Revolution From Within
Seeking greater control and economies of scale, hotel companies are uniting to develop online distribution and procurement systems.
By Joan Marsan, Technology Editor -- HOTELS Magazine, 6/1/2000
In years to come, the disorganized and overwhelming
array of online travel distribution channels will be viewed as unforgivable
by the consumer, says Scott Heintzeman, vice president, knowledge
technologies, Carlson Hospitality Worldwide. And quite a profusion
of Web sites there has been. Consumers can go to an individual hotel’s Web site to book
a reservation. Alternately, online shoppers might be able to access
the specific hotel’s booking engine through a corporate site.
Or, the traveler can turn to such conglomerates as Priceline, Expedia,
and literally hundreds of other travel-oriented sites to find lodging. “If
I were to ask someone to make a list of all the Web sites where our
hotels are represented, they would probably fall short by 80 percent,” says
Hedwig Wassing, vice president, sales & marketing and communications,
Golden Tulip.
Hoteliers are equally frustrated with the array
of e-commerce options available to them, frustrated to the point of
action. Hoteliers who must choose where and how hey want their property
represented are not always happy with their options. Their choice
doesn’t come easily—the
costs associated with procuring online bookings can be high, even as
high as booking through the GDS. And the risk of a customer having a
bad experience booking through a Web site designed and operated by a
third party can reflect poorly on the hotel, which has limited control
over, but great stake in, that consumer’s booking experience.
Further complicating matters, technology standards
and participation agreements interfere with a hotel’s ability to receive bookings
from an unlimited array of Web sites. Current technology requires a
hotel to provide separate allocations of room inventory for each site
on which the property is listed. This limits a hotel’s ability
to post real-time availability across the entire Web,
as well as at a central reservations telephone operation and even the
front desk.
“Ideally we’d like to be everywhere online,” says
Charlie Tomlinson, owner, Harrison House Bed & Breakfast, Corvallis,
Oregon. Tomlinson attended the January InnSpire 2000 conference in Rohnert
Park, California, a gathering that focuses primarily on addressing the
needs and interests of smaller, independent property owners. “I
speak for others when I say we would like the various
online booking providers to share availability. This is not about competitions
between Internet booking providers, but instead about sharing availability
and enabling more inns to utilize the strengths of online reservations.”
Organizations such as Hotel Electronic Distribution
Network Association (HEDNA), Hospitality Industry Technology Integration
Standards (HITIS), and Open Travel Alliance (OTA) have pursued the
goal of creating standards for electronic distribution that, if incorporated
by all systems vendors, would enable hotels to take advantage of the
full range of online opportunities available to them. Karl Schroll,
CEO and co-founder of Inntopia.com, a company that offers a Web-based
reservation solution, called for the creation of an open interface
at InnSpire and announced intentions to develop a solution. Still,
the problem hasn’t been solved, and
many hotel companies, tired of the waiting game and wanting
greater control over their booking process, have banded together to
plan an online venture.
Distribution Rulers
Bass, Cendant, Hilton, Hyatt, Marriott and Starwood
have joined discussions about creating an alliance that would produce
an e-distribution system capable of competing with online retail travel
operations such as Priceline and Expedia. The venture, if it progresses,
could result in the construction of a ubiquitous Web booking engine
with a direct connection to the central reservations inventory of
all participating hotels. “This is not
just another intermediary,” says Peter Connolly, a Hyatt Corporation
vice president. The broad-based, one-stop shop would
be a full-scale, brand-neutral operation disseminating, in real time,
room inventory across the Web. A retail Web site appealing primarily
to destination-driven travelers might even front the system. Eventually,
Connolly says, the operation would serve not just its founding members,
but the hotel industry at large.
“A large segment of the population is loyal to a cluster of brands
and not a specific brand,” Connolly says. Presently, these guests
turn to travel agents or online aggregators. And whenever a booking
is received through one of these indirect sources, the hotel loses a
piece of the profits. A travel agency often collects a 10% commission
on sales. Many online operators charge about a 5% commission. But guests
booking directly through a property’s Web site do so at a cost
to the hotel of about US$1. Moving guests from a third
party booking source to a hotel-owned Web site has the potential to
increase cash flow margins on a US$100 room night from 35% to 44%.
