Distribution 101 2004

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Distribution 1012004

• Resort Management Conference
• Greenbrier Resort
• Bill Peters
• Vice President Reservations Market Development
• Outrigger OHANA Hotels and Resorts

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Traditional Switching Companies
Global Distribution Systems (GDS) Originally
Airline Central Reservation Systems (CRS)
Amadeus
Worldspan
Apollo
Sabre
Switch companies Pegasus WizCom
Resort CRS
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Pegasus and WizComCirca Mid 1980s

• Switch companies bring to the table
• Single image inventory
• Instant confirmation
• Auto availability auto rate update
• Electronic transactions, less paper
• Reduction in processing agents

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The 2nd Traditional Method of Distribution is the
Wholesale Channel
Consumer
Wholesaler Fax Server
Travel Agent
Wholesaler
Resort FAX
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There is still a lot of paper!
Resort FAX
Paper, Paper and More Paper
Resort Agent
Resort PMS
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Internet Cloud ArrivedCirca 1998
Creating new Turbulence!!!
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Traditional Model
Travel agent commissionable rates
Dot Com commissionable rates
Traditional consumer
Internet consumer
GDS
Switch companies Pegasus WizCom
Resort CRS
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Merchant Model Circa 2001

• Paradigm changes
• Many dotcoms became more like traditional travel
  wholesalers
• Net rates 25 to 35 below rack
• Multi-million dollar consumer advertising
  campaigns
• Tremendous volume when it was needed post 9/11
  

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INTERNET CONSUMER
Traditional Wholesaler
Hotels.com
Orbitz.com
Travelocity.com
Expedia.com
Merchant Model and the mega dotcoms
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No Free Lunch!
Merchant Model
25 to 35 below rack rates
Resort ADR and RevPAR decline
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And it is a paper nightmare!
Resorts try to keep up with the Paper Faxes,
Room Blocks, Net Rates and Staffing.
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2003 -2004 Resorts Respond

• Millions of dollars are being invested to enhance
  resort Web sites regain control of the market
• The transactions on these sites will grow but the
  mega dotcoms are here to stay

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Speed bumps ahead!

• Speed Bump 1
• Mega dotcoms are way out spending the hotels in
  consumer advertising and Web placement
• Speed Bump 2
• Traditional wholesalers are also out spending the
  hotels in consumer advertising and Web placement

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Speed Bump 1
I need a Vacation!
Joe Consumer
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Speed Bump 2
I still need a Vacation!
Joe Consumer
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Your hotel finally!
Im going on Vacation!
Joe Consumer has run the Internet gauntlet and
finally makes it to the resort Web site.
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How to improve ADR/RevPAR

• Focus on the amount of business you are willing
  to allocate to the dotcoms
• Carefully monitor all channels in regards to
  price and availability
• Invest in your Web site

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New Distribution Concepts

• Rate parity in all consumer channels
• Live chat
• Electronic permission based marketing
• Convergence of voice, data video over IP
• Links out transparent sites in
• Low price guarantee

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Low Price Guarantee

• Does it work?
• The jury is still out.
• According to PhoCusWright Inc, Marriott, Holiday
  Inn and Hilton have seen a significant increase
  in transactions on their web sites since the
  introduction of their low price guarantee.

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Here are some of your competitors!
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InterActiveCorp Ten Banana Rating

• Owns an operates the following companies
• Hotels.com Interval International
• Expedia.com Ticketmaster
• Travelscape.com Newtrade Middleware
• TV Travel Group - UK Entertainment Book
• HSN USA HSN Europe
• Match.com Citysearch.com
• US Cable Travel Network Udate.com
• Zero Degrees.com Anyway.com - France
• (acquired 3/2004)
• Tripadvisor.com Hotwire.com
• (acquired 3/16/04)
• Activity World Hawaii
• (acquired 3/2004)

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Cendant Three Banana Rating

• Travel Distribution Services
• Galileo International Travelport
• Travelwire Lodging. COM
• Travel 2 and 4 Neat Group
• Wizcom Shepherd Systems
• Cheap Tickets Cendant Travel
• THOR RCI
• Hotel Club.com Rates to go.com
• Acquired (3/2004)

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Expedia.com Number One

• Market leader
• Air 46 (2003) was 36 (2002)
• Hotel 37 (2003) was 28 (2002)
• PhoCusWright consumer survey
• Merchant Model
• off lowest published public rate
• is negotiable
• Agreed upon mark-up (margin)
• Inventory management
• Change at will via Extranet site

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Expedia.com

• Watch for
• Forward distribution of the Merchant Model
• Travel agencies.
• Corporate travel
• Over 1,100 actively booking companies
• Loyalty club
• Strategic emphasis on customer loyalty
• Direct connect to CRS via Newtrade middleware
• Expedia hotel rating
• Improved dynamic packaging

