In Search of the Internet Intelligence Report That Makes Sense

Growing online distribution drives demand for new intelligence tools

 By Jason Price and Max Starkov

This year over 13% of all revenues in hospitality will be generated from the Internet. Three years from now the Internet will contribute over 20% of all hotel bookings and convincingly surpass total GDS bookings. With such an industrial shift toward the web, hoteliers need intelligence tools to measure performance against its competitive set on direct and indirect channels outside of the GDS. Hoteliers are in search of Internet intelligence reports that make sense.

Here’s what sales & marketing, and revenue managers should be asking in order to competently formulate their online pricing and inventory control strategy:

• Where do my online transactions originate? From the hotel owned website, the branded website, the search engines, a destination-website, or through online discounters and merchants.
• How do I measure up against my competitive set in utilization of the Direct and Indirect online channels?
• Is my entire online distribution model skewed toward the online discounters?
• How do I compare with competitors website to website; from lowest price guarantees to functionality, customer service, and usability?
• How do I make sense of my competitors’ online rates: merchant, web-only, e-specials, agency and opaque?
• Must I really need to match a lower competitive rate?

What about the traditional distribution reports?

Traditional vendors continue to provide the current landscape of intelligence distribution reports and focus primarily on the GDS. Recently some of these vendors added online distribution sections supplementary to their predominantly GDS reports. Unfortunately these reports offer hoteliers only a fraction of the big picture of online distribution--Pricing.

These rate-focused reports, like all GDS oriented reports, deal primarily with the daily rate information across online services-- helpful but only a fraction of the information hoteliers realistically need to compete online. Especially since most online hotel bookings don’t even come from the GDS but through merchant programs or Internet only reservation systems. These reports provide little analysis on how hoteliers can increase market share, re-gain control of their online pricing from online discounters, or how to utilize direct-to-consumer channels as opposed to merchant services. Sadly, these reports implicitly suggest overuse of intermediaries at the expense of the hotel’s own direct distribution strategy. If anything, these reports have aided and abetted those intermediaries to become the 800-pound gorillas of today.

So what's missing?

When it comes to the Internet, here are the two most critical questions that should be addressed and that are curiously absent from the traditional distribution intelligence reports:

·         Price vs. Positioning on the Web

·         Direct vs. Indirect online channel utilization

Intelligence information for online distribution must delineate direct from indirect channels. A direct channel results in customers booking directly from the hotel’s own website while indirect channels, naturally, are the intermediaries. Intelligence information must also include hotel positioning on major direct and indirect channels. Where the hotel ranks on an online service may make or break your entire online distribution strategy. Lastly, such valuable information requires professional analysis with commentary on steps to act or NOT act based on the competitive information being presented.

A sensible Internet intelligence report will offer:

• Tools to help re-gain control of online pricing from online discounters
• Strategies to leverage direct-to-consumer channels over merchant services
• Formulas to balance direct with indirect distribution for optimal results
• Methods to increase market share online
• Invaluable commentary that will teach hoteliers to implement a direct versus indirect distribution strategy
• Needed comparative information to act or not act based on intelligence delivered and action plan for the futur

The Internet is the best direct distribution medium ever created. Online hotel sales grew 49% in 2002 to reach above $6 billion, according to PhoCusWright. By 2005, conservative estimates project that nearly a quarter of all rooms will be booked through the web.

Price vs. Positioning

Traditional intelligence reports provide GDS pricing data but do not address the critical question of positioning of hotels on major online agency/intermediary services and the search engines. Hoteliers need positioning information (e.g. ranking) in order to make sound and effective marketing judgments. The order in which the hotel appears on a search engine or online travel agency/intermediary website is of absolute importance otherwise no one will find your hotel rates.

Here's what Bear Stearns analysts say about Internet positioning on major distribution channels: "Our research uncovered that being listed in the top five assures the highest level of bookings, and that after the fifth slot, bookings drop dramatically.” Survey after survey confirms the existence of the so called “50% Factor” - roughly 50% of people that visit the first page go to the 2^nd page, and only 50% of the people that land on the 2^nd page go to the third page, and so on.” In summary, positioning is equal if not more important than pricing for the hotelier to make sound revenue management decisions.

