eHotelier Newsletter

Dear Friends & Colleagues, The fifth annual Legislative Action Summit (LAS), held last week at the Loews L'Enfant Plaza Hotel in Washington, D.C., was a tremendous success. LAS attendees met with more than 200 Members of Congress and their staffs. Featured speakers at the Summit included Assistant to the President for Legislative Affairs Nicholas E. Calio, President Bush's chief lobbyist; Chief Deputy Whip Rep. Roy Blunt (R-Mo.); Senator Chuck Hagel (R-Neb.); and Tony Snow, current events analyst for FOX News Sunday.

The impact of this year's LAS was apparent immediately. During the LAS, attendees encouraged Congress to set up a fund to promote travel within and to the United States. Such a program disbursing federal funds to supplement existing state tourism promotion expenditures would significantly leverage state efforts. One legislative vehicle that would provide $100 million in funding for travel marketing is The American Travel Promotion Act (H.R.3321), [add link to Advisory on American Travel Promotion Act] introduced by Rep. Mark Foley (R-Fla.). LAS attendees convinced eight Representatives to sign onto the bill as cosponsors in just one day, which nearly doubled the number of cosponsors.

More cosponsors are expected soon thanks to the concerted efforts of LAS participants. In addition, Chief Deputy Whip Rep. Roy Blunt is a cosponsor of Rep. Foley's bill. This is very significant, because in his position as chief deputy whip, Rep. Blunt's major duty is counting votes to assess whether legislation has enough support to pass the House, and Rep. Blunt will move up to become the whip in the next Congress.

Attendees also lobbied their Members of Congress to increase the business meal and entertainment tax deduction to 100 percent [add link to business meal issue brief]. The allowable deduction for business meals and entertainment was reduced from 80 to 50 percent by congressional action in the mid-1990s

The lodging industry continues to view this tax law change as a constriction on its ability to grow and provide an increasing number of new jobs. Furthermore, businesspeople have traditionally used hotel restaurants as informal places of conducting business. For some businesses, the restaurant table is their only conference table. The federal government should not unduly hinder business productivity by treating these legitimate business expenses differently from all other legitimate business expenses

LAS attendees encouraged Congress to restore the spousal travel tax deduction to 100 percent. Past congressional action eliminated the deduction for spousal travel expenses. The lodging industry believes this restriction causes fewer people to travel thus inhibiting the industry's goals to grow and provide new jobs

Allowing a deduction for a spouse to travel on a business trip is a family friendly policy, encouraging not only spouses, but also children to travel. Such a policy would be especially welcome by family members whose jobs involve a great deal of travel.

Full deductibility would sell more hotel rooms and airline seats and boost attendance at conventions and other business meetings held at lodging properties. The policy also would increase the number of days people are able to travel on business as well as allowing businesspeople—especially middle-income taxpayers—to add family vacation time onto business trips. The restoration of this tax deduction would benefit the lodging industry and the entire economy.

It is estimated that a restoration of the deduction would cost approximately $20 million per year. Given the increase in economic activity the deduction would generate, the resulting economic growth would be much greater than the cost

AH&LA's governmental affairs department will continue the work of this year's LAS attendees and fight for these initiatives on Capitol Hill.

Finally, I hope to see many of you at our Annual Conference & Leadership Forum, April 3-4 in Philadelphia. This year's theme, "Leadership, Unity, and Growth" is the perfect description of the conference's 12 educational seminars, which cover topics such as executive leadership, human resources, environmental issues, insurance issues, sales and marketing, and technology. In addition, you'll hear from former New York Police Department Commissioner Bernard B. Kerik, Tom Brokaw, and Horst Schulze. To register via the Internet, visit www.ahla.com/annualregister. Get additional conference information at www.ahla.com/annualconference.

Interview with Le Meridien CEO Juergen Bartels – by Yeoh Siew Hoon, Editor, TravelWeeklyEast.com

Juergen Bartels is a hotelier in a hurry. He’s invested £10 million of his own money into Le Meridien, he plans to take the company public in five years and he knows that for all the money in the world, time is not on his side. The man, who once led Radisson and Westin, is determined to strike it even bigger third time round. He tells Yeoh Siew Hoon how.

Q: First, Radisson, then Westin and now Le Meridien. What’s different this time round?

Bartels: Well, I have invested £10 million (US$14 million) of my own money in this company. That makes a big difference.

Q: Do you think if other hotel chief executives had their own money invested …

Bartels (interrupting): Which hotelier can do that? You can’t make £10 million on salary.

Bartels: The deal I made with Westin – I was an investor in the Westin deal with Goldman Sachs and Starwood Capital. These deals are very rare.

That Westin deal was the biggest in the world that year, as was the Sheraton deal when it was sold to Starwood and Le Meridien when it was bought by Nomura.

I think banks would like it if more hotel CEOs had their own money invested in the company. Nomura asked that I did that. They knew I had the money.

