Hospitality Trend with Regard to Online Booking


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Hospitality Trend with Regard to Online Booking

  1. 1. 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
  2. 2. HT 344-Hospitality and Tourism Marketing and Sales Before people started using websites to book ahotel room and customize theirtrips online a few years back, many of them used travel agencies throughphone calls tobook their trips. After the advance of the technology, and spread of Internet, hospitalitybusiness became a lot more accessible by the public. Then people started to rely more andmore on the information that they accessed from the Internet. One of the most significantchanges that the Internet brought to the consumer is the capability of specifying exactlywhat is needed, the servicesprovided before consuming it, and it also added lots ofvariability to peoples’ choice.For instance, websites such as,, and are among the largest of the third party online travelagenciesin the industry; these three companies foundedrespectively in 2001, 1996 and1997.The online travel agency dominates the way people book rooms and trips to a largeextend. At some point, the rating on thesewebsites created worriesbecause of the negativefeedbacks than can be posted by customers; which influence hotels’ business sometimesunnecessarily. After the introduction of the Smartphone, the hotel booking trend started to showa slight shift from computer based websites to a Smartphone based application. In thenear future, we as a group believe that the trend of booking will still favor the computerbased websitestrongly. Mobile application will have a long way to go before it developsitself to a level that enable customersto form a habit and a dependency over theadvantages of what a computer can offer. Meanwhile, the way people book hotel roomswill still largely remain the same for a relatively long time. The trend for the near future that we are proposing will not generate a dramaticchange in terms of the experience that the customer gets, but behind the roughly sameexperience that people are getting from the online booking, there is a shift between whois dominating the online booking market shares. The competition between the onlinebooking website will switch between the third party, online travel agency and “hotelownedwebsite”. What we mean by “hotels owned website” is that a group of hotelsestablish and operate their own online booking website; to make the website offer asmuch as customers needed; and to draw more market shares of online booking towardsthem. Meanwhile, hotels will rely on the publication of the third party online travelagency 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 theirwebsite cannot be cost effective to the hotel, especially smaller ones.In addition, theexisting numbers of these agencies are many. In order for hotels to put their rooms to thepublic access as much as possible, they need to get involved with many of the identicalexisting online travel agencies in multiple costs. Namely, hotels are paying for the sametype of fee, and all to serve the same purpose. 2 University of Wisconsin Stout | School of Hospitality |
  3. 3. HT 344-Hospitality and Tourism Marketing and Sales The challenges toexisting third party online travel agencies are websites that hasbeen created by hotels themselves, as a group. An outstanding example would be thewebsite of a trend called was established in January2012.Hotels that are part of this website include “La Quinta, Millennium and many otherindependent, luxury, and leading name brand hotels in the world” (USA Today,9/24/2012). Other hospitality groups within include Choice Internationalhotels, Hilton Worldwide, Hyatt IHG, Marriott, and Wyndham Hotel Group. The statisticin the article “The Curious Identity of” showed that the percentage loss ofbookings to an OTA (Online Travel Agency) since the beginning of this year has grownsteadily from 17.2% to 23.9%. This indicates the competition between websites such and the third party online travel agencies is starting to favor the formertype. One of the advantages of the “Hotels owned website” over the third party onlinetravel agencies is the financial aspect. Among the commonly existed operations, a hotelmakes several separatepayments to different online travel agencies in order to sell theirrooms to the public in desired quantity and diversity. The fee that hotels are paying willcover the online travel agency’s operation cost, and in addition it will generate a profitover 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 operationsolely serves the allied hotel’s interest, and most importantly it will not charge a fee tothe 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 ofmarketing. Quoted from Vantage Hospitality Enters into Partnership with RoomKey.comby the CEO, 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 able tobook directly with our brands. Room Key’s platform enables us to continue to achieveour distribution strategy of reaching consumers where they are searching and bookinghotel accommodations, which is a very cost-effective channel for our members.” In the case of 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 to find their next hotel,” Said John F. Davis III, chiefexecutive officer of statement indicates that there is a commoninterest between hotels and websites such as, which will form a differentbusiness landscape for the future. 3 University of Wisconsin Stout | School of Hospitality
