Many Germans have never heard of the hotel booking portal HRS, let alone used it to plan their next holiday. The Cologne-based company has been far outpaced by the American heavyweights Booking.com and Expedia, even on its own turf.
But that’s not to say that Germany's largest home-grown online travel agency isn’t profitable. In 2017, HRS saw sales of nearly €4 billion ($4.9 billion). "We are now setting our sights on just under €5 billion (for 2018)," said Tobias Ragge, the chief executive.
Mr. Ragge’s father started HRS in 1972 for business travelers seeking accommodation during trade fairs. Back then, customers selected from paper lists of hotels that could not afford their own advertising.
Times have changed. The younger Mr. Ragge, who took over the reins in 2008, shifted the focus of HRS from consumer to corporate clientele, catering to hotel bookings for big companies such as Siemens, Huawei and Volkswagen. Corporate accounts now comprise two-thirds of its business.
But it's been six years since the company, which employs 1,500 people, was in its best shape, acquiring two competitors in 2012 to control more than 50 percent of the German hotel booking industry. Its fall from power and grace came as a result of changes in German antitrust laws in 2015, which cracked down on the controversial “best price clause” in its contracts. The clause forced hotels to offer their lowest rates to HRS, cutting out the competition.
HRS only remains profitable because its margins are so good.
Its market share has since fallen to 30.4 percent. Booking.com’s Priceline portal has 54.7 percent and Düsseldorf-based competitor Trivago, run by Expedia since 2013, has also carved out a slice. HRS only remains profitable because its margins are so good. Hotels pay a 10 to 15 percent commission on every booking directly to the portal. In return, HRS delivers up to a quarter of the revenue for some hotels, Mr. Ragge said.
It’s a lopsided relationship. On the one hand, hoteliers loathe third-party providers such as HRS and Priceline for taking so much revenue – but they can’t survive without them, especially the smaller, independent hotels. The cost of search-engine optimization, or paying for advertising and online maintenance to rank higher in Google searches, is very high.
According to 2016 statistics, every fourth hotel room in Germany is booked via an online portal. Eugene Block, owner of the prestigious Grand Elysée Hotel in Hamburg, has lambasted third-party providers repeatedly in German media, calling them nothing more than glorified “address books” that should be boycotted. “(They) demand commissions of 15 to 25 percent of the room price, which in my eyes is dishonorable,” he once said.
Mr. Ragge did what he had to do to preserve the family business. Instead of relinquishing to the digital age, HRS thrives on its "Enterprise" corporate bookings division, counting 26 of the 30 DAX companies, including Daimler and SAP, on its roster. It books business trips for employees with special discounts of up to 20 percent and shares travel data with the companies' IT systems.
This core business area is reflected in its expansion plans. HRS has offices in 34 locations, most recently opening in New Delhi, Bangalore and Seoul, with plans to open more in 2018.
Christoph Schlautmann covers the logistics and waste management sectors for Handelsblatt. To contact the author: [email protected]