Industry  |  7 June 2021  |  Eva Lacalle  |  3 minute read

What are hotel aggregators and how do they work?

what are hotel aggregators
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A hotel aggregator is a business that rents a hotel on lease, and in exchange takes over operational duties and marketing for the hotels. The hotel can lease a fixed amount of rooms or the entire hotel. While this model can be applied to all hotels, it’s generally applied to budget hotels who are in need of an extra push. 

When an aggregator approaches the hotel, they may propose a series of actions such as facilitating a smoother operations process, using different technologies, training staff or even a complete remodel of the look and feel of the hotel, depending on the needs of the hotel. We’ll look at what hotel aggregators are in more detail, how they work for hotel bookings, the benefits and some considerations when deciding whether to use this model or not. 

 

What are hotel aggregators?

A hotel aggregator is essentially a hotel consolidator. They can be responsible for a part of hotel room inventory, selling it under a different brand or taking over the whole hotel’s inventory. They might even take rooms and sell them separately to different platforms. Once agreed upon the structure of the agreement, the aggregators will take care of rebranding or the terms of agreement.

 

How do aggregators for hotel bookings work?

The hotel aggregator model can be complex but the idea is to boost business to the hotel and for the aggregators to make money by accomplishing certain targets set out in the initial proposal. The process of aggregation begins with selecting a series of hotels and analyzing both their financial results and their marketing plan in order to propose improvements. Based on their findings and their meeting with the hotel owner they then make a series of suggestions to help boost revenue.

Aggregators can touch on many different elements of the hotel. Some of the areas of improvement could be the implementation of a property management system or a hotel booking engine to help drive direct bookings. Other areas they might touch on are operational improvements, such as remodeling the hotel or upskilling staff. 

Once the proposal is accepted, the agreement is signed by both parties and the hotel owner would then proceed to lease the hotel in its entirety or by a set amount of rooms. The idea of the aggregation model is that properties are likely to see the benefits of increased bookings, as it’s in the aggregator’s best interest to try to reinforce their own brand to attract customers through different marketing strategies.

 

What are the benefits of hotel aggregators?

The aggregation model has become popular due to a range of benefits, which we will discuss in further detail below.

No need to worry about marketing

Of course, marketing and brand reputation are two of the main concerns of hoteliers, and with the aggregation model, there is no longer a need to worry about these aspects of the business. Aggregators take care of this for the hotel, often listing on OTAs or their own portal to generate bookings. As it’s in their best interest to create demand and generate leads, an important part of their job will be managing the brand’s online reputation, which is great news for hoteliers as they will no longer have to worry about marketing and reputation management.

Improved experience for staff

Staff may find that working in a more corporate setting will also provide some benefits. Since the level of service needs to be up to par with all the other hotels they manage, aggregators will ensure that staff are properly trained and have opportunities to learn and grow within the company, which in time also comes with better salaries. Find out more of the benefits of upskilling hotel staff

Standardized level of service

Aggregators seek to standardize the level of service, and the now upskilled staff will play an important role in ensuring this quality. Strict protocols will often be in place to ensure that operations run smoothly. This is particularly beneficial for the guest experience, which will positively influence their opinion of the hotel.

Fixed revenue

When aggregators first take over the hotel during the initial phase of refurbishing, the fixed fee might be lower, but as time goes on the fee will increase no matter the volume of sales and the occupancy levels. This is like a breath of fresh air to hoteliers whose main worry are always these figures. The fixed revenue paid will vary based on the number of rooms being managed, where the property is located and the actual state of the property.

 

What to consider when choosing this model

While there are many benefits to choosing this model as we discussed above, it’s important to consider that these benefits also come at a cost, such as losing a say in the important decisions. Aggregators will seek to standardize the level of service but in doing so they may overlook the procedures already in place, which could pose a big adjustment for staff. 

Furthermore, as it’s in their interest to increase bookings, they might do so at a cost, that is by reducing the price. Should the hotel step away from the aggregation model down the line, this may affect the hotel’s reputation. 

Standardizing also takes away the unique personality that an independent hotel might offer, and while a fixed revenue may be attractive, hoteliers must be aware that the hotel will most likely lose part of its original identity in the name of standardization. 

Conclusion

Hotel aggregators are an interesting business model in the hospitality industry, but of course it’s not for everyone. As we’ve discussed, it can pose some problems in terms of quality and over-standardization. Price disparity and negatively affecting prices due to higher discounts are other problems this model can present. 

Nonetheless, if the quality of service stays the same or improves, aggregation can be a wise business choice due to the fact that it provides a fixed monthly revenue and hoteliers no longer need to worry about marketing and brand reputation management. As in any business arrangement there are pros and cons that must be weighed, but if driving bookings to your hotel and increasing profit are concerns, aggregation could be advantageous. 

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Eva Lacalle
7 June 2021