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  • HT 344-Hospitality and Tourism Marketing and Sales Fall 12HT-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
  • HT 344-Hospitality and Tourism Marketing and Sales Before people started using websites to book ahotel room and customizetheir trips online a few years back, many of them used travel agencies throughphonecalls 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 startedto rely more and more on the information that they accessed from the Internet. Oneof the most significant changes that the Internet brought to the consumer is thecapability of specifying exactly what is needed, the servicesprovided beforeconsuming 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 thelargest of the third party online travel agenciesin the industry; these threecompanies foundedrespectively in 2001, 1996 and 1997.The online travel agencydominates the way people book rooms and trips to a large extend. At some point,the rating on thesewebsites created worriesbecause of the negative feedbacks thancan be posted by customers; which influence hotels’ business sometimesunnecessarily. After the introduction of the Smartphone, the hotel booking trend started toshow a slight shift from computer based websites to a Smartphone basedapplication. In the near future, we as a group believe that the trend of booking willstill favor the computer based websitestrongly. Mobile application will have a longway to go before it develops itself to a level that enable customersto form a habitand a dependency over the advantages of what a computer can offer. Meanwhile, theway people book hotel rooms will still largely remain the same for a relatively longtime. The trend for the near future that we are proposing will not generate adramatic change in terms of the experience that the customer gets, but behind theroughly same experience that people are getting from the online booking, there is ashift between who is dominating the online booking market shares. The competitionbetween the online booking website will switch between the third party, onlinetravel 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; tomake the website offer as much as customers needed; and to draw more marketshares of online booking towards them. Meanwhile, hotels will rely on thepublication of the third party online travel agency much less, in order to reach amore cost-effective operation. As we all know for athird party online travel agency to sell hotel rooms ontheir website cannot be cost effective to the hotel, especially smaller ones.Inaddition, the existing numbers of these agencies are many. In order for hotels to puttheir rooms to the public access as much as possible, they need to get involved with 2 University of Wisconsin Stout | School of Hospitality |
  • HT 344-Hospitality and Tourism Marketing and Salesmany 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. The challenges toexisting third party online travel agencies are websites thathas been created by hotels themselves, as a group. An outstanding example wouldbe the website of a trend called Roomkey.com. Roomkey.com was established inJanuary 2012.Hotels that are part of this website include “La Quinta, Millennium andmany other independent, luxury, and leading name brand hotels in the world” (USAToday, 9/24/2012). Other hospitality groups within Roomkey.com include ChoiceInternational hotels, Hilton Worldwide, Hyatt IHG, Marriott, and Wyndham HotelGroup. The statistic in the article “The Curious Identity of RoomKey.com” showedthat the percentage loss of bookings to an OTA (Online Travel Agency) since thebeginning of this year has grown steadily from 17.2% to 23.9%. This indicates thecompetition between websites such as RoomKey.com and the third party onlinetravel agencies is starting to favor the former type. One of the advantages of the “Hotels owned website” over the third partyonline travel agencies is the financial aspect. Among the commonly existedoperations, a hotel makes several separatepayments to different online travelagencies 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 “hotelsowned website” model, this will not happen. Hotels get together to form their ownresources to run this website, but this operation solely serves the allied hotel’sinterest, and most importantly it will not charge a fee to the hotels. The cost ofoperating this website is simply what it needs to stay in operation. Essentially hotelsare 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 theCEO, Roger Bloss “Vantage Hospitality is excited to join Room Key and distribute our family ofinns, hotels and suites. Room Key’s inventive model allows the consumer to choose thehotel that is right for them and provides us with a valuable audience that will be ableto book directly with our brands. Room Key’s platform enables us to continue toachieve our distribution strategy of reaching consumers where they are searching andbooking hotel accommodations, which is a very cost-effective channel for ourmembers.” 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 directwith our hotel partners like Vantage, so travelers can simply search, book andrelax.”John F. Davis III, the chief executive officer of Room Key also stated “We’rethrilled to partner with Vantage Hospitality to offer over 1,000 new hotel properties totravelers who visit RoomKey.com to find their next hotel,” Said John F. Davis III, chief 3 University of Wisconsin Stout | School of Hospitality
