Europe Books Hotels Online

<B>Europe Books Hotels Online</B>

By Amon Cohen

Europe is beginning to get the online booking bug, with hotel reservations leading the way. Evidence at this stage is anecdotal but more and more travel managers are examining self-service solutions for the first time, while suppliers are reporting a sharp increase in inquiries about building electronic distribution links.

To date, most of the progress seems to be in booking accommodations. When Electrolux launched its travel intranet recently, it included a hotel booking system, whereas it had only reached the pilot stage in one country for a rollout of GetThere's air reservations tool (BTN, July 10). Extranet links and real-time inventory access remain an even greater rarity in Europe than in the United States, but two interim solutions are emerging, especially in the highly Web-competent countries of Scandinavia: tools that bypass the global distribution systems but require the loading of rates, and accessing negotiated rates through hotels' public Web sites using passwords and client ID codes.

Radisson SAS and Starwood Hotels and Resorts Worldwide are among the chains offering the latter type of service. Radisson SAS will shortly go one step further by announcing the launch of a business-only Web site in conjunction with a major global distribution system. The site will be a pure booking engine, offering connectivity between client intranets and the hotel's central reservations system via the GDS. This will provide much greater administrative efficiencies and reduce the data corporate travelers have to supply each time they wade through the consumer site.

Starwood has devised a simple solution for its Web site: Corporate clients access preferred rates by typing in a unique URL. "To say we are seeing strong demand for electronic distribution is an understatement," said Brian Pratt, Starwood's senior vice president for e-commerce in Europe. "U.K., German and Scandinavian corporations are as advanced as those in the U.S., but the rest of Europe is not there yet."

Radisson SAS also is finding special interest in its home territory of Scandinavia, where it has clients such as Statoil and Norsk Hydro accessing their preferred rates through the Web. "Our sales people in the Nordic countries are being asked about electronic distribution every day," said Fredrik Korallus, Radisson SAS senior vice president of marketing and sales.

Among the advantages for clients cited by Pratt are the global standards of the Internet, making it easier to roll out a consistent worldwide travel program, and the improved quality of management information. "If someone books through the Web, they have to put in their ID number, so they definitely get the credit," Pratt said.

Nevertheless, there are shortcomings in accessing public Web sites, as another Radisson SAS client, the Norwegian telecommunications company Telenor, has discovered. Travel manager Alf M. Larsen has won an award from international hospitality association HSMAI for his introduction of a "virtual travel office" in May 1999. Larsen has done much to move travelers into the electronic environment, notably by making travelers meet transaction fees out of their own budgets if they elect to book through a travel agent. Nevertheless, he remains unhappy with his hotel booking arrangements. Online accommodation booking is running well below the 60 percent adoption rate he has achieved for reservations with Telenor's principal preferred carrier, the Norwegian airline Braathens, a rate he intends to push even higher to 80 percent by year-end.

Telenor travelers pick their hotel by clicking the city they are visiting, which presents them with the full range of its preferred hotels in reverse order of price. Clicking the property they wish to stay in transfers them to the relevant supplier Web site, from where the traveler makes the booking by typing in their agreement number and other information. "This is why our adoption rate is much lower than for Braathens, which only takes five or six clicks to book," Larsen said. "The hotels require too many clicks and each one involves different passwords and user names."

It is for these reasons that Radisson SAS shortly will launch the business-to-business booking Web site. Yet in spite of these problems, progress is being made. Radisson SAS reported that the number of bookings it receives from Telenor via its travel agency, Berg-Hansen, is down, thus reducing transaction fees. Not suprisingly, however, Larsen is looking for a single online system that can include preferred rates; he is talking to Amadeus and other suppliers.

A more satisfied online customer--although hotel groups are less pleased about this solution--is Christer Lindskog, travel manager with Volvo, the Swedish car manufacturer. Volvo is one of several major Swedish companies to use the GDS-bypass booking system NetBook, which has 400 properties in its database. Many of these are in Volvo's home town of Gothenburg, where the car company has an almost insatiable demand for accommodations, and in Stockholm, where another NetBook client, Ericsson, buys a staggering 140,000 room nights each year.

The solution NetBook has hit upon with many of its top clients is to negotiate guaranteed room allotments at their preferred hotels. Volvo, a NetBook customer for 18 months, has options on a range of rooms that are held for its travelers until between one and five days in advance. "It is very good during trade fairs when we need hotel rooms to carry on our normal business," Lindskog said. NetBook also is a useful booking tool for employees in parts of the world where Volvo does not have full travel agency representation, such as South America.