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Travelocity.com

• Market share 2nd in Air and 2nd in hotel
• Air 44 (2003) was 59 (2002)
• Hotel 34 (2003) was 34 (2002)
• PhoCusWright consumer survey
• Merchant Model
• off lowest published public rate
• is negotiable
• Agreed upon mark-up (margin)
• Inventory management
• Change at will via Extranet

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Travelocity.com

• Watch for
• Loyalty club
• Forward distribution of the Merchant Model
• Corporate travelers via GetThere.com
• Sabre equipped travel agents
• Dynamic packaging for Site59

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Hotels.com Number three

• Hotel reservations
• Hotel 24 (2003) was 17 (2002)
• PhoCusWright consumer survey
• Merchant Model
• off lowest published public rate
• is negotiable
• Agreed upon mark-up (margin)
• Inventory management
• Change at will via Extranet site

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Hotels.com

• Watch for
• Creation of a loyalty club.
• Dynamic Packaging
• Corporate Travel
• Forward distribution of the merchant model
• Conferences and Meetings
• Weddings and social events
• Airline sites such as Mexicana Airlines
• Latest news
• Provides hotel accommodations for Delta Airlines
  customers
• Bill me later service.

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Orbitz.com

• Market 3rd for air and 4th for hotel
• Air 41 (2003) was 25 (2002)
• Hotel 18 (2003) was 10 (2002)
• PhoCusWright consumer survey
• Merchant Model
• off lowest published public rate
• is negotiable
• Agreed upon mark-up (margin)
• Inventory management
• Change at will via Extranet site

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Orbitz.com

• Watch out for
• Forward distribution of the Merchant Model
• The business traveler
• Traditional travel agents as an alternative to
  GDS connections
• Group
• Weddings
• Social Events
• Loyalty club
• Latest news
• Cashing in with Las Vegas Casinos by offering
  packages for all Caesars Entertainment casino
  resorts

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Priceline.com

• Market share - 4th in Air and 5th in hotel
• Air 14 (2003) was 16 (2002)
• Hotel 13 (2003) was 7 (2002)
• PhoCusWright consumer survey
• Opaque pricing
• Room rate offering at discretion of hotel
• No agreed upon mark-up but is minimum
• Over 15,000 distribution partners
• EBay, Amazon.com, Lowestfare.com,
• GoGo (static packages)
• Inventory management
• Change at will via Extranet site

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Hotwire.com

• Market share - 6th in Air and 7th in hotel
• Air 6 (2003) was 14 (2002)
• Hotel 2 (2003) was 10 (2002)
• PhoCusWright consumer survey
• Opaque model
• Room rate offering at discretion of hotel
• No agreed upon mark-up but is minimum
• Inventory management
• Rates and inventory delivered through Pegasus
  switch.

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Priceline.com

• Watch for
• Dynamic packaging
• Private label booking pages to traditional travel
  agencies.
• Merchant Model offerings

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Travelweb.com

• (HDS) Hotel Distribution System
• Owned by
• Hilton, Hyatt, Marriott International, Pegasus,
  Starwood, Six Continents, and also Priceline.com
• Merchant model
• B2B only
• Supplies merchant model rates to sites such as
  lowestfare.com, Orbitz.com, Neat Group and many
  more small Internet travel sites.

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Sidestep.com

• New paradigm model
• Privately held Internet technology company.
• Commissionable Rate Program
• Consumer focused
• Re-directs consumer to resort site or it
  intermediary site.
• Core Technology
• Can access all of the travel inventory available
  on the Internet, which conventional search
  engines, crawlers and shopping bots cannot.
• 5 million membership since 2000

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US Best Hotels.com

• Direct to consumer hotel advertising firm
• Resorts pay annual fee per property
• One year of unlimited advertising through site
• Consumer can link directly to resort site and
  book a reservation
• Resorts do not have to allocate rooms
• Lessening dependence of mega dotcoms.

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WorldRes.com

• Net rate program (merchant model)
• Distributes net rates on retail Web sites
  worldwide
• Set room night limits
• Rates based on seasonal or daily demands
• Adjust rates in real time
• No long term contracts and pricing

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The battle continues for market share or is it
dominance ?
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The battle continues for market share or is it
dominance ?

• Airline against airline
• Destination against destination
• Mega dotcom against mega dotcom
• Traditional wholesaler against mega dotcom
• Travel agent against mega dotcom and traditional
  wholesaler Internet sites

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The battle rages

• Traditional media advertising against Internet
  advertising
• Traditional hotel distribution channels against
  the new Internet distribution channels
• Traditional challenge of resort against resort
  for occupancy, ADR and RevPAR.