  • HT 344-Hospitality and Tourism Marketing and Salesexecutive officer of RoomKey.com.The statement indicates that there is a commoninterest between hotels and websites such as RoomKey.com, which will form adifferent business landscape for the future. Furthermore, some of thethird party online travel agencies can hardly affordto lose the income generated from advertisements. Whereas websites likeRoomKey.com will probably benefit more in another way if they don’t incorporateadvertisement in their website. “Launched earlier this year, RoomKey.com is aninnovative hotel search engine that offers a simplified search experience. The websiteprovides hotel information straight from Vantage’s brands and brings the visitordirectly to the Vantage sites to book.” (Vantage Hospitality Enters into Partnershipwith Roomkey.com, Hospitalty.net) Moreover, there is another advantage of being a part of an allied system.It isthat hotels now can have more control over the pricing and gain more influenceamong customers. Hotels have the power to compete with the online travel agencyby actively lowering the price on the “hotels owned website” compare to the thirdparty owned website; to draw more business for the desired period of time. Also ifnecessary, they have the initiative to possibly start a price war with the third partywebsites when the conditions allow them. There is another type of competition thatis also against the third party onlinetravel 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 exampleisLasvegas.com. Lasvegas.com is a model we believe that lays under the principlethat 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 websitein terms of content diversity, and financial side of operation.Lasvegas.com hassuccessfully combined nearly all the presentable hospitality and tourism businesswithin the area and concentrated on its website. Lasvegas.com, the website itselfmight not be operatedin a non-third-party way, but the result and the competition itbrings to the general third party online booking agencies is nevertheless identical. Organizations who found themselves benefiting from following this trend ofhaving their own public websites, will likely be looking for corporation within oreven outside their industry in order to form a strong proposition and businessvariety to compete with the third party online travel agencies. Yanqin Chen works for SciteHotel in Beijing, China. She is in charge of thehotel’s financial control and strategic planning associated with the financial aspectof the hotel. The interview was conducted through email. We introduced the marketenvironment of the United States to her and she commented that “because of thehospitality industry is still growing fairly fast in China, and currently the marketenvironment and business landscape of the hospitality industry in China will probablyhave a few years of time in order to experiencing what the United States are 4 University of Wisconsin Stout | School of Hospitality |
  • HT 344-Hospitality and Tourism Marketing and Salesexperiencing at the moment; namely the competition between “hotels allied websiteand the third party online travel agency.” After the introduction of our trend, she humbly approved the trend andstated a point that is helpful to guide the hotel during a decision making processesto illustrate to which level in order for a hotel to realize there is a margin, or it isworth of forming a competition with the third party business in the long term. Sheclaimed 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 ischarging higher enough consistently throughout the industry. She further commented other possibilities to ease the financial burdenbetween the hotel and the online travel agency. And that is by acquiring onlinetravel agency’s company share. And she mentioned that there is two possible ways ifacquiring is favored over forming a direct competition. One way is by acquiring theonline travel agency to a level, which allows the hotel to influence their decisionmaking thus on the same cost basis to the hotel, the result would benefiting theirhotel as much as possible. Another direction could be takeover a travel agency andhoping to use this particular travel agency to extend its reach to the market, ratherthan using many online travel agencies to achieve relatively less in many differentwebsite. Another model that we mentioned to her is the lasvegas.com model. Whereastaking the benefit of a highly concentrated tourism destination area to exclude theparticipation of third party online travel agency. This method works and also servesthe customer a better way to explore the tourism destination area, and it can bringthe website an addition unique selling point. The future trend of acquiring more market share of online booking bywebsites such as Roomkey.com and Lasvegas.com is that certain percent of marketwould eventually and gradually reach a balance where the customers will locatethemselves with the type of website and service that best fits their preferences andneeds, therefore before reaching this balance, the market share of online bookingwill have more room for “hotel controlled website”. However, this does notnecessarily mean the third party online booking website will disappear from theworld of commerce; instead, they will likely to experience a decrease in marketshare unless they can discover a way to battle the potentially more cost-effectivemarketing strategic such as RoomKey.com. 5 University of Wisconsin Stout | School of Hospitality
  • HT 344-Hospitality and Tourism Marketing and SalesReferences: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.comhttp://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 |