October 2005 - The invention of internet added a new channel of room distribution for hotels. Hotel reservations have been made via Expedia and Travelocity (called third party websites or travel intermediaries) since 1996. However, most of the hotel owners and managers are clueless on seizing the opportunities provided by this distribution channel.

Hotel managers tend to overlook the contribution of third party reservations either due to the impression that the markups are too high or lack of knowledge. Over the last two years, we have consistently seen the markups by third party websites coming down from 33% to 25% or as low as 18%. Comparatively, a reservation through a travel agent over global distribution system (GDS) costs 10% commission and approx. $4 - $5 per reservation respectively. Considering the low cost of operations and increasing competition from hotel brand websites, further decline in markups from third party websites is expected in the coming years. Like travel agents, third party websites should be considered as partners and hotel managers must learn the art of maximizing this source.

The most important key to improve your online reservations is through better positioning on third party websites. Research has shown that while making a reservation, 90% of the customers do not go beyond the second page. It is very important to have your hotel positioned on the first page, preferably among top 10 to 15 hotel listings. Top placement not only increases hotel reservations but also provide free advertisement for your hotel. Most customers look at 3-4 websites before they make an actual hotel reservation. If your hotel is among top 15 on all the websites, the customers are getting 3-4 impressions of your hotel free of cost. Even if the customer is not making a reservation, s/he is becoming aware of your hotel in that market.

To improve your listing on third party websites, hotel managers must build relationship with market managers of respective websites. Website managers have complete control on the positioning of hotels and can divert traffic to your hotel. Do not wait for your website manager to contact you. Be proactive and call them, take them out for lunch, offer them free night vouchers at your hotel, send gifts, and build strong relationship. Remember, once you build the relationship, business will automatically flow. It is a winwin situation for both hotels and third party websites to work together, however it is important to know what your website manager expects from the hotel.

Websites expect two things from hotels; sufficient inventory (including peak season) and �best rate guarantee� or �rate parity� among all third party websites. During the peak season, it becomes difficult for hotels to provide high inventory to third party websites. In order to reduce bookings through third party websites, hotels should look into first increasing their rates before reducing the inventory. By doing this, hotels show their commitment to third party websites and paves the way for better relationship. Many hotel chains have applied �best rate guarantee� to divert reservations to their respective website.

However, hotel managers must make a conscious effort to maintain �rate parity�, if not on hotel brand website, most importantly among all the third party websites. If a hotel would like to offer lower rates than its hotel brand website, it can participate in package deals that have opaque rates. By doing this, the hotel still maintains �rate parity� regulated by hotel chains, and can increase its occupancy.

Another benefit of actively participating with third party websites is revenue management. Some third party websites offer reports that show future room rates for hotels in their competitive set. Unlike STAR reports, these free of charge reports show future rates of individual properties in real time, which can be an excellent tool for revenue managers.

The internet as a distribution channel is here to stay and grow, which makes it imperative for hotel managers to learn how to utilize this source to their advantage.

Amit Nagpal, MS, CHA
General Manager
Wingate Inn Commack/ Long Island
Email: [email protected]