Over 18,500 hotels worldwide wonder at its impact – positive or negative

The final quarter of 2003 witnessed unprecedented acquisition and merger activity by some of the world’s largest representation companies. Clients of these firms watched intently as their providers of GDS and Internet distribution bought, merged, and submerged.

The purchase of Unirez by Pegasus Solutions was the first major announcement. It was followed soon after by news of acquisition of Lexington Services by Calgary-based VIP International. The activity was capped by the merger of SynXis and hubX. The combined clients of these six companies number in excess of 18,000 hotels, spread across the globe. At each of these properties, management staff speculates about the impact – positive or negative – these developments will have on the services they receive, on prices for those services and on the volume of bookings they receive through the electronic distribution channels.


For many in the industry, the surprise in this spate of ownership changes was not that it occurred, but that it took so long to happen. With the gravy days of the 1990’s  when numerous unrepresented hotels were available to be courted and contracted over, the route to further growth for the larger players was through acquisition. Shrinking revenues in a slow economy weakened many representation companies, leaving them vulnerable for takeover.

Growth was undoubtedly a motivator for Pegasus Solutions, SynXis and VIP International but it was not their sole interest. Pegasus EVP Marketing Robert Boles explained that for his company, acquisition of low cost, functionally-rich technology that will enable Pegasus to develop two clearly defined service lines was a major factor. He said, “We went through a build or buy decision process and decided to buy Unirez. This allows us to more quickly deliver both a lower cost distribution connectivity service as well as a full service representation offering” (through Utell).

SynXis President and CEO Jim Kelly also cited technology gains in assessing the benefits of merging with hubX. Kelly said, “We will be able to provide a more advanced web site booking engine, and more numerous and improved PMS interfaces. The addition of the hubX talent gives us the ability to be quicker to market with new features and products and to be competitive with the addition of some web services such as web site development”.

Possibly indicating that client acquisition outweighed other advantages in VIP’s purchase of Lexington Services, VIP President Kelly Blake said, “VIP clients can expect to see even more of a product offering from the combined entity as the size of the company provides even more resources and negotiating power”.


The companies involved in this merger/acquisition activity occupied five of the top six slots in the most recent Hotels magazine report (July 2003) of the top representation companies. Suddenly the field of representation choices appears to narrow. Pegasus’ Boles said, “The smaller players will start to struggle as they cannot compete on the same basis”.

InnPoints Worldwide President Helen Collins said, “The recent consolidation will create a less competitive market. This will give the hotel fewer choices, but the technology options presented will be more extensive.”

Collins’ point about more extensive technology options is an interesting one. There is a potential benefit for not only the clients of these six (now three) companies but also for the customers of other representation firms, as their service providers will face pressure to strengthen the technology-based features they offer.

Boles, Blake and Kelly all feel that their acquisitions/mergers will result in stronger technology within their respective operations.  Boles said, “Pegasus intend(s) to leverage numerous elements of Unirez technology platform to add features and functions … in terms of enhanced, easy to use, user interfaces, and data management automation.”

Jim Kelly said, “SynXis will be able to provide a more advanced web site booking engine, and more numerous and improved PMS interfaces. The addition of the hubX talent gives us the ability to be quicker to market with new features and products.”

Electronic distribution through the Internet and the global distribution systems is becoming a higher profile issue for hotels worldwide. Once the domain of the reservation manager and the director of sales, it is now an area of interest for general managers and often property owners. Representation company executives recognize this heightened priority of their work. InnPoints’ Collins said, “Probably the biggest challenge currently facing our clients is in the area of channel management and the net rate (merchant) model programs. The technology needs to support the yield management and revenue management strategies of the client.”

Each of these “big three” appears intent on tackling these issues with a slightly different approach. At Pegasus, the strategy will be to offer two service tiers to its independent client – a basic level and a full service level inclusive of demand generation, sales and marketing activities each supported by the Unirez-developed technology platform.  Kelly said SynXis sees itself as a purveyor of fine technology to the hotel industry, not necessarily a representation company.  “hubX brought great technology, great technologists”, said Kelly. “We will continue to set the standard of automation of reservation management, incorporating history-based and competitive yield strategies while strengthening on-line training.”

The most high touch approach to supporting its company’s clients is voiced by VIP’s Kelly Blake who plans to extend VIP’s proactive revenue management coaching program to his newly acquired Lexington customers. Blake said VIP will continue to provide the industry’s highest level of service through our industry-leading ratio of revenue managers to properties (1 to 80) …continuing the push to become the revenue manager and virtual sales and marketing arm for independents to mid-sized hotel chains. Blake continued, “Not only will we help (our clients) navigate the myriad of ever changing electronic distribution channels, but we will help them optimize all of their sources of business, including group sales, meetings and conventions, tours, etc (outside of traditional representation company channels).”

Any attempt to amalgamate two organizations carries with it an array of challenges, many of them related to merging two corporate styles, to resolving differences in policies and procedures, to defining new roles and responsibilities for staff. The needs – current and future – of the customer are easily put aside while these more immediate, more emotional issues are put to rest.

In each of these three transactions very different management and operational styles are being brought together. And each of the new, much larger entities will be fundamentally challenged to maintain their focus on customer service.  InnPoints’ Collins said, “Service levels could potentially suffer in the new ‘larger’ companies if they do not handle the increased demands that come with the addition of thousands of new clients.”

We can add to these operations-related distractions the pressure of changing needs of many representation clients. The service hotels seek has progressed beyond “simple” connectivity to connectivity plus substantial, frequent support in evaluating distribution options, assistance in maximizing revenues through adept pricing in electronic channels. The representation industry will be challenged to reshape itself, to move to closer, more educational relationships with its clients. This will be a tall order in the midst of the industry’s commercial reorganization.

What does this all mean for the hotels who use representation companies? Will service deteriorate? Will fees rise? Is the news all bad? The single answer to these three questions, as I see it, is probably not. These mergers have created fewer, but stronger competitors. That competition will focus, and force, each vendor to listen and respond to their customers. Without exception, the executives of representation companies realize their clients’ needs are becoming both more complex and more urgent.

My counsel to hoteliers whose properties use representation companies:

  • Maintain an on-going dialogue with your representation company contact.
  • Ask them what more they can do for your property.
  • Ask them to identify the person in their company who can answer your specific questions; who can give you detailed advice on distribution options.
  • Ask for information updates on new developments in electronic distribution.
  • When appropriate, seek advice from an expert.

Once the dust has settled following the organization mergers, the customer focus will be sharper than ever. Yes, customer service will still be inconsistent. Who will receive the most attention?  Those who ask for it.  In hotel representation, as in so many other places, it is the squeaky wheel that gets the grease.