Efforts by the lodging industry to enable business travelers to book their negotiated rates online directly with hotels took a step forward this summer when Radisson SAS began promoting its Corporate Direct program, signing up 25 clients.
Yet, the road to the hotel direct connect—bypassing global distribution systems—remains strewn with obstacles, reflecting the underlying economics, service issues at the agency and the fact that there are more hotels. Additionally, buyers want asssurances that they will share in the transaction fees hotels save from bypassing GDSs.
Radisson SAS links its system into the travel management pages of clients' intranet sites.
It's meant to be easy to use and was developed in response to what we saw as increasing demand for this tool, according to Kurt Ritter, president and CEO of the Brussels-based company.
Corporate Direct clients bring about 1,000 annual room nights to Radisson SAS, which has 107 hotels in Europe, the Middle East and Africa.
"Like any online tool, there's the additional advantage for travel managers that the direct connection will help increase compliance to the preferred properties and thus help improve their negotiating leverage," said Fredrik Koralius, vice president of sales and marketing.
Reporting capabilities also should improve. "Buyers always are looking for tools that can provide tracking on the back end," said consultant Scott Gillespie, principal at Travel Analytics in Solon, Ohio. "Typically, buyers can track about 50 percent of hotel bookings through the agency. If they get that up to 80 percent through the direct connect's reporting capabilities, it's a plus. Everybody knows who's staying where and that's the basis of good pricing."
Finding the right economic model remains a significant issue. "The model has to make sense for both parties," said Andrew Menkes, chairman and CEO of Partnership Travel Consulting in Princeton, N.J. "Unlike air, the savings hotels would achieve from bypassing GDSs are not always of sufficient weight to justify the revenue sharing."
Menkes, who has considerable experience with airline direct connects, said it works best for hotels where there are economies of scale. It is better, for example, "If a particular client has a chain as its primary supplier and there's sufficient volume from that client," he said.
Fewer vendors are better. "It's a high priority for buyers who have chain deals," said Grant Caplan, principal in Consulting Strategies in Houston. "Among those, it works best for those with an effective online booking tool." Given this, many of Radisson SAS' Corporate Direct clients have midsize hotel programs and are not interested in spreading that volume among a number of vendors.
"These accounts don't generally run major bid programs," according to Jacques Dubois, vice president of channel and revenue management. "In many cases, they're providing a lot of volume to our hotels in no more than three or four destinations."
By contrast, direct connect would be of less interest to buyers whose travelers still book through an agency. "It's not a benefit if travelers are making reservations over the phone, because the direct connect isn't something the conventional agent has access to," Caplan said. "They'd have to get into a completely different system to look up that one element. It's not a realistic use of their time."
The Radisson SAS system modifies and cancels reservations, as well as books them, at no charge to the client. A link in the e-mail confirmation makes it possible to change a booking. "If travelers maintain a profile in the system, it's another way of accessing and changing bookings," Dubois said.
The technology platform supporting the Radisson SAS tool is a central reservation system on top of which sits a purpose-built XML Web-booking interface. This interface handles the system dialogue between browser and booking engine.
"All hotels in the portfolio are represented in the CRS. That is key. One single point of inventory and rate management ensures we can provide consistent rates across all the channels clients may choose to use," Dubois said.
Not all hotel companies have sophisticated-enough systems in place to allow them to attempt a direct connect. "The inventory as managed by some systems isn't necessarily consistent yet," Caplan said. "The properties don't install universally advanced software and there aren't enough standards between the properties, even within the same chain."
As the concept of hotel direct connect has gained popularity, buyers have begun to question whether they will share in the savings in GDS fees accrued by the vendors.
"Whoever is providing the direct connect avoids paying those $4-to-$5 charges, not counting fees for changes and cancellations," Caplan said.
Radisson SAS has achieved savings of about 12 percent per room night. "This represents about 4 percent of the average room rate for these clients," Dubois said. Yet, he expects this rarely will have an impact on rate. The overall percentage of bookings is still too small in relation to other channels.
He said regular self-booking tools often impose their own distribution or marketing fees, of which many clients are unaware. "These fees actually can make the transaction more expensive," he said. If the system doesn't interface with the CRS, the cost goes up even more due to manual processing costs.
"There was a lot of magic and sexiness to direct connect with airlines, but it doesn't necessarily correlate with hotel," Menkes said, "because, often, there's not that much of a savings opportunity in bypassing the GDS to make it worthwhile for both sides."
Ironically, the business travel segment where direct connect makes the most sense might not be hotel or air, but car. "There are few vendors. Then too the amount that has to be turned over to the GDS on a one-day rental can be as high as 10 percent," Gillespie said. "With hotel, as with air, the cost is greater, so the relative percentage going to the GDS is lower."
While online booking of hotels has grown in popularity at U.S.-based companies, European companies have been slower to adopt the technology. "It remains a regional phenomenon, with Scandinavian and then German companies being the most active," Dubois said. In the same way, adoption rates for booking hotels at U.S. and European companies traditionally have lagged behind adoption for air.
Direct connect is vulnerable to this as well. "Travelers want to see rich content when booking a hotel, rather than go through a structured booking system," Menkes said. "The hotel's a more personal experience. Remember, all 777s look alike, the service level is basically the same and they all park at the same airport. You can't say that about hotels."