While the hotel loses otherwise possible profits
in a third party-generated transaction, hotel marketing professionals
lose the opportunity to collect valuable information about customer
behavior when their future clients book through outside sources. Instead,
a separate branded entity has an opportunity to develop a relationship
with the customer, a relationship the hotel would like to learn from
and build upon to generate new business. The desire to gain control
over information, relationships, content, and distribution and compensation
rules has been the primary driver for the six companies as they strive
to unite and create a solution. “We
are aligned in the notion that suppliers should determine how inventory
is sold,” Connolly says.
No official deals have been struck yet, with participants in the talks
still hammering out the details of financing. Companies such as Pegasus
and WizCom have been included in the conversations. And while bringing
in venture capitalists, both traditional and e-commerce, would speed
delivery, profit and loss accountability comes into play. Connolly says
the companies may not want to be governed by those rules, as their primary
interest is assuring control over the medium, not rapid profitability.
Furthermore, the groups have yet to decide if the venture will focus
solely on business-to-business (B2B) commerce, or whether a business-to-consumer
(B2C) marketing and retail operation will be included. To date, emphasis
remains on the development of a business offering the technological
connections between central reservation systems and Web outlets.
Europe First
In an unprecedented move, however, European companies Accor, Forte
Hotel Group and Hilton International have beaten the U.S. group to the
punch. They announced in May they had reached agreement on the creation
of an Internet joint venture that will develop and operate online reservations
for consumers and travel professionals, enabling customers to book any
of the combined portfolio of hotels in Europe. The initial Web site
will go live in the last quarter of 2000. Several other major European
partners are expected to join the venture, which is expected to require
an initial investment of !20 million (U.S. $18 million).
“It is our duty to ensure our customers are presented with the
best prices and best information available directly from the leading
hotel companies,” says David Michels, CEO, Hilton International.
Citing concerns equal to those of his American peers, he says, “For
our shareholders we must ensure that inventory remains
under our control.”
Similarly overwhelmed by options and longing for
greater industry driven standards, companies seeking e-procurement
solutions are taking control of the development of these systems.
Spanish companies Sol Meliá,
Barceló and Iberostar have joined with Telefónica, Spain’s
largest telecom company with a booming B2B e-commerce
development branch, in an agreement to produce a vertical portal. The
B2B e-commerce site will address the purchase of hotel goods, the sale
of assets including inventory surpluses and used goods, human resources
services, industry news, and chat communities.
“This is the first time Europe is blowing something in the direction
of the United States,” says Luis del Olmo Piñero, previously
Sol Meliá’s vice president of sales & marketing and
recently appointed vice president of the company’s new e-business
division. The announcement of the venture came two weeks before Hyatt
Corporation and Marriott International publicly revealed their intent
to develop an industry-wide e-procurement business with Go-Coop. Funding
for the Spanish venture had already been secured, with Sol Meliá committing
about 24% of the cost, Barceló contributing 10% and Iberostar
providing 8%. Investments are expected to reach !30 million
(US$27 million) in the first 24 months of operation.
“One thing is to dream the venture, another is to be able to
deliver,” del Olmo says. The group aims to launch the service
in Spain before the year’s end, and they plan to expand immediately
to include Latin America and the Mediterranean, the Spanish companies’ natural
extended markets. “We can deliver in Spain,” del Olmo says.
And once the model is proven on this smaller scale, it will branch out
to serve Latin America, the Mediterranean, and “Who knows?” del
Olmo says, perhaps the world. Similarly, the U.S. venture,
though formed by chains with properties around the globe, will limit
distribution to North America before expanding the service worldwide.
Both ventures will be open to, and encourage, participation by more
chains.
While the U.S. companies’ discussions have focused on the issue
of controlling the methods of distribution, del Olmo hones in on the
economies of scale a vertical portal will produce for the participants.
Procurement is “a service that is not necessarily differential,” del
Olmo says. “This is cost savings, and when the mass grows, there
is a greater savings.”