The "online purchasing behavior" is extremely important to keep top of mind when exploiting any competing hotel’s Internet strategy. Here are three scenarios to illustrate the importance of positioning over pricing:

*     If a competitor's website lists a Web-only special that is $50 lower than yours, do you have to match it? It depends. If your competitor's website is nowhere to be found on the search engines (e.g. not among the top 50 listings), you should simply ignore it --nobody will see this Web-only special anyway.

*     If a hotel appears on Expedia as part of its merchant program and is listed among the top 1-2 pages, the hotel should expect more bookings than its competitor listed on Page 12 as part of Expedia's supplementary hotel inventory feed via Worldspan. Indeed Expedia reports 85% of its hotel revenues generated through its merchant program, which does not utilize the GDS. A traditional distribution report will never capture this critical information. 

*     If a main competitor aggressively uses Pay-Per-Click marketing and its sponsored links appear on top of the search results, the question then becomes whether to follow suit.

Direct vs. Indirect Online Channel Utilization

Roughly 52% of all online bookings in 2002-2003 will be completed directly through hotel-sponsored websites. If your hotel is not generating at least 52% of its online bookings directly from the hotel website then you are not competitive on the Web and run the risk of long term price and brand erosion caused by the intermediaries.

The foundation of a direct distribution strategy begins with an optimized hotel website and includes such important items as enhanced user experience, features that improve conversion rates, customer capture data on and offline, and optimized website navigation and body copy—essential for the search engines. 

Why is direct distribution so important? First of all, the Internet is the ultimate “Direct Distribution Medium”. It provides the hotel with long-term competitive advantages and lessens dependence on intermediaries, online discounters, and traditional channels about to become obsolete.  

Direct-to-consumer online distribution has the following benefits:

·         Puts the hotel in control of its Internet presence and rate exposure 

·         Prevents brand and price erosion

·         Is the shortest path to establishing interactive relationships with customers

·         Provides long-term opportunities to benefit from the lifetime customer value

·         Is the least expensive way to distribute hotel inventory

Therefore, determining how your website and online direct distribution model compares with your comp set is necessary long term for all those reasons listed above. Don’t overlook or underestimate the value of a direct distribution strategy from leveraging many online channels, including major search engines, pay-per-click services, email marketing, and so on.

So what is the ideal Internet competitive report?

Such a report would evaluate hotel and its comp set’s position and visibility in Cyberspace and measure performance on various online channels. It would measure up the hotel with its competitive set evaluating the use of the direct vs. the indirect online channels—offering pricing and positioning information. It will determine if the hotel’s online distribution is skewed toward indirect channels to the detriment of the hotel brand and price integrity. It would compare website to website, ranking on search engines and utilization of the direct channel, as well as pricing and positioning on major third-party channels.

Frankly, such an ideal report does exist. This report is competitively priced and called the Internet Distribution Monitor Report (IDM Report).

Key features of the IDM Report

The IDM Report offers easy to read tables, commentary, analysis and concrete recommendations:

·        Compares the utilization of Direct vs. Indirect distribution channels

·        Identifies major channels being used and not used by hotel and competitive hotels

·        Informs hoteliers on product pricing and positioning on all major distribution channels

·       Compares your website to your competitive set on functionality, usability, and best practices, focusing on features that boost the conversion rates (look-to-book ratio), add credibility and make the website search engine friendly.

·       Identifies and compares hotel website on all major search engines and PPC services

·       Compares rates and positioning in the indirect channel: merchant, opaque and    agency services

·       Offers timely information formatted in monthly, quarterly and annual reports

·       Delivers brand and property level reports

·       Tracks any competitive set, size of set, in any market and group of markets anywhere in the world

·       Best of all--easy to read, personalized, concise, and highly informative 20-page report offering commentary, analysis and recommendations to act or NOT act based on the intelligence collected

Direct Distribution Channel

The Direct Web Distribution is all about benefiting from the Internet as the greatest direct-to-consumer distribution medium. Direct online distribution should become the centerpiece of any hotel's Internet strategy. The most important direct channel is your website. Determine how your website measures up to your competitors, and compare listings on the major direct channels: search engines and pay-per-click services.

