1. HT 344-Hospitality and Tourism Marketing and Sales
Fall
12
HT-344 Hospitality and Tourism Marketing and
Sales
Professor Eric Brey.
Nov 16th, 2012
Hospitality Trend Assignment
Pu Zhao and ReemNasraddin
1
University of Wisconsin Stout | School of Hospitality
2. HT 344-Hospitality and Tourism Marketing and Sales
Before people started using websites to book ahotel room and customize their
trips online a few years back, many of them used travel agencies throughphone calls to
book their trips. After the advance of the technology, and spread of Internet, hospitality
business became a lot more accessible by the public. Then people started to rely more and
more on the information that they accessed from the Internet. One of the most significant
changes that the Internet brought to the consumer is the capability of specifying exactly
what is needed, the servicesprovided before consuming it, and it also added lots of
variability to peoples’ choice.For instance, websites such as Travelocity.com,
Priceline.com, and Orbitz.com are among the largest of the third party online travel
agenciesin the industry; these three companies foundedrespectively in 2001, 1996 and
1997.The online travel agency dominates the way people book rooms and trips to a large
extend. At some point, the rating on thesewebsites created worriesbecause of the negative
feedbacks than can be posted by customers; which influence hotels’ business sometimes
unnecessarily.
After the introduction of the Smartphone, the hotel booking trend started to show
a slight shift from computer based websites to a Smartphone based application. In the
near future, we as a group believe that the trend of booking will still favor the computer
based websitestrongly. Mobile application will have a long way to go before it develops
itself to a level that enable customersto form a habit and a dependency over the
advantages of what a computer can offer. Meanwhile, the way people book hotel rooms
will still largely remain the same for a relatively long time.
The trend for the near future that we are proposing will not generate a dramatic
change in terms of the experience that the customer gets, but behind the roughly same
experience that people are getting from the online booking, there is a shift between who
is dominating the online booking market shares. The competition between the online
booking website will switch between the third party, online travel agency and “hotel
ownedwebsite”. What we mean by “hotels owned website” is that a group of hotels
establish and operate their own online booking website; to make the website offer as
much as customers needed; and to draw more market shares of online booking towards
them. Meanwhile, hotels will rely on the publication of the third party online travel
agency much less, in order to reach a more cost-effective operation.
As we all know for athird party online travel agency to sell hotel rooms on their
website cannot be cost effective to the hotel, especially smaller ones.In addition, the
existing numbers of these agencies are many. In order for hotels to put their rooms to the
public access as much as possible, they need to get involved with many of the identical
existing online travel agencies in multiple costs. Namely, hotels are paying for the same
type of fee, and all to serve the same purpose.
2
University of Wisconsin Stout | School of Hospitality |
3. HT 344-Hospitality and Tourism Marketing and Sales
The challenges toexisting third party online travel agencies are websites that has
been created by hotels themselves, as a group. An outstanding example would be the
website of a trend called Roomkey.com. Roomkey.com was established in January
2012.Hotels that are part of this website include “La Quinta, Millennium and many other
independent, luxury, and leading name brand hotels in the world” (USA Today,
9/24/2012). Other hospitality groups within Roomkey.com include Choice International
hotels, Hilton Worldwide, Hyatt IHG, Marriott, and Wyndham Hotel Group. The statistic
in the article “The Curious Identity of RoomKey.com” showed that the percentage loss of
bookings to an OTA (Online Travel Agency) since the beginning of this year has grown
steadily from 17.2% to 23.9%. This indicates the competition between websites such as
RoomKey.com and the third party online travel agencies is starting to favor the former
type.
One of the advantages of the “Hotels owned website” over the third party online
travel agencies is the financial aspect. Among the commonly existed operations, a hotel
makes several separatepayments to different online travel agencies in order to sell their
rooms to the public in desired quantity and diversity. The fee that hotels are paying will
cover the online travel agency’s operation cost, and in addition it will generate a profit
over its operation cost. In the case of “hotels owned website” model, this will not happen.
Hotels get together to form their own resources to run this website, but this operation
solely serves the allied hotel’s interest, and most importantly it will not charge a fee to
the hotels. The cost of operating this website is simply what it needs to stay in operation.
Essentially hotels are self-hired, and there is a margin in switching into this method of
marketing. Quoted from Vantage Hospitality Enters into Partnership with RoomKey.com
by the CEO, Roger Bloss
“Vantage Hospitality is excited to join Room Key and distribute our family of
inns, hotels and suites. Room Key’s inventive model allows the consumer to choose the
hotel that is right for them and provides us with a valuable audience that will be able to
book directly with our brands. Room Key’s platform enables us to continue to achieve
our distribution strategy of reaching consumers where they are searching and booking
hotel accommodations, which is a very cost-effective channel for our members.”
In the case of RoomKey.com in particular, it is cost-effective, and also user-
friendly to the customers. Room Key’s representative quoted in the same article that
“Room Key delivers a simplified search experience and the confidence of booking direct
with our hotel partners like Vantage, so travelers can simply search, book and
relax.”John F. Davis III, the chief executive officer of Room Key also stated “We’re
thrilled to partner with Vantage Hospitality to offer over 1,000 new hotel properties to
travelers who visit RoomKey.com to find their next hotel,” Said John F. Davis III, chief
executive officer of RoomKey.com.The statement indicates that there is a common
interest between hotels and websites such as RoomKey.com, which will form a different
business landscape for the future.