  4. 4. HT 344-Hospitality and Tourism Marketing and Sales Furthermore, some of thethird party online travel agencies can hardly afford tolose the income generated from advertisements. Whereas websites like RoomKey.comwill probably benefit more in another way if they don’t incorporate advertisement in theirwebsite. “Launched earlier this year, is an innovative hotel search enginethat offers a simplified search experience. The website provides hotel informationstraight from Vantage’s brands and brings the visitor directly to the Vantage sites tobook.” (Vantage Hospitality Enters into Partnership with, Moreover, there is another advantage of being a part of an allied system.It is thathotels now can have more control over the pricing and gain more influence amongcustomers. Hotels have the power to compete with the online travel agency by activelylowering the price on the “hotels owned website” compare to the third party ownedwebsite; to draw more business for the desired period of time. Also if necessary, theyhave the initiative to possibly start a price war with the third party websites when theconditions 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 italso follows the same ideology that followed. A case is a model we believe that lays under the principle thathotels havemore direct control of their business. In the case of, many localhospitality businesses take part of owning or contributing to the website in terms ofcontent diversity, and financial side of has successfullycombined nearly all the presentable hospitality and tourism business within the area andconcentrated on its website., the website itself might not be operatedin anon-third-party way, but the result and the competition it brings to the general third partyonline 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 or evenoutside their industry in order to form a strong proposition and business variety tocompete 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 aspect of thehotel. 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 experiencingat the moment; namely the competition between “hotels allied website and the third partyonline travel agency.” After the introduction of our trend, she humbly approved the trend and stated apoint that is helpful to guide the hotel during a decision making processes to illustrate towhich level in order for a hotel to realize there is a margin, or it is worth of forming acompetition with the third party business in the long term. She claimed that “it isprobably only worth to establish the “hotel allied booking website” if the hotels involvedtogether is large enough and they online travel agency is charging higher enoughconsistently throughout the industry. 4 University of Wisconsin Stout | School of Hospitality |
  5. 5. HT 344-Hospitality and Tourism Marketing and Sales She further commented other possibilities to ease the financial burden betweenthe hotel and the online travel agency. And that is by acquiring online travel agency’scompany share. And she mentioned that there is two possible ways if acquiring is favoredover forming a direct competition. One way is by acquiring the online travel agency to alevel, which allows the hotel to influence their decision making thus on the same costbasis to the hotel, the result would benefiting their hotel as much as possible. Anotherdirection could be takeover a travel agency and hoping to use this particular travel agencyto extend its reach to the market, rather than using many online travel agencies to achieverelatively less in many different website. Another model that we mentioned to her is the 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 serves thecustomer a better way to explore the tourism destination area, and it can bring the websitean addition unique selling point. The future trend of acquiring more market share of online booking by websitessuch as and is that certain percent of market wouldeventually and gradually reach a balance where the customers will locate themselves withthe type of website and service that best fits their preferences and needs, therefore beforereaching this balance, the market share of online booking will have more room for “hotelcontrolled website”. However, this does not necessarily mean the third party onlinebooking website will disappear from the world of commerce; instead, they will likely toexperience a decrease in market share unless they can discover a way to battle thepotentially more cost-effective marketing strategic such as 5 University of Wisconsin Stout | School of Hospitality
  6. 6. HT 344-Hospitality and Tourism Marketing and Official Website.“ Hotel Search Site Adds More Chains.” September 24th, 2012. Travel,USA Today.“The Curious Identity of” September 18th, 2012. Competepulse.com“Vantage Hospitality Enters into Partnership with” October 17th, 2012.Industry News, 6 University of Wisconsin Stout | School of Hospitality |