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Hotels and E-Commerce:
Aggressive Pursuit of Control

By Bruce W. Mainzer, Senior Vice President of Marketing for TravelCLICK
May 2003

While it�s well known that travel is the leading category for all consumer Internet purchases, not everyone recognizes how substantial an opportunity consumer online hotel bookings constitute: 23 percent of all Internet travel transactions. The rapid acclimatization of consumers to conducting Web transactions and the sheer competition for their business spur ongoing dramatic growth. Though the GDS channels remain the largest source of electronic bookings: some $11.5 billion, in total hotel e-commerce, hotel bookings via the Internet will total an impressive $7.5 billion in 2003.  Never before have hoteliers been in a better position to win room nights through electronic channels. Savvy manipulation of the electronic channels is key to a smart hotelier�s continuing success.

How can a hotel possibly reap more from the already lucrative channels? By using e-marketing tools to streamline costs, identify opportunities and reach true potential customers.

Global Distribution Systems

In TravelCLICK�s forecast for 2003, the GDS remains the largest source of electronic bookings for hotels.  Airlines have drastically reduced commissions for travel agents, which makes them even more motivated to sell hotel bookings.  The best way to capitalize on this lucrative market, is for hotels to evaluate their competitive position with benchmarking tools (like TravelCLICK�s Hotelligence report) and increase the profile of their hotels by utilizing GDS e-marketing promotional messages.

One of the worst things a hotel can do is walk away from this $11.5 billion marketplace; especially since the higher yields and lower distribution costs compared to merchant sites on the Web make this a more compelling arena for increasing net revenues. There is a lot more upside to investing time and resources on behalf of the hotel in the GDS than in virtually any other competitive marketplace.

Internet Distribution
 
The Internet will continue to experience dramatic growth, as third-party sites such as Orbitz continue to attract consumer attention, and as more travelers turn from the hotels� 800 numbers to book on the property and chain Web sites.  Unfortunately, many hoteliers fail to recognize the importance of direct distribution through the Internet, even though TravelCLICK forecasts that such direct Internet distribution will be 1.5 times the size of the third-party Web marketplace this year. Internet Direct, consisting of business booked through chain Web sites and individual property sites is expected to generate $4.5 billion in revenues in 2003, while the retail, auction and net rate sites of Internet Third party distribution are forecast to produce $3 billion in revenues. The gap is even wider when one considers that the $3 billion in Third Party revenues net significantly less than that back to the hotels.
 
Hotels need to pay more attention to developing their direct online presence, not only because of the impressive size of the marketplace, but more importantly, because property and chain sites are the electronic channels with the lowest distribution costs.

Controlling the e-commerce marketplace
   
While many hoteliers are not yet maximizing their potential through the electronic distribution channels, the good news is that they are starting to understand what they�re missing. Despite the struggling economy, hotels are increasingly improving their understanding and control of Web and GDS commerce to earn more bookings and drive higher yields.  This is counteracting some of the mistakes that the industry fell into, particularly in Web distribution, in the past few years.

Hotels, owners and management companies must develop and implement online strategies that increase consumer direct business on their Web sites. It is not enough to rely on the fact that consumer online bookings are growing; it is imperative that hotels focus on improving their electronic channel and revenue management. 

A new division, TravelCLICK Interactive, helps hotels evaluate their channel management strategically while developing tactical options to drive more business to the property Web site at lower cost. The hoteliers who are most accomplished at e-commerce management understand how each component in their e-commerce supports their mission. A resource like TravelCLICK Interactive will provide:

• Internet Marketing Planning � a comprehensive review of the property�s e-commerce strategy, including e-distribution analysis, site navigation and database applications.
• Search Engine Optimization � to ensure that hotels make full use of the search engines consumers use for 90 percent of their online product research activities;
• Web Site Review � a thorough usability and content assessment of a hotel�s Web site to identify opportunities for increasing conversions
• Electronic Marketing � electronic campaign planning and database assistance specifically designed to drive more direct bookings to the property�s Web site.

This year is critical for the industry. It is clear from the success stories that GDS and Internet media continue to drive bookings, so leveraging a presence in those media by fine-tuning the message to reach the consumer at the time of booking remains important. But that�s just part of the picture. 

Managing the hotel�s e-commerce environment is the real task. New online decision support like TravelCLICK�s Electronic Marketing Centre where real-time benchmarking reports allow revenue managers to manage rate maximize their net revenues, and advisors like TravelCLICK Interactive experts are key. Hotels, and those e-commerce advisors who serve them, must be vigilant when it comes to seizing the potential of the electronic marketplace.