Hotel Sites Spark Buyer Ire
Two new Internet distribution systems offering discounted hotel rooms on the Web are meeting resistance from business travel buyers because neither Web solution intends to credit reservations toward volume commitments that buyers already have in place with the same hotels.
One of the Web systems, Hotel Reservations Network, last month launched Hotels.com. The second, Hotel Distribution System, in February announced it would begin operations by mid-year, partnering with five large hotel companies, including Hilton Hotels Corp., Hyatt Hotels, Marriott International, Six Continents Hotels & Resorts and Starwood Hotels & Resorts Worldwide.
Corporate buyers last week said that lower promotional rates traditionally have qualified toward volume commitment credit. The underlying issue for them then was obtaining reliable data about their travelers' use of the Web-based channel.
"It's a matter of being able to track these bookings," said Colleen Guhin, global travel manager at On Semiconductor in Phoenix. "I want my travelers to book through the travel agency or the online booking tool precisely so I can have a record of the transaction. Then, when I sit down to negotiate with hotels, I'll have data that's complete, thorough and that I can use as leverage to get a good deal."
With the tremendous popularity of the Internet, travelers are aware of the apparent bargains available on these sites. "Accordingly, when travelers come to me and say they've found a cheaper rate on the Web, I explain the situation and what I need for them to do," Guhin said.
Buyers want to get credit for each booking, so the distribution channel has to facilitate this. "Every room counts," said Rick Wakida, U.S. travel manager for Vodafone in Walnut Creek, Calif. "Especially in this environment when travel is down because of the economy, it is more important than ever that I capture all of my travelers' stays."
Even if the Web-based sites were able to track how many room nights a company's travelers were booking, it wouldn't necessarily help buyers. "I need the volume data on my side of the table," Guhin said. "It doesn't help me if the hotels know how many nights I'm generating and I don't."
Because of the overall success of managed hotel programs, travelers likely know the preferred properties in their company's hotel program, as well as the negotiated rate they're supposed to pay. Then they come across these same properties on the Web, but at a discounted rate, and given that many companies today also have cost-saving initiatives, travelers can get confused.
"Buyers don't want travelers thinking they're doing the right thing, when the stay isn't counting toward the company's bigger objectives," said Suzanne Fletcher, director of travel and meetings for Weyerhaeuser in Federal Way, Wash.
Such distribution systems as HDS simply aren't designed for corporate use, according to Bruce Rosenberg, senior vice president of e-business and distribution for Hilton Hotels Corp., one of HDS' hotel partners. "Corporate rates are negotiated, so the business model being used by the Web distribution channel doesn't dovetail," he said.
When hotel companies negotiate with corporate accounts, they intend these bookings to be made through traditional distribution channels.
"Ultimately, we encourage bookings through the travel agency or online through the company's electronic booking tool as a way to track employee travel," said David Ogilvie, vice president of global corporate travel for Starwood Hotels & Resorts Worldwide, another of HDS' hotel partners.
Corporate travel buyers' ability to track their travelers is important for security reasons as well as for any added leverage in negotiations.
"Certainly after Sept. 11, travel managers need to know where their people are staying. Booking through the traditional channels ensures they'll have that information," said Bruce Wolff, senior vice president of distribution sales and marketing for Marriott International. He noted that the target for both Web systems was similar to the wholesale market.
Hotel Reservations Network has just launched its Web site, while Hotel Distribution System's implementation is in the final planning stages. At HRN, access is through either the Web or a toll-free telephone number.
"Our room inventory is basically intended for leisure travelers," confirmed HRN president and co-founder Bob Diener. "The business travelers we attract will likely be people who are self-employed or work for small businesses."
Similarly, a spokesperson for HDS said the only business travelers that it expects to use the site are travelers whose companies don't have negotiated rates in place.
In addition to the five hotel companies, Pegasus Solutions is a founder of HDS and is providing the technology platform. At the onset, HDS plans to use different existing Web sites, including Orbitz, the airline site, to market its inventory. HDS president Joe Humphrey declined to speak to Business Travel News.
"The deals we offer, furthermore, are likely to include provisions like cancellation and change penalties, which leisure travelers are more accustomed to," said HRN's Diener.
Business travelers, on the other hand, aren't accustomed to such penalties. "Buyers always want to know if there are these kinds of restrictions built into the rate because they make it harder for their travelers to take advantage of them," Vodafone's Wakida said. "Advance deposits, for example, may be acceptable to leisure travelers, but wouldn't work for business travelers."
It's a different product with different rules, according to Marriott's Wolff. "Not only may there be a nonrefundable portion of the rate, but there'll be nothing like a last room availability clause, which we know many buyers feel strongly they need to have," he said.
There's also some disagreement as to how many downtown or suburban business hotels the Web sites will end up marketing. "If the sites are leisure-travel oriented as they say, it stands to reason that a significant portion of their inventory will be resort hotels, which aren't of that much interest for individual business travel anyway," Wakida said.
Gateway cities, however, attract both leisure and business travel. "The mix of properties on HDS may be skewed toward leisure travel, but there still may be significant product that's used by business travelers," Wolff said.
Market conditions also are bound to change as the economy improves.
"Once demand starts to return to normal levels, the Web sites might find there's a shortage of rooms available for them to offer at reduced rates," On Semiconductor's Guhin said.
In fact, as demand rebounds, travel buyers may find there's no longer the discrepancy between the discounted rates available on the Web site and the rates they were able to negotiate for themselves with the hotels. "The negotiated rates might end up looking pretty favorable," Starwood's Ogilvie said.