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Who Will Win?

• You will, after you listen to the next three
  speakers
• It is your product that the consumer wishes to
  purchase
• You control your sales and inventory strategies
• You make your resort and destination stand out
  among all others

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3 Key Issues in Hotel Electronic Distribution

• John Burns
• Hospitality Technology Consulting

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Web Now Drives Travel Decisions

• Most travelers research their options on the
  Web prior to booking
• either on or off-line
• Search engines play a key role
• optimization is a top priority
• Do you know where you display? With various
  phrasings? In each engine?

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Web Now Drives Travel Decisions

• Informative, appealing presentation of the
  resort is decisive
• decisions are based on Web content you wont get
  a second chance
• Resort travelers seek experiences, fond memories
• can you help them?
• do you say so?
• sell benefits, not features!

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Mega Agencies are Reshaping our Environment

• InterActiveCorp (Expedia, Hotels.com),
  Travelocity, Orbitz, Cendant (Lodging.con,
  Cheaptickets, etc.)
• Merchant Model produces approx. 5 of bookings
• influence of MM rates extends far further
  impacting ALL rates

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Mega Agencies are Reshaping our Environment

• Initially targeted individual leisure traveler
• Now active in
• corporate
• Expedia Corporate Travel, Orbitz for Business,
  Travelocity Business
• tour
• Expedia Classic Custom Vacations
• dynamic packaging
• WWTE, Neat .. .. TicketMaster, etc.

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Mega Agencies are Reshaping our Environment

• The Future?
• meetings and convention, groups...
• All based on MM rate structure
• Our initial attitude They are the enemy
• Our first reaction was denial
• some softening in approach
• movement (slowly) toward partnership

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Mega Agencies are Reshaping our Environment

• Think about a wholesale-based rate structure
• Remember, you have what the Megas need most
  Content
• A Footnote
• role of representation companies in jeopardy

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The Challenge to Manage

• Electronic distribution is re-testing every
  resorts skills and processes in
• pricing
• inventory allocation
• distribution management
• The average hotel attempts to maintain inventory
  in 7 electronic outlets
• Res managers say they can effectively manage 5

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The Challenge to Manage

• Begins with a thorough (highly detailed)
  forecasting process
• may utilize revenue management technology
• Includes consideration of daily potential of each
  channel -- including cost overhead and guest
  profitability
• who are your most valuable guests?

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The Challenge to Manage

• Competitive intelligence is vital
• robots are coming to our rescue
• Single point of management options - via CRS and
  dashboards - are emerging
• Options are changing and evolving
• review - and revise - your processes often

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In Summary

• 1. Powerful presentation essential
• 2. Understanding, working with, and anticipating
  the Megas imperative
• 3. Effective inventory management processes a
  necessity
• John Burns
• Hospitality Technology Consulting

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Resort Management Conference Greenbrier
Resort Dwight Gould
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Internet usage
US Internet Households Will Reach 84M by 2008
Forecast
Actual
Source Forrester Research, April 2003.
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Online Usage Will Keep Growing
- Millions of Users -
Source IDC, February 2002 (ICMM 8.1)
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Online vs. Radio / TelevisionDaypart Breakdown
Online
Media Mix Synchronization
Source TV Nielsen Media Research (2), Radio
Arbitron (12), Internet Nielsen//NetRatings (2)
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Change in offline media consumption with addition
of online
21 of users Consumed less TV due to increased
Internet Usage
Source Forrester Research, Technographics
Database, 2003 Base 18 U.S. Adults
(onlineoffline)
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Media Consumption
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Growth of Media Usage 1998 - 2003 (W25-54)
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Online Trends - Soccer Moms

• Per AOL, Moms spend up to 17 hours, per week
  online
• Moms time constraints account for increased
  Internet usage
• TV time is diminished
• Advertisers should consider increased online
  marketing to reach women 25-54 ( per Harris
  Interactive Study -May2003)

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Television campaigns reach the law of diminishing
returns
Internet
Branding Effect
Television
(The Web can give you incremental reach --
especially if your target is higher income,
better educated, etc.)
Frequency of ad exposures
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Why The Internet? Efficiently
Targeted Mass Reach
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Effectiveness of Online Advertising

• Key Findings Across Industries
• Adding online advertising to media mix expands
  reach and coverage
• Reallocating budget produces better overall
  results by increasing the ROI from advertising
• Optimal results are achieved when online
  advertising is 10 to 15 of the marketing mix

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Thank you
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Time for Q A !

• Web drives travel decisions
• Mega agencies reshaping environment
• Challenge to manage
• Online vs. radio / television marketing
• Growth of media usage
• Marketing on the Internet
• Revenue management and the Internet