- Business Opportunities Lebanon
- Business Opportunities Morocco
- Business Opportunities France
- Business Opportunities Jordan
- Business Opportunities in Mediterranean
Music Shop
www.milongamusic.com
Iloubnan - information portal on Lebanon
www.iloubnan.info
- Rental France
www.rental-france.com
- Web agency France
ebizproduction.com
Sole Agent for Philips & Whirlpool in Lebanon
www.azelectronic.com
Nsouli - Jewelry Lebanon
- Real Estate Lebanon
www.real-estate-lebanon.com
- Swiss watches manufacturing
www.elogaswiss.com
- André Marcha
www.andremarcha.com
- Car Rental Beirut Lebanon
advancedcarrent.com
- Swiss made watches
exposureswiss.com
- Car rental Tunisia
   
 

ARCHIVES
Back to archives
Back to news
French Version

Hotels are looking to take back some of the market share that online travel sites grabbed in the lean years

Later this year, if Hilton Hotels Corp.'s plan goes as expected, travelers won't see room rates posted on travel sites such as Hotels.com or Expedia lower than what Hilton advertises on its own Web site. "You don't let the customer see a rate less than a rate you sell yourself," Hilton CIO Tim Harvey says. "At that point, you lose trust of the brand, and whoever is selling the room gains that trust."

But customer loyalty isn't the only thing hotel chains and operators stand to lose to the growth in third-party online bookings. In an era when consumers are more likely to make travel plans based on the best rates on the Internet rather than what a particular hotel brand has to offer, hotels have found their relationships with third-party sites have resulted in inflexible pricing practices and lost profits.

While third-party sites helped the hotel industry through a tough economy"and continue to provide a valuable service by booking rooms that otherwise would go unoccupied"many say now is the time to establish more-favorable dynamics. "Everyone in the hotel industry is ready to get control of their inventories again," says Andrew Jordan, executive VP of sales and marketing and chief marketing officer at hotel chain Wyndham International.

Online travel sites present a complicated dilemma, one hotels are addressing in two ways: by creating incentive programs and improving brand Web sites to get customers to buy direct, and by changing how they do business with the third parties. It appears the third-party sites are more than willing to cooperate. By year's end, Expedia and Hotels.com, both owned by IAC/InterActiveCorp, and Travelocity, owned by Sabre Holdings Corp., plan to implement XML-based connections to Hilton, Outrigger Hotels & Resorts, and several more hotel chains that will completely reverse how business is conducted between the parties. Those efforts stand to have a huge impact on the industry: Expedia, Hotels.com, and Travelocity make up 74% of hotel sales by third-party Web sites, according to travel-research firm PhoCusWright.
These efforts can't come soon enough for hotel companies. While the industry remained profitable even during the economic downturn"earning room profits of more than $16 billion in 2001, $14 billion in 2002, and back to $16 billion last year, according to Smith Travel Research"it has been steadily losing money to online travel sites. The hotel industry missed out on $962 million in bottom-line profits last year, about 6% of the industry's estimated profits, Smith Travel says. Those profits would have gone to the brands if they had sold the rooms directly to travelers. The biggest losers are chain-owned hotels, because franchises and smaller operators benefit from the marketing muscle of online travel sites, Smith Travel analyst Jan Freitag says.

The new XML-based connections will help make it possible to have parity in prices between what customers see at hotel brand sites and what they find at third-party sites. And while third-party sites may not be able to underprice hotel chains, they'll benefit from more-immediate access to a hotel's inventory and availability. Both parties will benefit from lower costs and improved communications regarding room bookings. "This is a huge strategic focus for us," says Spencer Rascoff, VP of lodging for Expedia and Hotels.com. "Our hotel partners are lining up at the door to get in on it." In 2002, Expedia acquired Newtrade Technologies Inc., which is building the connectivity platform based on technology standards in the travel industry.

Most hotels currently agree to provide a certain number of hotel rooms to third-party sites over a specific time frame for a set rate, such as $100 for every room sold. The deal is structured so that the rate the hotel offers at its site at the time"say, $120 per night"is the same rate the third-party site offers to its customers, allowing the online partner to retain $20 of the total room revenue. When the third-party site gets a booking, it notifies a hotel by E-mail or fax or, in some instances, via an extranet that automatically updates the hotel's inventory.

