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Hotels Reap Online Benefits

The $131 billion U.S. hotel industry recently received a wake-up call. It was losing online bookings and income to third-party intermediaries such as Travelocity, Expedia, and Orbitz, which grew revenues from $3.7 billion in 2003 to $18.4 billion in 2005. Hoteliers know they can’t afford to hit the snooze button any more if they want to take back control of their inventory and pricing. But to do so means to beat a handful of Internet companies at their own game: Delivering content and service, while offering value.

After 9/11, hotel chains relied heavily on third parties to fill their rooms. The industry grew by 8 percent per year in 2004 and 2005, and for 2006 is expected to see only slightly slower growth in revenues (up 7 percent), according to Mintel International Group, a Chicago-based consumer, media, and market research firm.

To get consumers to book directly with them, in 2003 most hotel chains began offering a “best rate guarantee,” telling consumers that they could actually get lower prices by buying directly from the hotel of their choice, by phone or online. Hotel Web sites grew revenues from $4.2 billion to $14.4 billion from 2003 to 2005.

It costs a hotel between $1.50 and $3 per transaction to take a reservation through their own sites; that includes Web-hosting and maintenance, wear and tear, and other costs associated with the online booking, says Max Starkov, the chief e-business strategist at New York-based Hospitality eBusiness Strategies, an Internet marketing and distribution strategy consulting firm for hospitality and travel verticals. In contrast, they pay third-party sites about 20 percent of the room rate per booking.

“This is a humongous difference,” Starkov says. “So you can understand the reason why all of the hotel companies are frantically trying to control the distribution and lower costs.”

This year, nearly 30 percent of all revenues in hospitality in the U.S. will be generated via the Internet, and another quarter will be directly influenced by online research but booked offline. By 2010, the Internet will contribute more than 45 percent of all travel-related bookings in North America, reports Hospitality eBusiness Strategies.

Outside of limiting inventory to third-party sites and promising the lowest prices through their own hotel brand sites, experts say hotel chains need to implement customer relationship management tools and improve consumers’ experience at branded sites, which will ultimately increase the amount of time consumers spend with their brand.

“Because customers have become quite sophisticated in online travel research and online booking, they have come to rely on features offered on these intermediary travel sites — features they consider important to them,” says Mims Wright, a principal at T2Impact.com, a strategic consulting group. Thanks to community sites like TripAdvisor and VirtualTours.com where consumers can post and share reviews, combined with the presence of online travel agents, consumers expect complete trip planning, not just access to the hotel’s rates, but airfares, packages, specials, and promotions. “They like photo-sharing capabilities and maps that show nearby retailers, like all of the Kinko’s locations or all of the top restaurants or Starbucks around a hotel. They expect to see consumer reviews and consumer-contributed content,” Wright notes.

Hotel chains are also doing more site personalization whereby a site recognizes a returning customer and offers recommendations that fit the customer’s needs on a particular day, whether it’s airport pickup, conference room reservations, or a choice of USA Today or The Wall Street Journal waiting at their door each morning, effectively adding concierge service online.

Marriott has optimized personalization on its site, offering Marriott Rewards members the ability to set travel preferences and view the Web site based on their own preferences. Starwood Hotels & Resorts, owner of the Sheraton, Le Meridien, and the W hotel brands, has TheLobby.com, which features articles detailing events at locations around its hotels.

Hilton Hotels recently launched MyOmelet.com for its Embassy Suites brand, the first of several planned microsites. John Lee, vice president of brand marketing and communications for Embassy Suites, says the site is designed to highlight the chain’s signature omelet and complimentary cooked-to-order breakfasts. The site asks guests to share egg recipes or submit questions to their resident “Egg-Head,” a hotel chef, who answers the questions online and offers fun factoids about the Embassy brand.

In the first 42 days of going live, MyOmelet.com received 195,947 hits. “We want consumers to spend time with the brand,” says Lee. “We want to move beyond just transactional. Orbitz is purely transactional. There is no emotion. The idea of bringing a consumer into the fold is about creating a relationship with that guest, and it helps to build loyalty and repeat business.”

Building that relationship with a consumer is important, says Chris Haack, a consumer market analyst for the Mintel Group who wrote an August 2006 report on the hotel industry. He says most hotel guests are brand loyal, especially men, who usually stay at the same chains whether they are traveling for business or pleasure.

This reporter recently stayed at the Marriott Wardman Park Hotel in Washington, D.C. and shared a limo to the Dulles International Airport with a bank executive who says he’d racked up more than 200,000 points through his Marriott Rewards program. “I always stay at a Marriott,” he says. He lets the company pay for the business trips, but he redeems his points for free hotel stays when he vacations with his family.

Haack says hotels that want to get the most out of online need to place a priority on search engine optimization, since nearly 70 percent of consumers prefer to click organic or natural search engine listings as opposed to paid search listings.

“If consumers are not already loyal to Marriott, then that is where the search engines become the ideal vehicles,” says Paul Elliott, principal of search engine optimization for Brulant, a productivity consultancy that has advised large hotel chains and boutiques in their search engine strategies. “Hotels have now become very understanding of the power of the search engine to bring those customers in. It is all very measurable. We can measure if they are coming in from Google, what room rate they book at, how long they stay.”

Some Search Engine Optimization companies show the hotel chain target metrics they met regarding people driven to the Web site, but the best way to measure results, says Elliott, is to see if the customer has taken the next step in booking. The quality of that ECRM will help. “It is a little more hip, more fun, and less stuffy than just building just a corporate Web site.”

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