1. HT 344-Hospitality and Tourism Marketing and Sales
Fall
12
HT-344 Hospitality and Tourism Marketing and
Sales
Professor Eric Brey.
Nov 16th, 2012
Hospitality Trend Assignment
Pu Zhao and ReemNasraddin
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2. HT 344-Hospitality and Tourism Marketing and Sales
Before people started using websites to book ahotel room and customize
their trips online a few years back, many of them used travel agencies throughphone
calls to book their trips. After the advance of the technology, and spread of Internet,
hospitality business became a lot more accessible by the public. Then people started
to rely more and more on the information that they accessed from the Internet. One
of the most significant changes that the Internet brought to the consumer is the
capability of specifying exactly what is needed, the servicesprovided before
consuming it, and it also added lots of variability to peoples’ choice.For instance,
websites such as Travelocity.com, Priceline.com, and Orbitz.com are among the
largest of the third party online travel agenciesin the industry; these three
companies foundedrespectively in 2001, 1996 and 1997.The online travel agency
dominates the way people book rooms and trips to a large extend. At some point,
the rating on thesewebsites created worriesbecause of the negative feedbacks than
can be posted by customers; which influence hotels’ business sometimes
unnecessarily.
After the introduction of the Smartphone, the hotel booking trend started to
show a slight shift from computer based websites to a Smartphone based
application. In the near future, we as a group believe that the trend of booking will
still favor the computer based websitestrongly. Mobile application will have a long
way to go before it develops itself to a level that enable customersto form a habit
and a dependency over the advantages of what a computer can offer. Meanwhile, the
way people book hotel rooms will still largely remain the same for a relatively long
time.
The trend for the near future that we are proposing will not generate a
dramatic change in terms of the experience that the customer gets, but behind the
roughly same experience that people are getting from the online booking, there is a
shift between who is dominating the online booking market shares. The competition
between the online booking website will switch between the third party, online
travel agency and “hotel ownedwebsite”. What we mean by “hotels owned website”
is that a group of hotels establish and operate their own online booking website; to
make the website offer as much as customers needed; and to draw more market
shares of online booking towards them. Meanwhile, hotels will rely on the
publication of the third party online travel agency much less, in order to reach a
more cost-effective operation.
As we all know for athird party online travel agency to sell hotel rooms on
their website cannot be cost effective to the hotel, especially smaller ones.In
addition, the existing numbers of these agencies are many. In order for hotels to put
their rooms to the public access as much as possible, they need to get involved with
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3. HT 344-Hospitality and Tourism Marketing and Sales
many of the identical existing online travel agencies in multiple costs. Namely,
hotels are paying for the same type of fee, and all to serve the same purpose.
The challenges toexisting third party online travel agencies are websites that
has been created by hotels themselves, as a group. An outstanding example would
be the website of a trend called Roomkey.com. Roomkey.com was established in
January 2012.Hotels that are part of this website include “La Quinta, Millennium and
many other independent, luxury, and leading name brand hotels in the world” (USA
Today, 9/24/2012). Other hospitality groups within Roomkey.com include Choice
International hotels, Hilton Worldwide, Hyatt IHG, Marriott, and Wyndham Hotel
Group. The statistic in the article “The Curious Identity of RoomKey.com” showed
that the percentage loss of bookings to an OTA (Online Travel Agency) since the
beginning of this year has grown steadily from 17.2% to 23.9%. This indicates the
competition between websites such as RoomKey.com and the third party online
travel agencies is starting to favor the former type.
One of the advantages of the “Hotels owned website” over the third party
online travel agencies is the financial aspect. Among the commonly existed
operations, a hotel makes several separatepayments to different online travel
agencies in order to sell their rooms to the public in desired quantity and diversity.
The fee that hotels are paying will cover the online travel agency’s operation cost,
and in addition it will generate a profit over its operation cost. In the case of “hotels
owned website” model, this will not happen. Hotels get together to form their own
resources to run this website, but this operation solely serves the allied hotel’s
interest, and most importantly it will not charge a fee to the hotels. The cost of
operating this website is simply what it needs to stay in operation. Essentially hotels
are self-hired, and there is a margin in switching into this method of marketing.
Quoted from Vantage Hospitality Enters into Partnership with RoomKey.com by the
CEO, Roger Bloss
“Vantage Hospitality is excited to join Room Key and distribute our family of
inns, hotels and suites. Room Key’s inventive model allows the consumer to choose the
hotel that is right for them and provides us with a valuable audience that will be able
to book directly with our brands. Room Key’s platform enables us to continue to
achieve our distribution strategy of reaching consumers where they are searching and
booking hotel accommodations, which is a very cost-effective channel for our
members.”
In the case of RoomKey.com in particular, it is cost-effective, and also user-
friendly to the customers. Room Key’s representative quoted in the same article that
“Room Key delivers a simplified search experience and the confidence of booking direct
with our hotel partners like Vantage, so travelers can simply search, book and
relax.”John F. Davis III, the chief executive officer of Room Key also stated “We’re
thrilled to partner with Vantage Hospitality to offer over 1,000 new hotel properties to
travelers who visit RoomKey.com to find their next hotel,” Said John F. Davis III, chief
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4. HT 344-Hospitality and Tourism Marketing and Sales
executive officer of RoomKey.com.The statement indicates that there is a common
interest between hotels and websites such as RoomKey.com, which will form a
different business landscape for the future.
