distribution 101 2004
DESCRIPTION
Distribution 101 2004. Resort Management Conference Greenbrier Resort Bill Peters Vice President Reservations & Market Development Outrigger & OHANA Hotels and Resorts. Traditional Switching Companies. Global Distribution Systems (GDS) Originally Airline Central Reservation Systems (CRS). - PowerPoint PPT PresentationTRANSCRIPT
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Distribution 1012004
Resort Management Conference Greenbrier Resort
Bill PetersVice 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)
Switch companiesPegasusWizCom
Resort CRS
AmadeusWorldspanApolloSabre
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Pegasus and WizComCirca Mid 1980’s
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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Consumer Travel Agent Wholesaler Wholesaler Fax Server
Resort FAX
The 2nd Traditional Method of Distribution is the Wholesale Channel
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There is still a lot of paper!
Resort PMS
Resort FAXResort
Agent
Paper, Paper and More Paper
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Internet Cloud ArrivedCirca 1998
Creating new Turbulence!!!
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Travel agentcommissionable
rates
Dot Com commissionable
rates
GDS
Switch companies PegasusWizCom
Resort CRS
Traditional consumer
Internet consumer
Traditional Model
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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
Merchant Model and the mega dotcoms
Hotels.comOrbitz.comTravelocity.comExpedia.com Traditional Wholesaler
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25% to 35% below rack rates
Merchant Model
No Free Lunch!
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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I need a Vacation!
Speed Bump # 1
Joe Consumer
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I still need a Vacation!
Speed Bump # 2
Joe Consumer
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Joe Consumer has run the Internet gauntlet and finally
makes it to the resort Web site.
Your hotel – finally!
I’m going onVacation!
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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
How to improve ADR/RevPAR
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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?
1. You will, after you listen to the next three speakers
2. It is your product that the consumer wishes to purchase
3. You control your sales and inventory strategies
4. You make your resort and destination stand out among all others
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3 Key Issues in Hotel Electronic Distribution
John BurnsHospitality Technology Consulting
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Web Now Drives Travel Decisions
“Most” travelers research their options on the Web prior to bookingeither on or off-line
Search engines play a key roleoptimization is a top priorityDo 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 decisivedecisions are based on Web content; you
won’t get a second chanceResort travelers seek experiences, fond
memoriescan 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 travelerNow active in:
corporateExpedia Corporate Travel, Orbitz for Business,
Travelocity Businesstour
Expedia Classic Custom Vacationsdynamic 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 structureOur initial attitude: “They are the
enemy”Our first reaction was denialsome 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 resort’s skills and processes in:pricing inventory allocationdistribution management
The average hotel attempts to maintain inventory in 7 electronic outletsRes managers say they can effectively
manage 5
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The Challenge to Manage
Begins with a thorough (highly detailed) forecasting processmay utilize revenue management
technologyIncludes consideration of daily
potential of each channel -- including cost overhead and guest profitabilitywho 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 evolvingreview - and revise - your processes
often
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In Summary:
1. Powerful presentation: essential2. Understanding, working with, and
anticipating the “Megas”: imperative3. Effective inventory management
processes: a necessityJohn BurnsHospitality 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 US Internet Households Will Reach 84M by 2008
Source: Forrester Research, April 2003.
112.4111.2110108.8107.7106.6105.5104.3103.2102.110110099.19896.9
76.8 79.481.8 84
73.8
5.8
12.7
21.725
33.3
44.3
59.263.5
67.270.7
0.0
20.0
40.0
60.0
80.0
100.0
120.0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
US
Ho
us
eh
old
s (
mill
ion
s)
Total US householdsInternet households
Actual Forecast
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Online Usage Will Keep Growing…
145 175 201 208 217 232
500
615
731837
9411,053
0
200
400
600
800
1,000
2001 2002 2003 2004 2005 2006
(in
mil
lion
s)
United States
Worldwide
Source: IDC, February 2002 (ICMM 8.1)
- Millions of Users -
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Source: TV: Nielsen Media Research (2+), Radio: Arbitron (12+), Internet: Nielsen//NetRatings (2+)
0
10
20
30
40
50
60
70
80
6a 8a 10a
12n 2p 4p 6p 8p 10
p12
m
Inte
rnet
- R
each
%
0
5
10
15
20
25
30
35
40
45
Rad
io -
AQ
H R
TG
/ T
V -
PU
T%
RadioTelevisionInternet
Online vs. Radio / TelevisionDaypart Breakdown Online Media Mix Synchronization
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Change in offline media consumption with addition of online…
21%16% 16%
12%
0%
10%
20%
30%
40%
50%
60%
70%
80%
TV Newspapers Magazines Radio
Decreased No Change Increased
21% of usersConsumed less TV due to increased Internet Usage
Source: Forrester Research, Technographics Database, 2003 – Base 18+ U.S. Adults (online+offline)
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Media Consumption
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Growth of Media Usage 1998 - 2003 (W25-54)
MediumMedium 19981998 20032003 % CHG% CHG
Magazines 54.2M 55.1M 2%
Newspaper 49.3 50 1%
Radio 55.2 54.2 -2%
TV 54.2 57.6 6%
Cable 40.8 47.6 17%
Internet 17.3 44.9 160%
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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
BrandingEffect
Frequency of ad exposures
Television
Internet
(The Web can give you incremental reach -- especially if your target is higher income, better educated, etc.)
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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 decisionsMega agencies reshaping environmentChallenge to manageOnline vs. radio / television marketingGrowth of media usageMarketing on the InternetRevenue management and the Internet