Lindskog has discovered several additional advantages to using the online system, which sits on the Volvo intranet. He can control the accommodation selections available to each traveler according to the particular policy constraints. He also can sort users into different groups and consolidate each group's purchasing data.

Bypassing the GDSs also makes NetBook cheap. It charges around $2 per transaction. NetBook is hoping to expand beyond the Nordic countries into Europe and then the United States, but its Achilles heel is that hotel chains do not like it. The reason is they have to load rates into its database rather than supply a real-time link from their own property management system. "Whenever possible, we want real-time access to our inventory," said a source at a U.K. hotel group. "This is a step backwards. We have to fill out a large number of forms instead of being able to supply information seamlessly."

The consequence is that NetBook has been unable to secure chainwide agreements with some major hotel groups. These include Radisson SAS, whose properties "are unofficial embassies for Swedish travelers," said Lindskog. "A few individual Radisson SAS properties are on NetBook simply because they cannot afford to ignore the chosen distribution channel of their biggest clients."

Nevertheless, NetBook managing director Lars Isacson admits a solution needs to be found. "Rates are loaded into our system more easily than into GDSs, but one of the most important tasks for us right now is to provide real-time links," he said. "That will come for everyone because the demand for it is so strong."

Another European hotel booking system that is proving more popular with hotel chains is a British product called HotelHub. It claims the distinction of being the only Internet reservations company worldwide with connectivity to the two major switches, Pegasus and WizCom. It also offers connectivity to hotels directly through its own booking engine and therefore claims it can provide online real-time booking capability at virtually any hotel in the world.

HotelHub has a sister hotel booking service for corporate clients, called The Corporate Team. It can be accessed directly over the Internet or via hyperlinks from a client's intranet and can be private-labeled to appear as an in-house tool or integrated with e-procurement systems, such as Ariba and CommerceOne. The Corporate Team said it can bypass even the Internet by offering direct connectivity to clients' own wide area or local area networks. This offers greater security and guaranteed bandwidth but the cost of setting up and operating the line is expensive.

Despite earning critical acclaim within the travel industry, The Corporate Team has not yet won significant numbers of large corporate clients but deals with Pegasus and WizCom suggest it is on the verge of being taken seriously.

One provider sure to be a major electronic hotel distribution player is the as-yet-unnamed European hospitality portal being developed by Forte, Hilton International, Accor and others. The joint Web site is scheduled to go live in the last quarter of this year following an initial investment of 20 million euros (US$17.9 million).

Hilton International chief executive David Michels expects the Internet to account for 15 percent of his group's business within two to three years. Forte already takes 2.5 percent of its reservations directly through its own dot-com Web sites. It expects to boost its corporate online business in the first quarter of 2001 by upgrading its Web sites to make it possible to set up extranet links with clients. Forte Internet sales manager Stuart Hill said he has major customers waiting to go with the new technology as soon as it is in place.

However, Hill did inject a note of caution into the optimism surrounding the Web. "A lot of clients think they are way ahead but they are not," he said. "When I joined in February, I was told that providing an electronic link to a particular customer was to be my number-one priority, but they are still not ready." Korallus of Radisson SAS listed three requirements for corporate clients wanting online distribution. "Clients cannot have it unless they have a good travel policy, a good purchasing policy and a proper IT structure," he said.

Korallus also warned that clients will not procure cheaper rates by establishing direct links to hotel suppliers. Instead, he said, they will achieve savings through better control over policy, greater efficiency and the avoidance of travel agency transaction fees.

Even so, the power to shut out non-preferred suppliers simply by leaving them off the company traveler intranet could provide increased leverage for clients. "We will no doubt have a closer relationship with our customers, but on the other hand if they do not choose us as a supplier we could be really left out in the cold," said Radisson SAS Norwegian director of sales Tor-Geir Flatjord.

Travel agents also could be left out in the cold, but The Corporate Team joint managing director, Jay Virdee, said this is unlikely for those that can provide an electronic booking presence. "I don't think clients will be able to bypass agents and go direct to hotels unless they are exceptionally large and one or two hotel groups can adequately meet their requirements," he said. "A role will exist for agencies like ours that have transformed the way we work with not only our clients but also our hotel suppliers."

According to Virdee, this shift in the distribution triangle will transform agency-client remuneration, just as it has in the airline sector. "We can demonstrate to our clients where we add value and hence can command a fee for this," he said. "The convention of commission-based hotel pricing will come to an end as e-commerce grows.