Direct distribution section covers:

• 17-point website functionality comparison
• Search engine ranking (positioning)
• Pay-per-click (PPC) marketing services utilization and positioning
• Proprietary CyberScore system to evaluate the hotel utilization of the direct channel
• Analysis and Recommendations

Indirect Distribution Channel

Compare pricing and positioning on the most popular indirect channels. Know which indirect channels are used by your hotel and comp set. Make sure visitors to these well-trafficked websites can find you. Set your pricing strategy with the full picture: Pricing and Positioning. 

Indirect distribution section covers:

• Merchant channels

• Agency channels
• Opaque channels
• Proprietary CyberScore system to evaluate the hotel utilization of the indirect channel
• Analysis and Recommendations

The IDM Report is produced by Hospitality eBusiness Strategies, Inc. in New York City, a leading Internet strategy-consulting firm for the hospitality vertical. Current subscribers to the IDM Report include several major brands, many franchised hotels, hotel management companies and independent hotels and resorts. Click here to learn more: http://www.hospitalityebusiness.com/services05.shtml

Conclusion:

Clearly the need to measure up against the competition on a monthly, quarterly, or annual basis is critical as more and more travel is purchased online. The IDM Report crystallizes such information to allow for revenue and marketing managers to breathe today as they prepare for tomorrow. Build an effective and competitive online distribution strategy, gain clarity and control over your Internet distribution strategy, and measure and maintain your lead online long term.

About the Authors:

Max Starkov is Chief eBusiness Strategist and Jason Price is VP of Business Development and eMarketing at Hospitality eBusiness Strategies in New York City.  Max and Jason combine the best practices in three critical areas: solid hospitality and travel background (22+ years), Madison Avenue advertising and marketing background (8+ years) and Cyberspace experience as founders, CEOs and executives in two consecutive Internet technology start-ups in hospitality and travel (6+ years). In 2001 they won the prestigious 2001 Worldwide Microsoft RAD Award for Web-based technology applications, inventory management and reservation systems for hospitality. To read more click here: http://www.hospitalityebusiness.com/team.shtml

KPMG/YouGov survey: consumer spending on holiday and leisure pursuits In 2003

*              60% of consumers choose foreign destinations over holidays
                In UK

*              Londoners more bullish about taking holidays abroad

*              Majority of consumers would go to restaurants, pubs and clubs less
                 in order to cutback on spending

Holidays Consumers were asked about how many foreign holidays they were planning in 2003.

                -              25% said two or more

                -              35% said one

                -               22% said none, they were planning a UK holiday only

                -               18% said they were planning no holiday at all

-                Londoners were more upbeat about taking holidays as 34%
 expect to take 2 or more holidays overseas compared to 22 % in
Scotland and the South, 23% in the North and 26% in Midlands and   Wales

Alessandra Alonso from KPMG's travel, leisure and tourism practice said: "Despite the current economic uncertainty and the threat of war and terrorism, 82% of those surveyed are planning at least one holiday in 2003; although foreign holidays put the UK in the shade. 

"Snow and general bad weather over the Christmas break would certainly encourage people to book for guaranteed sun.  UK operators need to be increasingly creative and add value for money in order to attract sun-seeking Britons to stay at home.   Marketing niche propositions smartly such as culture and history, theme parks and adventures, will strengthen their unique appeal.

"There is still a core group of Britons who cannot afford to go on holiday. Uncertain times have fuelled this  (65% of people  surveyed believe the economy will get worse).  It is possible over the next 12 months that a very small percentage of this group might change their mind and be drawn to last minute deals which offer extra value for money."

Going out

Consumers were asked to identify which areas they would spend less on

If they had to cutback on spending.

