to global business travel.

“We are working to make sure that whatever process you need, be it procurement, payment process, etc., we can reduce costs by automating your processes and applying various best practices. industry-wide to increase the productivity of your employees. participation in your company’s travel program.

What is the most difficult challenge that HRS will face in the years to come? Ragge says he’s tapping into the Chinese market. “China is already our second largest market,” he says, but notes the company needs to do better.

Online bookings in Chinese business travel become more important every year as travelers increasingly want to book their rooms through their company’s booking tool, and there is a gap in the market that HRS can fill. , he believes.

Globally, Ragge says the “foremost” aspiration of the company is to achieve its ambition to become “the world’s leading provider of business hotel reservation services for business travel”.

It remains to be seen whether the inauguration this summer of its new headquarters will mark the start of a global growth spurt driven by corporate earnings or the culmination of a business that could see the tide turn off for its business. General public.