The banks asked me, ‘JB, could you do a tabulation of your value including your home?’ I did it, not knowing what they were after. In the end, they said, ‘How about putting the full amount in, including your home?’ I asked my wife and she agreed.

Bartels: I took the same gamble as the bank. And who knows more about the business – me or the bank? That’s why they made the deal with me.

Bartels: In the deal with Westin, Nomura was my debt financier. We paid US$546 million for Westin and sold it for US$1.8 billion. I guess I am a rare breed, other than people like Bill Marriott, Barron Hilton and Barry Sternlicht.

Q: The question I was going to ask was, if hotel CEOs had their own money invested in their companies, would they run it differently? Would they be more prudent with spending?

Bartels: I truly believe that I would not do it differently – whether I had money invested or not. I do the best I can regardless. I know banks and owners don’t believe this – but I am telling you and it’s up to you to believe me.

Bartels: We want to be the number one, upper upscale hotel company, in the world by 2004 with measurable results including occupancy, average room rate, gross operating profit.

Bartels: I have asked the banks for US$550 million in renovation funds for two years. I have got that. We will be spending five times more on renovations than before, we will accelerate capital spending. People are saying times are not good but

This is a cyclical business. We were on the decline before September 11; that accelerated our decline. I have said business will recover in the last quarter of this year. I could be right, I could be wrong, nobody knows.

I see renovation as marketing – if rooms are ugly, customers do not come back. We are preparing for the turnaround and designing our product, Art & Tech, where we will convert 5,000 rooms out of the 52,000 rooms we have.

I am going around and asking owners of our hotels to spend money. I have just come from Dubai where the owner has agreed to spend on 248 rooms.

Bartels: Yes but they see that we are renovating the hotels we own and they understand that some of the money is mine.

We have also shown them results. We converted one floor at the Russell Hotel (London). The non-renovated rooms get an average rate of £52, and the renovated ones get £176. You know what the maid at the Russell said to me? ‘It’s such an ugly hotel, you give us ugly rooms and ugly uniforms and you don’t train us.’ So we designed new uniforms for them, we renovated the rooms and we spent more money on training. You have to invest in renovation, people and marketing.

Bartels: I have never heard of a good hotel that is ugly and is run by terrible people. A good hotel is a good looking hotel run by interesting people. I am a European, an old European. I have to become more cool. There is no point having a dining room that is empty and when you walk into it, the maitre d’ asks if you have a reservation. That is belittling the customer and it is annoying.

Bartels: I am designing a wrist band in acrylic with a logo and no name. If a customer enquires about it after the third interaction, the staff is supposed to give it to the guest as a present.

I have designed a name badge which says, in French, ‘Yes, with pleasure’. You know, generally three percent of employees are NDG (No Damn Good). I would like our people to smile first and with a badge like that, they must be smiling otherwise the customer will say, ‘what do you mean, yes, with pleasure, and you are not smiling?’

We are giving our guests 100g Hermes soap in a box that costs £11.50 each and they can take it home with them. Our competitors give their guests 14g soap. When recession hits, that goes down to 2g.

There are 10 million rooms in the world, occupied every night by 1.5 people each. That’s 45 billion pieces of soap thrown away, it’s a mess.

Q: Those are the details but generally all hotel rooms tend to look the same because they tend to be designed by the same people.

Bartels: That’s why I went to Yvonne Gold who has never designed a hotel room in her life.

She designed the modern art museums in England and I love her work. She asked me if she should go look at a hotel and I said, ‘No. I want nothing from a hotel.’

Q: You must be spending a lot per room. Can you get the rate to justify the spend?

Bartels: Between £45,000 and £50,000 per room. The TV, bed and shower are the technologically modern items. I need to get at least £50 more for the converted room worldwide. It will take us at least two years to put the rooms in. We have time to get the rate. The trend with modern hotels these days is, we all use the same designers so we wake up and don’t know where we are. We want Le Meridien to be different in the details.

Europeans are better managers at taking care of the details and the Americans are better at marketing.

We want to make the transition to become more American, to become better at marketing.

Bartels: Asians are even better at details than Europeans but are not good at marketing. We want to become the world champion in operations and marketing. For example, we are paying travel agents more commissions. We have issued 3,950 membership credit cards to the industry. We will have 65,000 members by year end.

There are 750,000 travel agent personnel working in the 139,000 agencies worldwide. Each will get a personal incentive and a credit card.

We have increased agent commission from 10 to 12 percent but the individual agent will also get two percent in addition to the 12 percent for her agency.

Take our 1,000 sales people – we are giving them an additional 2.5 percent incentive when they sell each other’s hotels.

Q: You are incentivising travel agents when most upper scale hotel companies are planning to go direct to consumers?

