Internet Raises Profile Of Independent Hotels

The Internet as a booking engine has created an unexpected asset for independent hotels in relation to the major multi-brand companies, according to data released by PricewaterhouseCoopers and input from independent operators in New York, Chicago and Houston. The competitive boost it gives them in providing equal visibility is surprising, considering the amount of resources the major chains have put behind their Internet efforts. For buyers whose programs balance a mix of chain and independent properties, the David and Goliath battle for Web bookings can affect availability on any given night in key cities.

Bookings across all types of Internet sites in 2003 accounted for 26,000 rooms per night at U.S. hotels, said Bjorn Hanson, global leader of PwC's hospitality and leisure practice. These bookings represented $715 million in incremental revenue for hotels. "Because many of the rooms were booked at third-party sites that offer heavy discounts, however, the incremental revenue cost the industry $1.987 billion in average daily rate for a net loss of $1.272 billion," Hanson said. Branded hotels suffered disproportionately versus independent properties, losing more than $3 in nightly rate during the year.

"Online distribution has made the industry much easier for an independent to access. The third-party sites, in particular, bring tremendous volume to the table every week," said Mary Lou Pollack, general manager at The Alex, which opened in January in New York. "The demand generated by the sites in a market like this is so enormous that a hotel with 207 keys like ours suddenly can pick up 100 room nights in a three-hour period. It doesn't matter if our multi-brand competitors fill up before we do as long as the outcome is the same. If you removed e-commerce distribution, it would be The Alex fending for itself next to the Marriott, Hilton and Starwood reservations systems. We'd be dead in the water."

Visibility can be crucial for independent properties. "Without the name recognition right now, we rely on third-party sites to generate bookings, both business during the week and leisure on weekends," said Joe Borkowski, area director of revenue at Hotel 71 in Chicago, which opened a year ago. "Travelers going to the Web sites who are not familiar with our property see us on the same page with the Marriotts and Hyatts. It's a way we compete until we can build our own base of repeat customers."

Rate parity is as important to the independents as it is to chain hotels. "We make sure rates on the third-party sites are the same as those on our own site," said Tracy Fitz, director of sales and marketing at The Hotel Derek in Houston. "Should travelers find a lower rate on another site, we match it. It's our own version of the chain's best rate guarantees."

In the same way, the independents are careful their Web rates do not alienate corporate accounts.

"Our Web rates aren't in conflict with negotiated rates because we give corporate clients the best rate we have," said Stephen Shapiro, managing director of The Buckingham in New York. "Consequently, if travel managers find a better rate on the Web, whether it's intentional or not, we gladly extend that rate to them. When you give a corporate rate, you're discounting, generally for a 12-month period, and you're guaranteeing that discount. So we want to be sure we protect the integrity of that rate. At any time during that 12-month period, we may run a special for a week, but it's always only a short-term offer."