The problem is that none of these approaches allows back-and-forth communication between a third-party site and a chain's central reservation system, its revenue- or yield-management system (which uses analytics to determine the most a hotel can charge for a room), or an individual property's management system. So if rooms are filling quickly and a hotel's yield-management system indicates the rate should be increased to $140 a night for the given time period, the result is that the third-party site starts beating the branded site on price. That disparity exists until one of the parties notices the difference and acts on it.

The systems that Expedia, Hotels.com, and Travelocity are developing for later this year will let hotels use XML connections to push out pricing and inventory updates directly to third-party sites as soon as they happen. "So when changes are made to published rates, it's very easy to adjust so there's no lag between retail rates and the changing of online rates," says Josh Feuerstein, VP of hotels at Travelocity. "It does make price parity easier to chase."

Improved business-to-business connections aren't the only way hotels are fighting to take back control of bookings. Most of the major chains offer lowest-rate guarantees: If a customer finds a lower rate at a third-party site, the hotel will match that rate and, in some instances, throw in perks such as a late checkout or an additional discount of, say, 20% on top of the third-party rate.


At Hilton, the company's Hilton Honors members who book rooms online earn points for discounts and perks such as frequent-flier miles only if they book at Hilton's site. Last year, Hilton deployed a $50 million hotel-management system, called OnQ, that lets any of its 2,000 hotels, which include the DoubleTree and Hampton Inn brands, view the history of a customer's relationship with the company. In the past few years, the share of online bookings Hilton records through its sites rose from 70% to 80%. "Fifteen months after we started going down this road, we feel third-party business is relatively modest, which is where we really need it to be," says Bala Subramanian, senior VP of electronic distribution for Hilton.

Hilton last month began feeding into its OnQ system information it collects about prices of its rooms on third-party sites and about competitors' prices. Previously, revenue management was determined using only internal information about future bookings. "Now we consider what's being loaded into third parties as well," CIO Harvey says.
Wyndham in recent months has worked to make booking rooms on its site easier so customers don't leave for other sites. It added servers to support more bookings and ensure fast transactions, and it changed the way it displays rates online to provide more detailed options. Wyndham also installed systems that comb third-party sites for its rates and uses that information to update its revenue-management system.

"The ability to read and react is much richer than it was a year ago," executive VP Jordan says. Members of Wyndham's ByRequest loyalty program who book at Wyndham sites get perks such as free long distance, photocopying, faxing, and Internet access. For nonmembers, Wyndham dangles free rounds of golf, free breakfasts, and airline miles. Online bookings through Wyndham sites have doubled within the past year, Jordan says.

To gain back control of rooms, hotel franchisers need to get their franchisees on board. Many franchisees have come to depend on the extra marketing prowess provided by third-party sites. But Carlson Hotels Worldwide, for example, is looking to put in place processes that will allow it to make more decisions on behalf of its franchisees, such as negotiating companywide relationships with third parties that are more favorable than what franchisees have been able to negotiate on their own.

In 2001, suffering from the dot-com bust, Carlson franchisee Radisson Hotel Fisherman's Wharf in San Francisco started a relationship with Expedia and Hotels.com. But the hotel has been shifting its focus away from third-party sites to wholesalers and group sales, which take a smaller cut than third-party sites. "We were a bit unbalanced before," says Yair Eldar, the hotel's general manager. "We were selling rooms too cheaply." But when Carlson negotiates more-favorable rates, Eldar says, its use of third-party sites may start to rise again.

In their own defense, online sites say they generate their own customer loyalty. "Customers want to see all the choices out there," says Travelocity's Feuerstein. "They want to go to one place that gives them a fantastic selection and has an objective store of information about hotels. That's one thing that will never change"people like selection."

The hotel industry's relationship with third-party sites is changing, but there's no indication it will end. "They serve a purpose," says Tim Stanley, CIO at hotel and casino chain Harrah's Entertainment Inc. "If you have excess inventory, they're a great way to sell it. But you don't want to lock up inventory [with third-party sites] that you can sell otherwise." The trick for hotels in the coming months will be to achieve the right balance between the two.

Marseille,04 19 2004
Redaction
Ebusiness
ebizproduction is supported by "Le Conseil Régional de la Région
Provence-Alpes-Côte d'Azur".
| Home | Version française | contact@1stmediterranean.com | © ebizproduction - Web Agency - 2001/2008 |