-    The majority (29%) would cut back on going out to restaurants,

      bars and pubs

-     21% said they would spend less on purchases for the home

-     17% would cut back on buying clothes

-     13% would spend less on entertainment (eg cinema and

       theatre)

-     Scots consumers were more likely to cut back on going out to
      restaurants etc (31%) compared to their counterparts in the north of
      England (27%), in Midlands and Wales (29%) , and London and the South (30%).

Michael Coughtrey, partner specialising in leisure at KPMG , said: "Going out to restaurants and pubs is a discretionary expenditure which can easily be cut.  Economic uncertainty will catalyse such consumer behaviour and it is likely high street restaurant chains will suffer more as mass market demand contracts.  Also, consumers tend to change where and when they drink as opposed to how much,  so we could see a rise in off licence sales and even bootlegging where people will search for cheaper alcohol prices."

Contact: 
Bernice Marks at KPMG on 07789 925294 or the UK KPMG Press Office on  020 7694 6344.

1  The research was carried out by YouGov on behalf of KPMG amongst 1450 adults.  The results were weighted to be representative of the UK 18+ population.

2  KPMG is the global network of professional services firms whose aim is to turn knowledge into value for the benefit of its clients, its people and its communities.

KPMG LLP operates from 24 offices across the UK with more than 9,500 partners and staff.  KPMG recorded a UK fee income of £1,018 million in year ended September 2002.

KPMG LLP is a UK limited liability partnership and the UK member of KPMG International, a Swiss non operating association.

Website:  http://www.kpmg.co.uk

Australia: local tourism boost 'not enough'

Mercury  - Tourists flocked to domestic destinations over Christmas, but did not make up for the decline in international visitors, the tourism industry has said.

Tourism Task Force chief executive Chris Brown said holiday destinations close to the major capitals felt the real benefit of the local tourism surge, which came in the wake of the Bali bombings.

Areas including the Gold Coast, Sunshine Coast and NSW south coast felt the most benefit.

"Australians have responded well (to the idea) of holidays at home and I think a lot of people have certainly taken their family on holidays in locations close to major capital cities, where the real benefit has been felt," Mr Brown told ABC Radio.

He said the industry was delighted that Australians decided to holiday more at home this Christmas as they did the previous year after the September 11 terrorist attacks.

"(But) it's not nearly enough to make up for the economic damage to the nation that's caused by the reduction in international tourism and also doesn't make up for the reduction in tourism to some of the more long-haul domestic destinations."

News@PATA

PATA ADDS SECURITY TO CONFERENCE PROGRAMME

PATA will convene a special session on the first day of the PATA Annual Conference in Bali, entitled, "PATA’s New Agenda: Regional Security and the Lessons Learnt from Bali." The session will be jointly facilitated by PATA President & CEO, Mr. Peter de Jong and PATA Vice President, Mr. Peter Semone. The inter-active session will comprise two parts: Jakarta-accredited ambassadors giving their perspectives on regional security issues, and a case study on the recommendations of the recently-completed PATA Bali Recovery Task Force. The Jakarta-based diplomats will deliver their opinions on October 12 and its aftermath, measures taken in and by their respective countries, and implications for the future. On the case study, Mr. de Jong said: "The PATA Task Force recommendations have profound implications, not just for Bali and Indonesia but for all PATA members and for our entire region. This new session will be of great interest to a wide range of stakeholders in tourism." PATA Annual Con

ference 2003 takes place in Bali, Indonesia, April 13-17, 2003. For registration and programme information visit www.pata.org or e-mail events@pata.th.com.

INNOVATIVE MEKONG THEME

The theme for the 8th Mekong Tourism Forum which takes places in Hanoi, Vietnam, March 28-30 is: "Innovation: Selling the Mekong in a Dynamic Marketplace." The keynote speech, entitled, "Facing the Marketing Shift," will be delivered by Chairman of Victoria Tourism, Mr. John Morse. The event will be held in the Hanoi Daewoo Hotel and is supported by the Asian Development Bank, the UN Economic and Social Commission for Asia and the Pacific, and the Agency for Coordinating Mekong Tourism Activities. Delegates who register before February 28 will save US$20 on registration. To register, visit http://www.pata.org/frame_e.cfm?pagetype=eprog&ebid=35. Further information is available from Mr. Aaron Tan, PATA Manager-Development, at aaron@pata.th.com.