Bartels: I believe in travel agents. If I don’t get travel agents to help me, I would have no power. People say, ‘doesn’t he know it’s the Internet’ but the upper upscale market is still driven by agents.

Q: You plan to take Meridien public in five years – when you will make a lot of money and engineer the biggest deal of that year?

Bartels: Good question, he doesn’t really need the money. I do not consider what I do as work.

Bartels: When I was younger, I was more driven. My mother told me I was anxious and eager. Now I am more relaxed.

Bartels: I want to show that Europeans can do something inspiring for this industry. We founded the industry but the Americans came along and they hired Europeans to run their hotels. Asians? Do they need Europeans and Americans to run their hotels? No. They have Asian superstars as well.

Bartels: I have just been in this job six months, I have already influenced a lot of stuff. Give me time. But I am in a hurry, and it’s for a different reason. I am 61.

The 29th European Hotel Manager’s Association (EHMA) annual congress was recently held in Amsterdam. Andersen, the leading advisor to the international hotel industry released performance data for 2001 and also took the opportunity to poll the audience on their views as to the outlook for the industry. This revealed that a significant shift in sentiment has occurred since the gloomy days following September 11.

A similar poll held at the 13th Annual European Hotel Investment conference in London in November was unsurprisingly much more negative. Six months on, the industry can congratulate itself for prompt action and an innovative approach to coping with the crisis.

Participants at the annual EHMA congress were asked how they rated the prospects for the performance of the provincial hotel market in France, Germany, Italy, Spain and the UK. The audience overwhelmingly indicated that they believed the outlook to be more positive than their counterparts in November. The Mediterranean markets of Italy and Spain were where delegates were most upbeat, with on average 60 percent of delegates believing that these markets should improve during 2002. This compares with 35 percent and 45 percent of delegates, respectively, in November.

Julia Felton, director of Andersen’s London based Global Hospitality Knowledge Services Team and responsible for the Andersen Hotel Industry Benchmark Survey, commented that “the Mediterranean countries of Italy and Spain were the industry’s real winners during 2001 with many cities, and in particular the resort markets, reporting positive revPAR growth. We see no real reason for this trend not to continue”.

Felton added “fear of flying and the desire to holiday in perceived ‘safer’ destinations closer to home may actually benefit these destinations disproportionately during 2002”.

The biggest change in sentiment was related to the prospects for the German hotel industry. In November, 85 percent of survey participants believed this market would decline during 2002, whereas in February just 18 percent of survey participants believed this would be the case. With the German economy under pressure and GDP estimates for 2001 at just 0.7 percent, there is a real danger that German consumers may well curtail their travel plans during 2002. With Germany being one of the largest outbound markets in the world, the fact that consumers may opt to holiday at home could conversely stimulate demand at home during these tough times.

Felton concluded, “ We are delighted that the industry’s outlook for 2002 is increasingly positive. Following events of September 11, Andersen suggested the decline should begin to decelerate in November and expressed a view of cautious optimism for 2002. Whilst 2002 will certainly remain a year of some uncertainty, we reiterate our views that the outlook continues to improve and we anticipate further mergers and acquisition activity”.

Copies of the Andersen Hotel Industry Benchmark Survey Annual Survey – Europe are available. Please call us on +44 (0) 20 7304 1304 or e-mail us at hotelbenchmark@uk.andersen.com

Launched in 1996 as the definitive source of hotel performance data outside North America, the Andersen Hotel Industry Benchmark Survey collates data from more than 5,500 hotels in 300 markets across 140 countries.

Andersen is a global leader in professional services. It provides integrated solutions that draw on diverse and deep competencies in consulting, assurance, tax, corporate finance, and in some countries, legal services

(Reuters) - U.S. hotel room revenues fell 7 percent to 9 percent in February, in the best showing in months for one of the industries hardest hit by the post-Sept. 11 travel crisis, according to figures released on Thursday.

The drop in room revenues, the most widely watched industry barometer, came as hotel occupancy rates fell 3 percent to 5 percent, according to Smith Travel Research.

The 7 percent - 9 percent drop in February room revenues was a major improvement over January, when the figure was down 12.9 percent and marked the first month of single-digit decreases since September.

At the height of the travel crisis, hotel room revenues plunged 23.4 percent in September compared with year-ago levels. Analysts welcomed the latest results, saying the numbers indicate the industry is continuing a gradual rebound as people return to the road for business and leisure travel.

"The declines have become less onerous," said Brian Egger, an analyst at Credit Suisse First Boston Corp. "You're starting to see some initial signs of resumption in travel, some signs of the early stage travel recovery in lodging travel demand."

Among individual price segments, luxury hotels continued to take the biggest beating in February as class-conscious business and leisure travelers traded down to more affordable accommodations.

Luxury hotel room revenues were down 11 percent to 13 percent, while, at the other end of the spectrum, economy hotels suffered a more modest 2 percent to 4 percent drop.

