Marriott International on Nov. 11 will announce a sweeping overhaul of its transient pricing, bringing parity to all Marriott distribution channels—offline and online. The move comes in response to the growing impact of Internet-only rates, specifically the discounts available on merchant model sites. At the same time, Marriott is eliminating fixed consortia rates available through travel management companies in favor of more fluid pricing.
Effective for bookings as of Jan. 1, the new pricing strategy applies to all Marriott brands, except Ritz-Carlton and Ramada International.
As part of the parity guarantee, "Our customers receive the best available room rate by booking through any Marriott channel, whether it's worldwide reservations, our branded Web sites or directly with the hotel," John Marriott III, executive vice president of Marriott Lodging, told BTN late last week. "In other words, we don't have Internet-only rates. We guarantee customers get the best available rate, no matter which Marriott channel they go through."
Starwood Hotels & Resorts Worldwide, Hyatt Hotels Corp., Best Western and others also have taken steps to neutralize the growing threat of Internet-only rates. Their best rate guarantees primarily provide parity only with their own Web rates. By extending parity to all online rates as well as its offline channels, Marriott's approach is the most aggressive to date.
Since travel managers and agents frequently could find lower rates at some hotels by calling the property directly, "We guarantee against property calls as well, which means there are no better deals either here or on the central reservations system or global distribution system," Marriott said.
He acknowledged that travel managers' frustration with Web-only rates factored into the overhaul, since buyers have seen the primacy of their negotiated rates undercut too often by discount rates on the Web. Travel management companies also have been at a disadvantage because they typically are excluded from Web-only rates.
By including TMCs in its pricing parity, Marriott has done away with fixed consortia rates, opting instead for a more fluid pricing model where rates could change daily. "TMCs now know that we're giving them the best available rates. Eliminating traditional consortia rates was part and parcel of no Web-only rates," said Bruce Wolff, Marriott senior vice president of distribution sales and strategy. "As a result, TMCs no longer have to worry about finding better rates for their customers on other channels. What we've done is level the playing field. TMCs now have the same access to rates as other customers. Our best available rates now will be available to the consortia."
Marriott last year took the first steps to move away from fixed rates toward more dynamic pricing. When the corporate rate at a hotel fell below the negotiated rate based on market conditions in a particular destination, Marriott began billing travelers the lower rate
(BTN, Nov. 11, 2002).Travel managers typically prefer fixed rates because they facilitate budgeting and forecasting, but, in this case, the potential for cost savings has prevailed. "The way the system is set up, it only works in buyers' favor. If the rate goes lower than the negotiated rate, they get the lower rate. If the rate goes higher, we still live up to our negotiated rate," Wolff said.
Travel managers largely support hotel companies' efforts to take back control of their inventory. "We're among hotels' best clients and it's time they start looking after us," said one Chicago-area buyer last week. "At a recent meeting, we couldn't get the room block we needed at the hotel, which was showing as sold out, but the rooms were available, same night at practically the same rate, on a merchant model site."
Use of the Internet for booking hotels continues to accelerate. TravelClick, which monitors Web usage, last week reported that room nights booked by travel agents through online sites in the third quarter were up 51.6 percent over the same period last year. Best Western International last week said that 37 percent of total reservations for 2003 through October were made online. Best Western vice president for e-commerce and field marketing Ric Leutwyler credited a jump in third-party Web site bookings as a factor. At Marriott, the Internet—through all channels—currently only represents an estimated 10 percent of total bookings, but that percentage is growing rapidly.
As Web bookings have increased, a shift has occurred among the usual distribution channels. "The latest data indicate that bookings made to call centers are declining disproportionately," said Bill Carroll, a professor at the Center of Hospitality Research of the Cornell University School of Hotel Administration, who has studied trends in online distribution. "By comparison, there's only been a slight reduction in the number of bookings made through the travel agency."
As hotel companies seek to impose more control over their inventory, one issue is how much sway they hold with individual property owners and franchisees, which traditionally have had the final say on pricing.
Marriott insisted imposing a systemwide policy hasn't been a problem. "Franchisees actually have wanted to see us do this. They see it as being in their best interest," he said.
Marriott's relationship to the online site Travelweb isn't expected to change as a result of the new policy. Launched last year by Marriott and four other major hotel companies and Pegasus Solutions, Travelweb is the hotel industry's own version of a merchant model site.
"We're guaranteeing that Travelweb will not have a better price for our products than we have," said Wolff, who was Travelweb's founding chairman. "We still see it as a viable distribution tool for us." According to Marriott research, a significant percentage of Travelweb bookings are incremental to the company, meaning they wouldn't have come through Marriott.com or the company's other branded sites.
Both Starwood and Hyatt last month announced additional solutions to counter escalating discount third-party bookings. Starwood began offering travel buyers parity for negotiated rates with unrestricted rates available on its branded Web sites—as opposed to any third-party sites—for North American reservations
(BTN, Oct. 20). The Starwood effort only applies midweek, when business travelers most likely are booking.
Hyatt, meanwhile, announced it expected by the first quarter of 2004 to have technology in place on its branded site to give buyers a direct link to special rates, should those rates be lower than the comparable negotiated rate. Travelers will be able to access the rates through a corporate identification number. In the interim, Hyatt president Ed Rabin said the adjustments would be made manually at the property level
(BTN, Oct. 6).Marriott also is taking aim at Hilton Hotels Corp., Best Western and other hotel companies that have arranged special preferred deals with such online travel agencies as Expedia and Travelocity. In particular, Hilton's deal with Expedia in April broke new ground. In return for special access to Hilton's inventory, Expedia agreed not to post rates for Hilton properties that undercut the rates on Hilton's own sites
(BTN, April 28). Steve Armitage, Hilton senior vice president of sales, has said the company is pleased with how the Expedia deal is proceeding.
"We're not giving online channels preferential rates," Marriott said. "Everyone is being treated the same, regardless of channel. Rates are transparent across the system."
Travel management companies, in particular, will appreciate the level playing field. "They can quote and sell us and be comfortable they're not going to be short-circuited by us giving preferential rates somewhere else," Wolff said.
As with other industry best rate guarantees, Marriott's program allows travelers to approach the company if they feel they have been overcharged. "If the customer finds a lower rate within 24 hours for the same hotel, room type and date anywhere—meaning on an Internet travel site, through a travel agency, travel management company or even through another Marriott source—the hotel will match the lower rate and give an additional 25 percent off," according to Marriott.
The 25 percent adjustment is at the high end of these guarantees. Other hotel chains offer additional discounts of 10 percent to 20 percent. "We plan to allow claims through both the telephone and the Internet," Marriott said. "Our intention is to get back to people within 24 hours, though the amount of time probably will be less."