3
University of Wisconsin Stout | School of Hospitality
4. HT 344-Hospitality and Tourism Marketing and Sales
Furthermore, some of thethird party online travel agencies can hardly afford to
lose the income generated from advertisements. Whereas websites like RoomKey.com
will probably benefit more in another way if they don’t incorporate advertisement in their
website. “Launched earlier this year, RoomKey.com is an innovative hotel search engine
that offers a simplified search experience. The website provides hotel information
straight from Vantage’s brands and brings the visitor directly to the Vantage sites to
book.” (Vantage Hospitality Enters into Partnership with Roomkey.com, Hospitalty.net)
Moreover, there is another advantage of being a part of an allied system.It is that
hotels now can have more control over the pricing and gain more influence among
customers. Hotels have the power to compete with the online travel agency by actively
lowering the price on the “hotels owned website” compare to the third party owned
website; to draw more business for the desired period of time. Also if necessary, they
have the initiative to possibly start a price war with the third party websites when the
conditions allow them.
There is another type of competition thatis also against the third party online
travel agency in favor of the traditional trend. It is more geographically oriented, and it
also follows the same ideology that RoomKey.com followed. A case example
isLasvegas.com. Lasvegas.com is a model we believe that lays under the principle that
hotels havemore direct control of their business. In the case of Lasvegas.com, many local
hospitality businesses take part of owning or contributing to the website in terms of
content diversity, and financial side of operation.Lasvegas.com has successfully
combined nearly all the presentable hospitality and tourism business within the area and
concentrated on its website. Lasvegas.com, the website itself might not be operatedin a
non-third-party way, but the result and the competition it brings to the general third party
online booking agencies is nevertheless identical.
Organizations who found themselves benefiting from following this trend of
having their own public websites, will likely be looking for corporation within or even
outside their industry in order to form a strong proposition and business variety to
compete with the third party online travel agencies.
Yanqin Chen works for SciteHotel in Beijing, China. She is in charge of the
hotel’s financial control and strategic planning associated with the financial aspect of the
hotel. The interview was conducted through email. We introduced the market
environment of the United States to her and she commented that “because of the
hospitality industry is still growing fairly fast in China, and currently the market
environment and business landscape of the hospitality industry in China will probably
have a few years of time in order to experiencing what the United States are experiencing
at the moment; namely the competition between “hotels allied website and the third party
online travel agency.”
After the introduction of our trend, she humbly approved the trend and stated a
point that is helpful to guide the hotel during a decision making processes to illustrate to
which level in order for a hotel to realize there is a margin, or it is worth of forming a
competition with the third party business in the long term. She claimed that “it is
probably only worth to establish the “hotel allied booking website” if the hotels involved
together is large enough and they online travel agency is charging higher enough
consistently throughout the industry.
4
University of Wisconsin Stout | School of Hospitality |
5. HT 344-Hospitality and Tourism Marketing and Sales
She further commented other possibilities to ease the financial burden between
the hotel and the online travel agency. And that is by acquiring online travel agency’s
company share. And she mentioned that there is two possible ways if acquiring is favored
over forming a direct competition. One way is by acquiring the online travel agency to a
level, which allows the hotel to influence their decision making thus on the same cost
basis to the hotel, the result would benefiting their hotel as much as possible. Another
direction could be takeover a travel agency and hoping to use this particular travel agency
to extend its reach to the market, rather than using many online travel agencies to achieve
relatively less in many different website.
Another model that we mentioned to her is the lasvegas.com model. Whereas
taking the benefit of a highly concentrated tourism destination area to exclude the
participation of third party online travel agency. This method works and also serves the
customer a better way to explore the tourism destination area, and it can bring the website
an addition unique selling point.
The future trend of acquiring more market share of online booking by websites
such as Roomkey.com and Lasvegas.com is that certain percent of market would
eventually and gradually reach a balance where the customers will locate themselves with
the type of website and service that best fits their preferences and needs, therefore before
reaching this balance, the market share of online booking will have more room for “hotel
controlled website”. However, this does not necessarily mean the third party online
booking website will disappear from the world of commerce; instead, they will likely to
experience a decrease in market share unless they can discover a way to battle the
potentially more cost-effective marketing strategic such as RoomKey.com.
5
University of Wisconsin Stout | School of Hospitality
6. HT 344-Hospitality and Tourism Marketing and Sales
References:
Lasvegas.com. Official Website.
http://www.lasvegas.com/
“RoomKey.com Hotel Search Site Adds More Chains.” September 24th, 2012. Travel,
USA Today.
http://travel.usatoday.com/hotels/post/2012/09/la-quinta-millennium-leading-hotels-join-
roomkeycom/70000994/1
“The Curious Identity of RoomKey.com.” September 18th, 2012. Competepulse.com
http://blog.compete.com/2012/09/18/the-curious-identity-of-roomkey-com/
“Vantage Hospitality Enters into Partnership with Roomkey.com.” October 17th, 2012.
Industry News, Hospitality.net.
http://www.hospitalitynet.org/news/4058144.html
6
University of Wisconsin Stout | School of Hospitality |