SPONSORSHIP OPPORTUNITIES FOR MEKONG FORUM

Lunch and coffee break sponsorship opportunities at the 8th Mekong Tourism Forum are open to PATA members who would like to showcase their companies to operators from the Mekong region. Over 200 delegates from public and private sector operators attend the Forum each year. For more information, please contact PATA Director-Business Development, Mr. Stephen Yong, at stephen@pata.th.com.

JOIN PATA AT THE WORLD’S LARGEST TRAVEL SHOW

PATA has organised a stand at ITB in Berlin (March 7-11, 2003). The PATA stand, in a prominent location, is traditionally a focal point for buyers interested in Pacific Asia products. Exhibitors are provided with fully-furnished booths, a reception and hospitality service. Booths guarantee privacy for business. Some space is still available. For more information and to register, contact PATA Europe at europe@pata.mc.

LAST CALL FOR CENTRAL EUROPE SALES MISSIONS

Pacific Asia suppliers interested in attending the PATA Central Europe sales missions to be held prior to ITB 2003 need to register by January 15 to secure space. The events (Budapest, February 28; Prague, March 3; and Warsaw March 4) offer suppliers the opportunity to develop contacts in the increasingly important Hungarian, Czech and Polish markets. To register, contact PATA Europe at europe@pata.mc.

DISPLAY YOUR BROCHURES AT BIT 2003 IN ITALY

PATA members can display brochures at the PATA stand at BIT 2003 in Milan, February 15-18. The cost of this one-time exceptional offer is US$250. The PATA stand, in a prominent location in the Pacific Asia area, is a great opportunity to reach the Italian market in a cost-effective way. To have your brochures displayed or to exhibit at the show under the PATA umbrella, contact PATA Europe at europe@pata.mc.

PATA STRATEGIC INTELLIGENCE CENTRE WORLDWATCH

** According to researcher International Data Corp (IDC), Pacific Asia IT and telecommunications markets will expand 11 per cent to US$81 billion this year, with Indian companies emerging as key players. The growth in the region (excluding Japan), is being driven by infrastructure upgrades.

** An estimated 600 people have died due to a cold weather snap which has swept across India, Bangladesh and Nepal.

** Penerbangan Malaysia Berhad (PMB), the holding company that owns Malaysia Airlines, has ordered six Airbus A380s in a move valued at US$1.5 billion. The 550-seater aircraft will be delivered to Malaysia Airlines in 2007 for operation on the lucrative "Kangaroo Route."

** The IMF forecasts that Asia will lead the way in world economic growth in 2003, performing better than the global average of 3.7 percent.

** Malaysia's Air Asia, the first no-frills airline in the region, will start weekly charters to Bangkok in February as a prelude to launching scheduled services at a later date.

** The Association of Southeast Asian Nations will launch a tourism security and safety information Web site, partly to counter foreign government advisories warning people about travelling in the region, officials said.

Hotels will not regain control over distribution, says report

TravelWeeklyEast.com -   According to a report by PhoCusWright on distribution strategies and market forecasts for hotels, hotels will be hard-pressed to regain control of distribution, amidst a lingering recession and the continued strength of online retailers in the marketplace.

The report predicts that within three years, online hotel bookings will increase from nine percent of total gross bookings to one in five.

Online travel agencies now represent nearly half (49 percent) of the $6.3 billion in online hotel sales (2002), with the remainder coming from hotel websites.

PhoCusWright projects that roughly three-quarters of online agency hotel sales are via the merchant model, where the agency often takes a 15-30 percent "margin" on the net rate offered by the hotel (as opposed to the customary 10 percent commission). This business model has boosted profits at Expedia and Hotels.com, which represent roughly 60 percent of online agency hotel sales, said the report.

Travelocity also has a new merchant rate programme which it launched in late 2002; Orbitz will likely follow this year.

Although hotels will not be as proficient as airlines are in controlling online distribution, the report recommends that hotels “get much better at it” over the next few years.