Furthermore, some of thethird party online travel agencies can hardly afford
to lose the income generated from advertisements. Whereas websites like
RoomKey.com will probably benefit more in another way if they don’t incorporate
advertisement in their website. “Launched earlier this year, RoomKey.com is an
innovative hotel search engine that offers a simplified search experience. The website
provides hotel information straight from Vantage’s brands and brings the visitor
directly to the Vantage sites to book.” (Vantage Hospitality Enters into Partnership
with Roomkey.com, Hospitalty.net)
Moreover, there is another advantage of being a part of an allied system.It is
that hotels now can have more control over the pricing and gain more influence
among customers. Hotels have the power to compete with the online travel agency
by actively lowering the price on the “hotels owned website” compare to the third
party owned website; to draw more business for the desired period of time. Also if
necessary, they have the initiative to possibly start a price war with the third party
websites when the conditions allow them.
There is another type of competition thatis also against the third party online
travel agency in favor of the traditional trend. It is more geographically oriented,
and it also follows the same ideology that RoomKey.com followed. A case example
isLasvegas.com. Lasvegas.com is a model we believe that lays under the principle
that hotels havemore direct control of their business. In the case of Lasvegas.com,
many local hospitality businesses take part of owning or contributing to the website
in terms of content diversity, and financial side of operation.Lasvegas.com has
successfully combined nearly all the presentable hospitality and tourism business
within the area and concentrated on its website. Lasvegas.com, the website itself
might not be operatedin a non-third-party way, but the result and the competition it
brings to the general third party online booking agencies is nevertheless identical.
Organizations who found themselves benefiting from following this trend of
having their own public websites, will likely be looking for corporation within or
even outside their industry in order to form a strong proposition and business
variety to compete with the third party online travel agencies.
Yanqin Chen works for SciteHotel in Beijing, China. She is in charge of the
hotel’s financial control and strategic planning associated with the financial aspect
of the hotel. The interview was conducted through email. We introduced the market
environment of the United States to her and she commented that “because of the
hospitality industry is still growing fairly fast in China, and currently the market
environment and business landscape of the hospitality industry in China will probably
have a few years of time in order to experiencing what the United States are
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5. HT 344-Hospitality and Tourism Marketing and Sales
experiencing at the moment; namely the competition between “hotels allied website
and the third party online travel agency.”
After the introduction of our trend, she humbly approved the trend and
stated a point that is helpful to guide the hotel during a decision making processes
to illustrate to which level in order for a hotel to realize there is a margin, or it is
worth of forming a competition with the third party business in the long term. She
claimed that “it is probably only worth to establish the “hotel allied booking website”
if the hotels involved together is large enough and they online travel agency is
charging higher enough consistently throughout the industry.
She further commented other possibilities to ease the financial burden
between the hotel and the online travel agency. And that is by acquiring online
travel agency’s company share. And she mentioned that there is two possible ways if
acquiring is favored over forming a direct competition. One way is by acquiring the
online travel agency to a level, which allows the hotel to influence their decision
making thus on the same cost basis to the hotel, the result would benefiting their
hotel as much as possible. Another direction could be takeover a travel agency and
hoping to use this particular travel agency to extend its reach to the market, rather
than using many online travel agencies to achieve relatively less in many different
website.
Another model that we mentioned to her is the lasvegas.com model. Whereas
taking the benefit of a highly concentrated tourism destination area to exclude the
participation of third party online travel agency. This method works and also serves
the customer a better way to explore the tourism destination area, and it can bring
the website an addition unique selling point.
The future trend of acquiring more market share of online booking by
websites such as Roomkey.com and Lasvegas.com is that certain percent of market
would eventually and gradually reach a balance where the customers will locate
themselves with the type of website and service that best fits their preferences and
needs, therefore before reaching this balance, the market share of online booking
will have more room for “hotel controlled website”. However, this does not
necessarily mean the third party online booking website will disappear from the
world of commerce; instead, they will likely to experience a decrease in market
share unless they can discover a way to battle the potentially more cost-effective
marketing strategic such as RoomKey.com.
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6. HT 344-Hospitality and Tourism Marketing and Sales
References:
Lasvegas.com. Official Website.
http://www.lasvegas.com/
“RoomKey.com Hotel Search Site Adds More Chains.” September 24th, 2012. Travel,
USA Today.
http://travel.usatoday.com/hotels/post/2012/09/la-quinta-millennium-leading-
hotels-join-roomkeycom/70000994/1
“The Curious Identity of RoomKey.com.” September 18th, 2012. Competepulse.com
http://blog.compete.com/2012/09/18/the-curious-identity-of-roomkey-com/
“Vantage Hospitality Enters into Partnership with Roomkey.com.” October 17th,
2012. Industry News, Hospitality.net.
http://www.hospitalitynet.org/news/4058144.html
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