Negotiations for the choice of a platform for
the Spanish companies are nearing completion, and were simplified
by the members’ levels
of technological development. Sol Meliá had been in e-procurement
development for six months prior to the commencement of the deal, and
the platform they were working with fit their partners’ strategies.
“Travel is the easiest thing to sell online because there is
no fulfillment problem,” Connolly says. The e-procurement ventures,
on the other hand, require the delivery of massive quantities of product—the
U.S. hospitality industry alone purchases some US$50 billion worth of
goods annually. Still, the members of these new partnerships dream of
creating a single purchasing network serving competitors with properties
around the world. It’s a lofty goal, and it remains to be seen
if they will reach it.
Netline
Following the success of their Millennium Madness
promotion in January, Microtel Inn & Suites (www.microtelinn.com) has launched Millennium
Madness II. The online campaign offers Web surfers substantial savings
for booking rooms online, with “MicroSaver” rates ringing
in at US$32 per night for a single accommodation and US$42 for a double
accommodation or suite for a savings of about US$10. “We want
to be the hotel brand of choice for Web surfers,” says Vinay Patel,
vice president, brand marketing. Promotions have helped hotels to boost
awareness and, more importantly, use of online channels. The January
Microtel promotion boosted the chain’s Web bookings by almost
200%.
Similarly, Best Inns & Suites (www.bestinn.com) offered a Best
Blitz promotion with reduced room rates for travelers who book online.
Since the program’s March 15 launch, Internet room reservations
for the chain have increased 400%, reports Rick Welch,
vice president, brand marketing.
An online auction attracts clients to the Hawthorn
Suites Web site (www.hawthorn.com). Guests receive 1,000 auction dollars
for every room night they spend at Hawthorn hotels, and in exhange,
they can use their auction dollars to bid for prize items on Hawthorn
Suites’ site.
Prizes range from free stays at the hotel, to a Phillips
flat screen TV, to a Hawaiian cruise.
The tactic encourages customers who might traditionally
use other reservations channels to investigate the Hawthorn Suites
Web site. The site receives about 2 million hits each month, traffic
having doubled since the Feb. 15 launch of “Sleep Once...Twice...Sold@hawthorn.com” auction
promotion. Bids placed have numbered in the thousands.
Tech Briefs
Breaking Down Barriers
Guests form their first impressions at the front
desk. They frequently site speedy check-ins as the best way
to improve their introductory experience. Hoteliers,
on the other hand, emphasize providing personalized service.
The Hilton New York & Towers
delivers both.
The installation of a dozen 15-inch flat screen
monitors at the front desk of the Hilton’s new lobby allowed
designers to reduce the width of the desk by 6 inches without sacrificing
visual quality and space essential for performing check-in
duties. The front desk previously created an imposing barrier between
guests and staff, says John Luke, vice president, front office operations,
Hilton Hotels.
“We took this opportunity to look at the front desk from the
guest’s perspective,” Luke says. “Narrowing the desk
from 47 to 41 inches helped turn into a bridge what has
been a physical and psychological barrier between guests and hotel team
members.”
In-Room Access
The Mandarin Singapore installed the NetHotel
broadband solution for in-room Internet access via cable modems
in its Main Tower guestrooms, those that cater to corporate
travelers. Guests use their personal laptops to hook
into the system. The hotel will charge a flat rate of S$12 (US$7)
per day for use, pricing the service below competitors. The hotel
selected the system because the use of cable eliminates interference
with the hotel’s PBX.
The Roosevelt Hotel, New York, meanwhile, installed multimedia desktop
computers by Show Digital, New York, in 30 rooms in September. Rates
for using the computers, which offer high-speed Internet access, are
US$14.95 per day.
The machines have achieved usage rates of 30% for rooms equipped with
the service and had generated by March US$15,000 in total revenues,
which are shared with Show Digital. Small adjustments to the PMS interface
comprised the only cost to the hotel, a cost willingly absorbed, says
Steven Kipnis, hotel manager.
“You’ve got be either up there with your competition or
ahead of them,” he says. Access to the Internet has become just
as integral to hotels as business centers, Kipnis says.
Tech Supplyline
- Dallas-based Pegasus Systems completed its
acquisition of REZsolutions, Phoenix, creating the world’s
largest third-party marketing and reservations provider to the hotel
industry...