Internet error puts Starwood in no-win situation

USA Today -  A missing zero on its Internet sites threatens to cost hotel giant Starwood either a lot of money or some customer goodwill.

A month ago, Starwood's Web site recently showed $85 rates — instead of $850 — for over-the-water bungalows during high season at its luxurious new resort on the French Polynesian island of Bora Bora in the South Pacific.

Over two days, 136 people booked 2,631 rooms at the cheap rate and some made multiple reservations covering more than two months of vacation, Starwood says. If all the reservations were kept, the glitch would cost the resort $2 million.

Last week, the Bora Bora Nui Resort and Spa told customers it won't honor the rate, outraging many.

"A company takes a risk when it puts its business on the Internet and bears responsibility for checking for errors," says Rob Kniaz, who stays at Starwood hotels often. "It's not hard to write software that says this price is 10% of what is usually charged."

Internet mistakes aren't new. Kniaz, in fact, was able to stay at Starwood's W Times Square for about $20 — only paying room taxes — when Starwood honored a $0 Internet rate for certain rooms about a year ago.

United Airlines has had several glitches on its United.com that let some passengers pay $25 for San Francisco-Paris flights and, more recently, $5 for Chicago-Denver flights. In each case, United honored the cheap fares.

The $60 million, 120-bungalow resort, which Starwood manages, opened in October.

"While we deeply regret the rate snafu, the resort is just not in a position to honor the erroneous rate which would result in a more than $2 million loss to the resort," says Starwood spokeswoman K.C. Kavanagh.

In the W Times Square case, she says, only about 250 rooms were booked at the wrong rate.

"In this particular situation, we are talking about nearly 3,000 rooms at a luxury resort with an extraordinary and obviously erroneous price differential," she says.

Starwood says it's trying to satisfy the customers. Its offer: A $531 nightly rate at the resort, 40% off the typical bungalow rate or airfare reimbursement for those who booked non-refundable airline tickets before they were informed of the rate error.

"We do want to try to make things right with the relatively small number of guests who booked the rooms" at the wrong rate, she says.

Dan Hammer says he understands but still hopes he gets an $85 rate.

"These are the bungalows that you only dream about," says Hammer, a New York-based toy manufacturer who had planned to take his wife

Australia Accommodation Performance Results Reveal  Serviced Apartment Demand Grew 7.9% During  September Quarter 2002, While Hotel Demand  Declined Slightly

The latest Australian Bureau of Statistics tourist accommodation performance results demonstrate continued strong demand growth in the national serviced apartment sector, according to Jones Lang LaSalle Hotels. 

The data reveals serviced apartment demand grew 7.9% during September quarter 2002, whilst hotel demand declined slightly. The results form part of the latest update of Jones Lang LaSalle Hotels’ Hotel Property Digest and are consistent with demand growth patterns over the full year to September 2002.

"These results demonstrate a continuation in the trend of escalating consumer preference for serviced apartment accommodation across both corporate and leisure sectors. This trend has been reinforced by the emergence of strong serviced apartment brands such as Medina, Pacific International, Saville, Mirvac, Oakford, Outrigger and Quest." said Mr Troy Craig, Senior Vice President, Jones Lang LaSalle Hotels. "The proliferation of new serviced apartment properties across Australia over the past few years has also stimulated demand growth.  Since 1997, serviced apartment room supply has increased 41.6%. "

Across Australia, hotel demand experienced a slight decline during the September quarter ( –0.8%) largely due to softer international arrivals and flat corporate demand. This softening was offset by room supply reductions in Sydney, allowing national hotel occupancy levels to edge up marginally. Strong demand growth in Perth and Adelaide also compensated for flat to weaker demand in most other markets.

As Australia’s international gateway, Sydney hotels felt the full effect of lower international visitors. 

According to Mr Craig "The bulk of Sydney hoteliers reported a soft July and August in what many termed a winter of discontent. However, anecdotal evidence suggests occupancy growth in the latter part of 2002 compared to fourth quarter 2001, albeit from the lower base of the post September 11 environment.