| June 2000 - Guests are happily surfing the Internet at high speed from
your guest rooms. The marketing hype and a couple surveys said that
your guests demanded this service ASAP. Looking at your Internet
usage levels beyond the occasionally computer geek heavy conference,
you find that 2-5% of your guests really meant it. Nonetheless, the
Internet is the future and you are positioned to capitalize on all things
Internet.
Congratulations. You are a technology leader.
You led the industry and committed to a turnkey high-speed guest Internet
provider for five years. The decision was easy given the service providers
ability to create and operate a total guest Internet solution. In
addition to technology, the service provider even customized a guest web
for your property. The web site operated as a subscriber system where
the provider’s portal presented with all sorts of interesting Internet
content and services. They could even move between your many properties
and be “remembered”. Best of all, the Internet service provider financed
the whole solution allowing you a revenue share and immediate revenue stream
(OK its kinda small right now). Everybody wins. Or so it seems.
Hmmmm. Your Internet Provider Has a New Friend.
Imagine that you are in year two of your five year contract for internet
services. And imagine this press release from your service provider.
| Dateline 2002
“In-Room Internet U.S.A” Announces Joint Marketing
and Integration of Services with the worlds largest domestic internet travel
and reservations provider; “Cyberspace Travels”.
In-Room Internet USA announced today that they would integrate their
widely used in-room guest web portal with the leading guest travel and
reservations web portal from Cyberspace Travels. Their combined portals
and business initiatives will create a mega-travel web portal called “Personal
Traveler” that caters directly to frequent travelers. “A traveler visiting
our combined portals can pre-purchase their entire travel experience including
their airline tickets, car, and hotel room;” says David Davidson of Cyberspace
Travels. “But that’s not all,” interjects Mark Serfer of In-Room
Internet U.S.A. “They can also now pre-purchase in-room digital amenities
like including which online newspaper they would like to read, which games
they would like to play online, which movie they would like to watch online.
“In fact they can actually pre-purchase or fix prices for these digital
amenities on an annual basis through our Personal Traveler portal site
and can use these personally selected amenities at any hotel and even from
home.”
Personal Traveler also announced a loyalty program that provides free
digital content services to frequent travelers and heavy consumers of portal
information. With Personal Traveler, travelers can for the first
time personalize their entire travel experience and can completely integrate
and pre-negotiate their travel services. |
Our Condolences On Your Loss Of Revenue and Brand:
You, the hotelier, have been “disintermediated”. This is
a fancy Silicon Valley term which means that you have been disconnected
from your own guests. Consider:
-
A percentage of travelers will pre-purchase travel and digital amenities
from this portal. And they will like it. They will ask during
future bookings; “does this hotel provide access to my guest portal so
I can get my favorite digital amenities?” Some percentage of guests will
choose to stay where they are provided free access to their travel portal
amenities portal.
-
You, the hotelier, will be pressured to provide universal access to all
these emerging travelers portals. Your contribution to the delivery
of high-speed internet access shifts to having the high speed “digital
plumbing” available for your guests favorite portal. By the way, you may
not even own that digital plumbing.
-
Alas the guest amenities relationship is now with the travel portal provider
and not you! What precisely is your argument for a share of the digital
amenity profits from this new portal? You are not in a strong position
to expand or even retain existing percentages of revenue share. Worse,
you are at risk of losing current telephone and television revenues.
If you believe that television and telephone are destined to operate over
the internet. Those amenities will also ultimately be offerred directly
to the traveler from the portal.
You thought you were providing new guest internet amenities. But
strategically you were exiting the internet business and enhancing a competing
brand. Your brand and the guest portal brand are now competing for
the same traveler’s attention, and you are at a distinct disadvantage.
Why? The scope of the travelers portal is broader than a hotelier’s contribution
to the travel experience. The portal provides value before,
during, and after a travel event. It will have a greater share of
your guests attention by its very nature.
Now What? Strategic Options.
What strategic foresight might have prevented you from placing your
brand and your guest relationship at risk? What can you do
to meet the guest’s travel needs and still serve your own interests? Consider
the following..
-
Control the guest portal and the content presented
to your guests. Don’t confuse a guest portal customized to your
brand image with control of that web portal and the content aggregated
on that portal? Here’s this control question made tangible:
who owns AND actually presents the first web page a guest sees as they
enter your high speed internet service? The answer for both questions
had better be you, the hotelier.
-
Be the aggregator of your digital guest amenities.
Own your Internet information content relationships. Your portal provider
owned all the Internet content relationships and those relationships were
essentially sold to the travel portal. There is a strategic advantage in
uniquely integrating the nearly infinite content and services available
over the Internet. Effective aggregation improves your guest services
and differentiates your guest experiences (and your therefore brand).
-
Control the flow of dollars.
Establish ownership and control of guest billing. Look for an independent
Internet services billing system like SDD’s JAZZ Guest Internet Accounting.
Such a system would provide you independent presentation, pricing, margins,
and posting control of your digital amenities. Without control of your
billing system, you may have thought you were revenue sharing with the
Internet portal provider. But your Internet service provider was
really sharing with you.
Construct Internet Deal Structures Which Enhance Your
Brands (Not Just Deals To Simplify Your Life)
Your challenge is to structure an Internet service provider relationship
which builds (or at least does not dilute) your brand. This is especially
true of five year relationships. Turnkey guest Internet solutions have
undeniable advantages. But the emergence of guest oriented travel
portals is one of several future scenarios where long-term implications
could outweigh the short-term gains. Consider two possible principles for
structuring your Internet vendor relationships.
-
There may be some guest Internet technology components that you should
own. In this case strategic technology may be the Guest Internet
Accounting system.
-
There may be some guest internet services responsibilities that you should
retain. In this case, a strategic responsibility might be the negotiating
of your own Internet content deals.
These and other alternatives should have one objective. They should
help keep your brand central to creating valuable services for the guest.
Ron Tarro is President/CEO of SDD, Inc. SDD is a telephone
and internet communications accounting tools provider based in Delray Beach,
Florida. (www.sddsystems.com).
Mr. Tarro was formerly a senior member of Ernst & Young Management
Consulting’s internet and telecommunications strategy group. |
