Internet Usage Spreading

The Internet, access to which will soon to become as simple as making a call on your cell phone as more consumers convert from wired to wireless appliances, poses some fascinating opportunities and challenges for the lodging industry. Yes, it will certainly revolutionize many operating disciplines such as housekeeping, HR and purchasing, but its most significant impact is likely to be on the distribution of room inventory and the corresponding impact on the forces of supply and  demand. 

Let's review some of the most recent data and evolving preference measures that lead to this conclusion (all taken from our 2000 National Leisure Travel Monitor):

• 46% of U.S. adults now have Internet access from their homes, up three points in just one year;
• Access from work increases this incidence to almost six out of every ten adults;
• Only 8% of U.S. cell phone subscribers have Internet access, yet this percentage is forecast to rise almost five-fold in just three years; 
• 35% of leisure travelers used the Internet to plan some aspect of a vacation last year - the comparable percentage for business travelers was 39% - both up almost ten points in just one year;
• Six out of ten adults express interest in using the Internet to plan and/or purchase travel services in the future.

Early industry views of the Internet were understandably sanguine, replete with references to an avalanche of new reservations, a dramatic reduction in the cost of processing reservations, and the ability to profile guests in variety of ways heretofore impossible. Some of these predictions have come true, yet something else has happened along the way; as more consumers have discovered the Internet, they have also discovered its potency as a weapon in their increasingly aggressive quest for the lowest price and/or best value. Some additional observations from our 2000 National Leisure Travel Monitor illustrate the point:

• Almost six out of ten leisure travelers now actively seek the "lowest possible rates" for travel services;
• Fully eight out of every ten say they attempt to negotiate the best rates on hotel accommodations;
• Two-thirds now agree that "the single greatest change created by the Internet is to give consumers like me greater control";
• Only 12% have ever logged on to a "name-your-price" or "auction" web site ... yet fully four out of ten say they will in the future. 

So where is all of this likely to lead? To real-world proof of my new law of Internet usage: lodging industry profit margins will vary inversely with the incidence of consumer utilization of the Internet for the planning and purchasing of travel services. Stated another way, as Internet access becomes more ubiquitous and effortless, more consumers will discover how to use the technology to shift the locus of control in future transactions from "the supplier" (you) to "the buyer" (themselves). This is a logical consequence of greater access to competitive pricing; not to mention the marked shift in consumer sentiment that is responsible for unprecedented consumer activism. 

In some respects, the future has already arrived. Witness the growing popularity of Internet travel agencies such as Travelocity and Expedia; the increased traffic on travel service auction sites such as Priceline and SkyAuction; and the slow-but-certain migration of meeting planners to auction sites such as StarCite and EventSource.

Internet Irony

Hence, we discover the ultimate Internet Irony: as it has become easier to reach consumers (through growing use of the Internet), it has also become more difficult to influence them. In fact, early returns suggest that the focus of control has already begun to shift, and the implications for future pricing and distribution strategies are profound.

Peter Yesawich is President and CEO of Yesawich, Pepperdine & Brown, an international advertising, marketing and research company serving the hospitality industry. From guest satisfaction to consumer trends, Peter is often out in front as one of the first to understand the hotel ramifications of wider consumer preferences.

The Global Hospitality Group(r) is a registered servicemark of Jeffer, Mangels, Butler & Marmaro LLP