- WizCom, Parsippany, New
Jersey, released FastConnect, a quickly deployed
electronic distribution system for small-to medium-sized hotel chains...
- WorldRes.com,
San Mateo, California, formed alliances with PMS
providers Multi-Systems, Inc., Phoenix, and Hotellinx Systems, Finland,
and reservations provider TRUST International, Frankfurt...
- The newly reformed Lodgistix
lodging sales organization of Eltrax, Atlanta, allied
with Daylight Software, s&c
systems purveyor...
- Springer-Miller Systems, Stowe, Vermont, and Resort
Condominiums International, Parsippany, New Jersey,
allied to develop an enterprise-wide timeshare resort automation system...
- Bass Hotels & Resorts,
Atlanta, named IDeaS, Eagan, Minnesota, its preferred
yield management vendor...
- MICROS, Columbia, Maryland, will provide hotelBANK exchange
services to Asia Hotelnet, Hong Kong...
- Newmarket, Portsmouth,
New Hampshire, launched the MeetingBroker.com e-commerce
solution...
- On Command, San Jose, California, launched the small
hotel version of its OCX in-room entertainment platform...
- The Chicago
Park Hyatt installed 200 environmentally friendly
Panasonic, Secaucus, New Jersey, mini-bars...
- GHS Global, San Francisco, and Tele-Tech
Services, Summerville, South Carolina, partnered
to offer an Internet-based call management system...
- Marc Hotels & Resorts,
Honolulu, selected the XENON CRS by Hotel Data Systems,
Norwalk, Connecticut...
- HIS, Scottsdale, Arizona, unveiled its Internet sites
at hotelroomfinder.com and hotelroomsforyou.com...
- Scandic Hotels, Stokholm,
will use Finnish company Nokia’s LAM and mobility management
equipment to provide wireless connections to virtual
private networks from guest rooms, lobbies and conference areas...
- Choice Hotels Scandinavia
will outfit 53 of 100 properties with the E@siSystem
in-room computer workstations by PCC UK.
DJ Vallauri Talks Technology
DJ Vallauri, vice president, e-commerce, Prime Hospitality, Fairfield,
New Jersey
Q: What projects will you be undertaking in your new role as vice president,
e-commerce, Prime Hospitality?
A: My role is to focus the organization to ensure
we maximize the various revenue opportunities the
Internet can offer to Prime and its franchisees. Focus not only from
a standpoint of leveraging our customer base and resources into new
business development opportunities and partnerships, but also focusing
on the best way to extend and further market our two proprietary hotel
brands, AmeriSuites (all-suites) and Wellesley Inn & Suites
(limited service and extended-stay).
As you may know, each of our proprietary brands
maintains a Web site that provides customers with
a real-time reservations booking capability, which, by the way, is
seamlessly integrated through our CRS and PMS. While our past e-commerce
initiatives serve as a great foundation for us, we will continue to
grow our sites and improve our “stickiness
factor” for visitors. An immediate focus will be to increase
our on-line visibility and distribution points through partnerships
and content alliances with the ultimate goal of driving
new bookings through the sites.
Our brand sites are www.amerisuites.com and www.wellesleyinnandsuites.com.
Q: In what ways will Prime Hospitality’s e-commerce ventures
be similar to other hospitality companies’ e-ventures, and in
what ways will they differ?
A: We have some pretty aggressive e-commerce initiatives
and projects currently in the development stages
and this will be an area I plan to discuss in detail over the coming
months. One initiative that we’re
really excited about is our direct Internet booking engine, which will
allow us to work with our corporate customers in a more direct fashion
through their corporate Intranet. The management team at Prime is very
aware of the financial impact e-commerce can make, and we’re
dedicating the necessary resources in this area.
Q: Currently the Prime Hospitality Web site is under
construction. What can we expect to see when the site
is up and running, and when will it go live?
A: Our corporate site, found at www.primehospitality.com is soon to
be our Corporate and Investor Relations Web Site, which is planned to
launch in [May]. This site will be hosted by our partner PRNEWSWIRE
and will provide visitors with corporate and real-time stock market
quotes for Prime.
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