Despite the recent progress, Egger forecast the industry would continue to post year-over-year declines until at least the third quarter, when year-earlier figures start to become easier to beat.

"Now the question is, if we've settled into a period where (room revenue) declines are less onerous, when do we actually see the potential for gains?" Egger said. "I think that's still several months away."

The nation's largest hotel operators are Marriott International Inc. (MAR), Starwood Hotels & Resorts Worldwide Inc. (HOT) and Hilton Hotels Corp. (HLT).

While London hotels suffered an "annus horribilis" in 2001, the market will recover this year, say consultants PKF.

According to PKF’s London Trends 2002 survey, published today, 2001 was always going to be a tough year for the hotel industry.

Melvin Gold, managing director of hotel consultancy services at PKF, said: “Whilst it cannot be denied that the London hotel industry suffered a bad year, it was 2001’s misfortune to follow the Millennium, a year of record-breaking success. There was never any expectation that London would be able to match the second highest-ever rooms yield of £91.59 achieved in 2000.”

During 2001, occupancy at London’s hotels dipped below 80% for the first time in eight years. It fell by 9.7% to 72.9%.

Average room rate was down by 4.1% to £108.85, with revenue per available room (revpar) falling by 13.4% to £79.35. This included, in October, the largest-ever single-month drop, when revpar fell by 34.1% to £68.84.

The survey also highlights the difference in performance between inner and outer London hotels. Inner London hotels, which are more dependent on overseas tourists, saw revpar fall by 13.8% to £81.41, while outer London hotels recorded a smaller decline of just 2.4%.

Gold said: “Whilst 2001 may have seemed like an annus horribilis, it should be regarded as a dip caused by a variety of different and unforeseen circumstances from which the industry will recover.”

He added that there were a number of events such as the Queen’s Golden Jubilee and the Farnborough Airshow to look forward to in 2002 that were likely to boost business within the industry.

AN ANALYSIS OF THE ONLINE PRICING STRATEGIES OF THE INTERNATIONAL HOTEL CHAINS

By Dr Peter O’Connor - Institute de Management Hotelier International (IHMI) France

The price at which a product is offered for sale has been identified as one of the key motivators for encouraging customers to purchase online. This study represents the first significant investigation of the electronic pricing strategies of the major international hotel companies, and analyses the rates offered by hotels across five of the major online distribution channels.

Key findings include that hotel brands currently use multiple simultaneous routes to the marketplace, and that the rates offered over these routes have to a large extent become equal. However significant differences can be observed depending on the market segment being serviced by the brand, with direct online channels being consistently cheaper for economy and mid-priced properties and online GDS based intermediaries offering the best value at the luxury end of the market.

Keywords: Pricing, hotel chains, Web reservations, e-commerce, electronic distribution.

Effective distribution is particularly important in the hotel industry because of both the perishable nature of the hotel product and the industry's high fixed costs.

An unsold hotel room cannot be stored and subsequently offered to the customer at a later date. Thus the sale of each room each night at an optimum price is critical to each property's long-term profitability. To achieve this, hotels use a variety of different distribution channels to sell their product, and also manipulate price in response to demand using sophisticated yield management systems in an attempt to maximise revenues.

The importance of electronic distribution routes has grown significantly in recent years. According to statistics quoted in the Horwath Worldwide Hotel Industry Studies, direct reservations fell from approximately 39 percent in 1995 to just 33 percent in 1999, with the corresponding growth being focused exclusively in electronic channels (O'Connor, 2001). And while hotels continue to make extensive use of the travel agent orientated Global Distribution Systems (GDS), end user consumer adoption of the Internet as a mainstream commerce medium has prompted a change in the way in which the hotel product is being distributed. The Web has dramatically changed the way people communicate, research information, make decisions and particularly the way in which they buy goods and services. Travel products in particular have proven to be some of the most suitable for sale online.

The typical profile of an Internet user - affluent, frequent travellers who spend above average on leisure and entertainment - is an attractive market for travel suppliers (NFO Plog Research, 2000). Furthermore, from a consumer perspective, in an increasingly wired world, purchasing travel online has become faster, easier and more convenient than contacting a travel agent or telephoning a supplier directly. As a result, online travel revenues are forecast to grow sharply. For example, according to a recent report by Jupiter Media Metrix (2001), online travel sales will more than triple in the next five years from US$18 billion in 2000 to US$63 billion in 2006.

Booking volumes are also forecast to climb, with the Travel Industry Association of America (1998) estimating that by 2002 between 6% and 10% of all travel reservations will originate on the Web. This will make travel the highest grossing online product, nearly doubling that of the current leading product - PC hardware. Key to successful selling online is the issue of price. Studies by Gomez (2000), the Travel Industry Association of America (2001) and PhoCusWright (2001) have all identified price as being one of the key motivating factors that encourages consumers to purchase travel online. For example, the PhoCusWright study found that competitive pricing is the best way to attract customers (Pastore, 2001). When travellers who haven't bought online were asked what would encourage them to do so, 64 percent said that saving money would make them more interested. No other benefit - saving time, getting bonus loyalty club points, more control or obtaining better information, came close to this level of response.

