Starwood Hotels & Resorts Worldwide last week introduced a new pricing policy for corporate accounts intended to counter the widespread availability of discount Internet rates that undercut negotiated rates. Because Starwood's objective is to protect its position with corporate buyers, the parity in rates is only effective for unrestricted reservations Monday, Tuesday or Wednesday nights.
"This is about when 80 percent of business travel takes place, so they are the three peak nights these travelers are booking," said David Ogilvie, Starwood vice president of global corporate travel. "To prevent any negotiated rates we have with travel buyers from being undercut, we are aligning these rates at our North America hotels with the retail rates available on Web sites, such as Starwood.com."
While they generally applaud the spirit of the Starwood move, travel buyers remain concerned that deeply discounted pricing available from other Internet distributors will continue to undermine their efforts to promote the use of negotiated rates and capture of corporate spending data.
"What we're saying is that there won't be a better rate available on Mondays, Tuesdays and Wednesdays than the negotiated rate across the board, as long as we're talking about unrestricted retail pricing," said Marty Ginoo, Starwood corporate director of pricing strategy. "We basically aligned our online and offline pricing. Consequently, contracted rates will not be undercut by better retail rates that might be available on Web sites." In addition, price parity extends to other channels, including global distribution system bookings and those made directly at the property.
Starwood's pricing parity doesn't apply to rates on merchant model discount sites. Typically, in return for the heavy discount, reservations made on these third-party sites carry heavy restrictions. The most common restriction on such bookings, which are prepaid, are no-cancellation provisions. Others include minimum lengths of stay and certain arrival and departure requirements. The no-cancellation provisions can be particularly onerous for business travelers who often make last-minute changes in plans. Compared with midweek reservations, bookings Thursday to Saturday tend to skew toward leisure travel.
Starwood—whose brands include Westin, Sheraton, W, St. Regis and Four Points by Sheraton—is the first to break out Web bookings by night of the week. Other hotel companies are moving quickly to fortify their Internet positions on a range of fronts. Hyatt Hotels Corp. this month introduced a best rate guarantee on its branded Web site. Like other such guarantees, the objective is to drive Web bookings to the brand's site as a way of controlling its inventory. "We've done business with the intermediaries and will continue to do so, but no longer necessarily at their will," said Hyatt president Edward Rabin
(BTN, Oct. 6).Hilton Hotels Corp. this spring broke new ground when it gave one third-party site, Expedia, special access to its inventory. In return for the preferred status, Expedia doesn't post rates for Hilton properties lower than the rates on Hilton's branded sites. Other hotel companies followed suit, including Best Western International, which last month announced an arrangement with Travelocity.
Sol Meliá Hotels & Resorts and Le Meridien Hotels & Resorts recently made their inventory available on Travelweb, the merchant model alternative created last year by Hilton, Hyatt, Marriott International, InterContinental Hotels Group and Starwood.
Travelweb last week announced it had agreed to provide its rates to seven more merchant sites, including hotelrates.com and bookmytravel.com.
While the issue of parity with Web rates has strained hotel-buyer relations, hotels clearly have no intention of dropping what remains an effective way to dispose of excess inventory.
Kevin Maguire, travel manager at Tokyo Electron America in Austin, Texas, has been a vocal critic of Web rate excesses. "Hotel companies tell us they value the relationship and want our business, but then promote a distribution channel that has the total opposite effect," he said.
Starwood's Ogilvie confirmed the proliferation of discount Web rates has undermined buyers' trust. "Our hope is that this will build the confidence of travel managers and, in turn, business travelers that when they book the rate they get is the best rate for that stay, whether they book using their own online tool, through their travel agent or direct with us," he said.
Pricing inconsistencies, to some degree, were inevitable once the Web took off as a distribution vehicle. "As a result of what's happening online, the market has become much more transparent. It's very easy for either a traveler or travel manager to see discrepancies between what might be their contracted rate and the retail rate," Ogilvie said.
Buyer irritation is understandable, said Andrew Menkes, president and CEO of Princeton, N.J.-based Partnership Travel Consulting. "Pricing initiatives such as Starwood's are a step in the right direction. The bigger issue, however, has been program credibility," he said. "If buyers sign a contract with a hotel and then travelers on their own can undercut the rate by going directly to the Web, it impacts the credibility of the overall travel program, not just the hotel portion."
As buyers cope with Web rates, Norm Rose, president of Belmont, Calif.-based Travel Technology Consulting, sees the sheer proliferation of outlets as a concern. "There are so many channels within the marketplace where rates are being distributed. Each merchant site gets to decide the eventual price. This makes it almost impossible for travel managers to benchmark they're getting the best deal," he said. "As an industry, we may need to get away from a yearly hotel exercise and think of it as a more dynamic process."
Menkes proposed a simplified approach. "Perhaps negotiated rates should be the ceiling across the board. The traveler will never pay higher than that rate. However, it always will pay for the traveler upon checkin to inquire if there's a better rate available, including a lower Web rate," he said. "It also needs to be apples-to-apples. If the Web rate requires an advance, nonrefundable desposit, that's not the same as a negotiated rate."