Recent studies have shown that online travel purchasers tend to be price driven. For example, according to Yesawich, Pepperdine & Brown (2000), almost six out of ten leisure travellers now actively seek the "lowest possible price" for travel services. Similarly, a recent Forrester Research study (2001) found that 66% of all buyers used an online discount in the past 12 months to buy travel online, and a study by the Joint Hospitality Industry Congress (2000) found that there is a real expectation among consumers that Internet prices will be lower than those in the "bricks and mortar" world.

Such a perception has developed for several reasons. Firstly, many of the most well known Internet retailers (such as, for example, Amazon.com) compete with traditional outlets based, to a large extent, on price. As a result, there is an assumption among Web users that the same is true for travel products. Secondly, many consumers are aware of the lower distribution costs associated with Web channels (Nua, 1998). As Jack Geddes, Managing Director Sales and Marketing Asia, Radisson Hotels Worldwide has pointed out "Consumers now understand that suppliers are cutting costs through this channel and expect savings to be passed onto them, as well as being rewarded for making the booking themselves" (Muqbil, 1998).

Such expectations are being reinforced by the budget airline sector, which offers significant discounts for online bookings. Companies such as EasyJet, RyanAir and Buzz estimate that by avoiding telesales and travel agents, they can make savings of up to 30% - which they pass onto customers in the form of lower fares (Cooke 2000). Lastly, many hotels use the Web to sell last minute deals - packages at relatively low prices but with short lead times. While such promotions can help dispose of distressed inventory, they have also resulted in the public associating rooms sold over the Internet with cheaper prices.

These factors have combined to make consumers associate online booking with good value. However, in the case of hotel own branded Websites, industry practice seems to be the opposite of theory. In their 1999 survey, O'Connor and Horan (1999) found that , in the majority of cases, rates obtained over this channel were significantly higher than those obtained by contacting the Central Reservations Office. Often the rate quoted by the company's Web site was substantially higher, despite the associated lower cost of distribution.

However this study was limited in that it only focused on direct sales over hotel chains' own branded Websites. Hotel electronic distribution is rapidly evolving and a large number of other online consumer focused channels are now available, with most chains using multiple routes to get their product to the consumer (Castleberry et al, 1998). The availability of so many alternative points of sale poses some interesting questions.

Is there consistency between the availability and prices being offered over each of the channels? Research has shown that consumers shopping for travel online almost always check more than one site before purchasing. According to Jupiter Media Metrix, for the hotel product 10 percent of bookers visit one site, another 43 percent visit two or three sites and 22 percent visit four or more sites. Online purchasers have become increasingly intolerant of inconsistent information, and may react to disparate rates on different channels by purchasing from the company's competitor. Furthermore, if rates are not consistent across channels, is any one route consistently cheaper and is the company's pricing strategy logical from both the consumer's and the hotel's perspective?

Previous studies of hotel Internet use have been limited. Murphy et al (1996) focused on rating the content of hotel Web sites, while Van Hoof and Combrink (1998) attempted to measure managers' perceptions of, and attitudes towards, the Internet. Web reservations facilities were investigated in detail in a prior paper by the author (see O'Connor & Horan 1999). However the issue of pricing over multiple simultaneous travel distribution channels does not appear to have been the subject of extensive systematic research to date. The objectives, therefore, of this study were to analyse the rates being offered to consumers over hotel electronic distribution channels and to subsequently identify the pricing strategies being used by the hotel companies.

Obviously a exhaustive analysis of the rates being offered by all hotels would be impossible. However, as the use of both technology and electronic distribution has in the past been lead by the major international hotel chains, an analysis of their efforts was though to be indicative of developments in this area. As a result, it was decided to focus the study on the behaviour of the top 50 international hotel brands. While this strategy means that the findings are not representative of the industry as a whole and thus the results not generally applicable, it does allow an accurate benchmark of trends as they currently stand to be established. The companies were chosen based on the ranking of the top 50 hotel brands published in Hotels magazine in July 2000.

Two companies (Disney and Club Med) were removed from the listing as they are in effect resorts, only distribute their rooms as part of packages, and thus their products are not directly comparable. Furthermore, three companies neither offered on-line reservations facilities on their own Website, nor were they listed on any of the other channels studied. Thus the results discussed below reflect the findings in respect of the 45 hotel brands for which consistent data could be found.

Five major types of electronic B2C distribution channels were identified from the literature and leading examples of each category selected for inclusion in the study. In addition to the chain's own website, these included channels which draw their data / reservations engine from the Global Distribution Systems (Microsoft Expedia and Travelocity); those which are based upon the databases / reservation engine of the Switch companies (TravelWeb); and pure Web based channels that require their inventory / reservations database to be maintained online (WorldRes).

While not collective exhaustive, these represent the majority of the non-direct-to-hotel reservations. Omitted from the study were the "name-your-price" / "auction" style websites, which, due to their bidding pricing structure were not comparable and thus could not be included.

Voice channels were also incorporated into the study for comparison purposes by analysing the rates offered by the toll free number to the Central Reservations Office (CRO). Data was collected by iteratively reserving a double room for specified dates in a selected property from each of the brands using each of the distribution channels discussed above. Where the product requested was available on the system, both the number of rates displayed and the lowest rate available were recorded for analysis.

The hotel company's Central Reservation Office was subsequently telephoned and the same product requested. In the latter case, the first rate quoted by the telesales agent was recorded. This process was repeated for five sets of alternative dates to reduce the possibility of error due to systems malfunctions or other exceptional circumstances.

4.1 Number of channels used

As can be seen from Table 1, each of the major hotel brands uses multiple simultaneous distribution channels, with the mean number of channels being 4.68. The most commonly used channels were over voice through the company's Central Reservation Office and through the company's corporate Website. Those companies that did not use voice were in the economy sector, and, although outside the scope of the study, it could be speculated that their abstinence from using this channel could be a reaction to its high operating costs.

The level of use of company's own Websites was also found to be high, with nearly 97% of the brands surveyed offering the facility to make an online reservation in this manner. It is interesting to note that this represents a considerable advancement when compared to prior surveys (O'Connor & Horan, 1999 and Hensdill, 1998), which found that only approximately 50% of the major hotel companies provided such on-line facilities, indicating major growth in the use of the Web as a direct selling medium by the hotel industry.

In contrast, usage of the other channels investigated is lower. Approximately fourfifths of the major brands used the GDS based intermediaries Microsoft Expedia and Travelocity respectively, three quarters used TravelWeb and only approximately one third used WorldRes at the time of the study. These findings are not in themselves surprising.

Both Expedia and Travelocity draw their data from the major GDS, and as the majority of the hotel brands represented in the study are business focused, representation on the GDS and thus their subsequent listing on these channels was to be expected. Similarly, TravelWeb draws its data from THISCO (The Hotel Industry Switching Company), and thus any of the hotel brands that use this as their switch service could be expected to leverage their investment by make inventory available for sale over TravelWeb - the switch's consumer focused Website. However the low usage of WorldRes is surprising. With the exception of a company's own Website, using WorldRes has the lowest potential transaction cost and thus would appear to be an attractive channel for use by hotel companies.

However, in practice, it does not list the properties of many of the major hotel brands. Examination of its property database reveals a large percentage of independent hotels, bed & breakfasts and smaller hotel chains, yet the question has to be asked as to why the major brands do not exploit this distribution channel?

With the exception of the toll free number (where the first rate offered was accepted), each of the channels analysed offered multiple rates to the customer. As can be seen from Table 2, each channel presented an average of five rates in response to the request, with more being offered to the customer in the case of Travelocity than through the other channels surveyed.

Presenting a variety of rates to the customer has both positive and negative implications. From a positive perspective, it offers the potential customer a choice and allows them to match their needs with the products being sold. On the other hand, presenting multiple rates without adequate product differentiation can create confusion in the mind of the customer as to what there are getting for their money.

This is best demonstrated by an example encountered in the study, where a property had 17 different rates available for a particular date on TravelWeb, with few (if any) discernable differences noticeable in the rate descriptions. Clearly such a scenario would be confusing and frustrating for any customer wishing to book that property.

In terms of which channel is consistently cheapest, such a broad generalisation is difficult to make. However, based on an analysis of the rates found in the study and making allowances for rounding and currency conversions, it can be seen that prices across each of the channels were comparable, with the average price for the requested room being in the range of US$163. There were two noticeable exceptions to this trend. Microsoft Expedia was consistently marginally cheaper than any of the other channels, as can be seen from Table 3, and the rates found on WorldRes were in general more expensive. Such findings are surprising in that, as was explained earlier, the transaction costs associated with each channel vary greatly.

Expedia, as an online travel agency, has a higher cost of distribution from the hotel's perspective, and thus it would be logical to assume that rates offered over this channel would reflect these higher costs. Similarly, since WorldRes's transaction costs are relatively low in comparison with the other channels surveyed, it should in theory be offering the cheapest rates but in practice it quoted the highest prices. Clearly, when selling the hotel product online, there does not appear to be a relationship between the cost of using the distribution channel and the rate offered.

However simply examining averages often hides valuable information. If the brands studied are subdivided into classifications based on their targeted market segment, a different picture emerges. As can be seen from Table 4, hotels at the lower end of the market are far more likely to offer consistent rates across all channels used. While it could be speculated that the reason for this might be because economy properties are more likely to have a single fixed price for their product irrespective of demand, it could also be due to a more consistent pricing strategy on the part of the hotel companies involved when addressing a relatively price sensitive market.

Furthermore it can be seen that consumers at the lower ends of the market are far more likely to obtain lower rates through direct channels. For economy brands, direct sales over the company's own Website was cheapest nearly one quarter of the time, with a further 46 percent offering the same rate irrespective of the channel used.

Thus a consumer making a reservation for an economy room on a hotel company's Website would find the cheapest rate on this channel three times out four. With mid-priced products, the chain Website is even more likely to give the best rate, offering the cheapest rate nearly half of the time. However at the upper end of the market the situation was very different. Hotel company Websites gave the cheapest rate in less than 10% of cases, but quoted the highest rate in over one third of cases.

The evidence is clear. If you want to stay in upmarket hotels, avoid booking on their Website if you are searching for good value! Instead the online intermediaries, (in particular Microsoft Expedia), offer the highest probability of finding the cheapest rate available for such upper-end properties. It is also clear from the data that a hotel company's Central Reservation Office, accessed through a toll free number, is not the place to obtain cheaper rates. Irrespective of the market segment, there is a higher probability of obtaining the most expensive rate through this channel, and bookings through this route were almost never the cheapest available.

However this finding is to a large extent a factor of the methodology used. With voice, the first rate quoted was the one recorded for analysis. In many cases, other (lower) rates were quoted when the researcher indicated that he did not want to make a booking, suggesting that some degree of haggling would have resulted in significant lower prices on this channel.

From the above discussion, it can be seen that both the range of channels through which hotels can be booked and the complexity of these channels have grown. This study represents the first major attempt to understand hotel company's pricing strategies over electronic routes. Bookings made on five major consumer-focused online travel sites were analysed to establish if a logical pricing strategy could be established.

The study revealed that the majority of hotel brands now use multiple simultaneous electronic channels of distribution, making their product available to a relatively wide audience. While the use of voice through a Central Reservation Office has fallen slightly, there has been a growth in the availability of hotel company's own Website, with 19 out of 20 of companies now making their product available for sale in this manner. The differences between this and earlier published research indicate a major expansion in the use of the Web as a direct selling medium on the part of the hotel industry, perhaps accompanied by a realisation of its benefits in comparison with other, more traditional, electronic channels of distribution. Most companies offer multiple rates to customers over each channel utilised. It is interesting to note the large number of companies that now have consistent pricing across all channels.

Previous research found less than 10 percent of companies had consistent pricing and cited the lack of integration between the various inventory databases used to manage inventory as a possible cause. Yet over one third of brands now offer consistent pricing across multiple channels, indicating progression in the industry's management of electronic distribution in the interim. Although no single channel is consistently cheaper, in-depth analysis does reveal a link between the market being targeted and price. Firstly, cheaper prices can rarely be obtained over voice channels, irrespective of market segment.

From the data it can be seen that consumers are more likely to find cheaper prices on hotel chains' own Websites in the economy and mid-price segments. More upmarket hotel brands are, on the other hand, more likely to quote more expensive prices on their own Website than on other channels. Perhaps this is a reaction by the brands at the lower end of the market to the price sensitivity of their customer, or alternatively a realisation that at least some of the cost savings generated by direct selling should morally and ethically be passed onto the consumer. In any case, it represents a more progressive and realistic pricing strategy than that of the upper-end brands, who in many cases are charging their highest prices over the channel that represents their lowest cost of distribution.

And what are the implications of these findings for the consumer? Firstly, it is clear that for those with a taste for more upscale products, the hotel brand's own Website is not the place to shop, as better value can be obtained in most cases through other channels. More interesting, however is the fact that, in general, prices have become more are less equal across many of the channels investigated, and thus by implication, across many other electronic distribution channels as well. It is well established that time is a valuable commodity in today's society. Since the number and variety of ways that a consumer can book a hotel room has become undeniably complex, the cost associated with searching through even a small number of the many consumer-focused channels currently available in the marketplace in an attempt to find a cheap price has also grown dramatically. Given that this study has found that many of the rates being offered over alternative channels are more or less the same for the majority of hotels, the question must be asked as to whether spending time and energy searching for the cheapest rate is worthwhile?

Institut de Management Hotelier International (IMHI)
http://www.essec.fr/
Avenue Bernard Hirsch, BP 105
CERGY PONTOISE CEDEX, 95021
France
Phone: + 33 1 3443 3177
Fax: + 33 1 3443 1701

The FT reports that Queen Moat Houses is in talks with Six Continents about extending its franchise agreement to cover all its German hotels rather than the 11 currently trading as Holiday Inns.
QMH is reportedly ‘in better shape than ever’, despite recording FY pretax pre-exceptional profits of £3.3m compared with last year’s £17.5m.
Its financial year covers the FMD crisis early in 2001 and the post-11th hotel slowdown.
The FT points to the fact that QMH’s Holiday Inns in Germany are seeing a room yield 25% higher than that achieved by those operating under its own Queens brand.
Click here to get to the index of press releases on QMH’s web site, from where the financials can be downloaded.

Twenty-two government and state tourism offices have confirmed their participation at the PATA Travel Mart, April 9-12 in Singapore. Many new buyers have signed up. Nepal is "sold out" as the Feature Country. There will be dedicated Adventure Travel talks during the event and by night there will be a full calendar of social activities free for registered delegates.

Bahrain, Bali, Brunei, China (PRC), Chinese Taipei, Egypt, Fiji, Hong Kong SAR, India, Indonesia, Korea (ROK), Macau SAR, Malacca, Sabah, Sarawak, Malaysia, Nepal, New Zealand, Pakistan, the Philippines, Singapore and Thailand will all attend. NTOs such as MIn addition, many new buyers will attend the event for the first time. One hundred and ten buyers currently registered for the Mart are new buyers. The Mart is expected to draw a total of 250 new and repeat buyers from the leisure segment. PATA and Reed Travel Exhibitions estimate another 100 buyers for the corporate market will attend.

So far, European buyers constitute the largest group with 43 percent of total buyers. Asian buyers are second with 26 percent, the Americas third with 15 percent. Buyers from the Pacific will make up about nine percent and the Middle East six percongolia and Sri Lanka have also made enquiries

Organisers said they were not surprised about the late booking surge. "NTOs, buyers and sellers all took a wait-and-see approach before signing up for the Mart," said Reed Travel Exhibitions Director-Sales & Marketing, Mr. Andrew Lee. "They have seen the early signs of economic revival and have committed to the future."

All 45 seats for the two post-PATA Travel Mart buyer and media tours to Nepal have been fully booked. At least 10 more delegates have been waitlisted. Nepal is the Feature Country during the Mart and will host the opening ceremony and welcome dinner at the Jurong Bird Park in Singapore on Tuesday, April 9

Adventure Travel is the Feature Product. During the Mart on April 10, 11 and 12 there will be 20-minute adventure travel demonstrations and talks by specialists at the Feature Area sponsored by ActionAsia

In addition, April 11 will be Corporate Travel Day, with OAG, the airline scheduling experts, running two educational business travel planning courses for corporate travel planners and buyers.

Every night of the Mart delegates can enjoy complimentary social functions such as the Nepal-sponsored opening ceremony at Jurong Bird Park, Tuesday, April 9, and late night events on Wednesday, April 10 and Thursday, April 11 sponsored by Travel WeeklyEast, Singapore Tourism Board, TTG Asia and TravelAsia.

Accor Golf and Resort Services, in cooperation with Asian PGA, and TTG Asia, will sponsor the PATA Travel Mart Golf Tournament at Sofitel Palm Resort on Tuesday, April 9

Pacific Asia Travel Association (PATA)
http://www.pata.org/
One Montgomery Street, Telesis Tower, Suite 1000
USA - San Francisco, CA 94104-4539
Phone: +1 (415) 986-4646
Fax: +1 (415) 986-3458
Email: patahq@pata.org

The Pacific Asia Travel Association (PATA) is pleased to announce that Professor David Bellamy, famed botanist, writer and broadcaster, will deliver the keynote address at the 1st PATA Sustainable Tourism Conference, October 23-26, 2002 in Banten, Western Java, Indonesia. His speech will be entitled "Tourism: The Way Ahead to Sustainability and Beyond."

Dr. Bellamy's television and radio broadcasts communicate to thousands of people his enthusiasm and concern for the natural world. His travels take him around the globe heralding the message that a new, enlightened view of conservation is needed, and that every person has a part to play. Since his first major television series and accompanying book "Bellamy On Botany" in 1972, he has published some 80 papers and 34 books. Among his main spheres of interest are the evolution of ecosystems, especially wetlands and coral reefs; marine pollution, human/environment interaction, conservation, sustainable development, ecotourism, business and the environment.

The 1st PATA Sustainable Tourism Conference will be held in the lush setting of Indonesia's Banten Province, under the theme: "Protecting Indigenous Culture and the Environment for Sustainable Growth." The event is being developed as a forum for the academic community to meet with tourism businesspeople to discuss the development and promotion of sustainable tourism initiatives that are sensitive, practical and profitable. The event will feature objective conference sessions and case studies, a tabletop session of some of the region's most unique sustainable projects, an off-site workshop for hand-on audit exercises, and pre- and post-event tour options.

Please visit www.pata.org to view the programme, hotel and airline details, destination information and to download registration forms. E-mail: pstc@pata.th.com. Fax: (66-2) 658-2013.

Newsletter - March 12, 2002