marketing hotels using global distribution systems revisited

“Marketing Hotels Using

Global Distribution Systemi’

Revisited

A prescient 1993 article foresaw the issues underlying the revolution in electronic distribution, just before the internet took hold.

BY PETER O’CONNOR AND GABRIELE PlCCOLl

N ominating our favorite article from the last ten years of the Cornell QuarteTl, required no hesitation. It was clearly Emmer, Tauck, Wilkinson, and Moore’s

December 1993 article entitled “Marketing Hotels Using Global Distribution Systems” (CHRAQ, Vol. 34, No. 6, pp. 80-89). That paper, which is reprinted on pages 94-104 in this issue, was far ahead of its time, correctly forecasting the effect that electronic distribution systems would have on our industry, explaining the implications of the developing technology for practicing managers, identifying the core issues that would encourage technology’s adoption (and those that would limit that adoption), and presenting a call to action to the industry as to how to use global distribution systems (GDSs) for maximum benefit. Both of us still use the

article as part of our classroom teaching despite its age, because it presents a clear overview of early hotel electronic distribution that is unparalleled elsewhere. In this commentary, we would like to revisit the ideas presented in the original article, update them to reflect the realities of a web-enabled hotel electronic-distribution environment, highlight some of the critical issues currently being faced as to how the hotel product is being distributed, and speculate a little about the future of electronic distribution. Because electronic distribution continues to evolve, our commentary finishes with some concrete suggestions as how best to take advantage of its outstanding potential.

0 2003, CORNELL UNIVERSITY

OCTOBER-DECEMBER 2003 Cornell Hotel and Restaurant Administration Quarterly 105

COMMENTARY I MARKETING: ELECTRONIC DISTRIBUTION

GDSs and web net hotel reservations

60,000,000

Source: GDS-booking figures courtesy of HEDNA. Web-booking figures are authors’ estimates Note that all figures from 2002 onward are forecasts.

The Era of the GDS The Emmer et al. article was written at an op- portune time-the precise moment when GDSs were starting to become a mainstream channel of distribution for U.S. hoteliers (see Exhibit 1). The article introduced readers to the components of the developing technology (the GDSs themselves, hotel-representation companies, central reservation systems, and switch companies), as well as identified practical steps that hoteliers needed to take to get a higher number of book-

ings from the developing systems. Distribution using GDSs’ promised benefits in terms of cost, efficiency, and market reach relative to traditional print- and telephone-based methods. Using a GDS, hoteliers could have access to a worldwide market of travel agents, all clamouring to sell hoteliers’ products with little extra transaction cost beyond what the hotels would normally pay in commission charges. In addition to highlight- ing these benefits, the 1993 authors also presented strategies for getting the most out of the devel-

106 Cornell Hotel and Restaurant Administration Quarterly OCTOBER-DECEMBER 2003

MARKETING: ELECTRONIC DISTRIBUTION I

COMMENTARY

GDSs: Still in the Picture

As discussed in the accompanying article, GDSs remain an important source of business for many hotels. Many of the points that Emmer et al. stressed are worth revisiting, as they still hold true.

(1)

(2)

(3)

(4)

Understand how travel agents use the GDSs to book hotel rooms. Having a good knowledge of how travel agents work helps hoteliers to include the right type of information and rates on their CDS listing. Yet many hotels continue to use a standard, one-size-fits-all approach on all of their electronic- distribution channels. Travel professionals need different information in a different format than do consumers. Remember one simple fact: Making the travel agent’s job easier has just one effect-more bookings!

List all attractions, points of interest, and landmarks that attract business and leisure guests as “qualifiers.” This point seems self evident, yet our distribution audits consistently find obvious items missing. In many cases, the problem is caused by hotel staff members’ being too close to the situation and think- ing that something important is too well known to be included. A fresh pair of eyes is often helpful. The key question here is, “What causes customers to book my hotel?”

Use availability options to maximize yield. The advice given in the 1993 article about closing out the GDS is particularly rel- evant in this era of automated revenue-management systems. Unlike voice channels, the GDSs do not provide the opportunity to explain to the customer that just a single night of a proposed five-night stay is unavailable. Y our hotel is simply not displayed if just one night of the dates requested is closed out. Thus, offering availability options has an effect on days before and after- wards. Using a minimum length of stay, or simply presenting a higher rate for the busy night, will have a better effect on both occupancy and profitability.

Effectively list rate categories and room types. Restrictions on both the number of rates displayed and the content of rate description have been almost eliminated. Yet many properties continue to use cryptic rate codes and truncated textual descriptions,

(5)

(6)

(7)

(8)

out of habit rather than necessity. Rewriting your descriptions in clear, concise, sales-oriented language can have a positive effect on sales, as it is greatly appreciated by travel agents.

Use negotiated rates. Many hoteliers resist offering negotiated rates, citing the loss of revenue that results from the cheaper prices. Yet, when the yield from a negotiated rate is compared with that from a room sold using the merchant model (as discussed in the accompanying article) or through a discount website, it can look positively attractive. Consider expanding your use of negotiated rates to reward agencies that deliver consistent business, monitoring their performance using services such as TravelClick’s HotelIntelligence reports.

Keep your hotel description current. While old rates and descriptions are continuously replaced by new rates, many hotels forget about their HOD data. Once again, distribution audits often reveal these data to be incomplete, inaccurate, and out of date. Remember this is your main opportunity to convince the travel agent that yours is the right hotel for their client. When was the last time you revised your HOD to take changes in your product into account?

Include your two-letter code on all promotional material. Any material destined for the travel trade needs to list the hotel’s GDS code prominently. Remember the easier you make it for travel agents, the more likely they are to book your property.

Consider GDS advertising. Paid advertising such as sign-on messages, POS messages, and broadcast messages have been shown to be effective at generating business. For example, a recent study by NFO Hog Research shows that over 50 percent of all travel agents who received GDS advertising made a booking at a hotel in the three subsequent months.’

Given their ability to be precisely targeted, and noting travel agents continuing role in influencing the purchase decision, investing in such a campaign can often be an effective way of increasing business from the GDS.-l?O’C. and G.l?

’ “NFO Plog Report Survey on Travel Agent GDS Usage,” EyeForTravel newsdesk, 10/9/2003.

oping technology. As can be seen from the sidebar at the top of this page, much of this advice still holds true today.

The authors were also on point when high- lighting the limitations of the developing systems and the implications that these would have for hoteliers. Naturally, as technology has developed in the intervening period, many of these problems have been resolved. Database-structure problems that limited property descriptions and the number of rates that could be displayed have

been corrected, the time delay between updating information and its appearance on the system has been shortened, and GDS to CRS connectivity has progressed substantially, so that today what appears on a travel agent’s terminal is identical to what can be seen at the hotel chain’s central reservations office. As a result, travel agents have developed much more trust in what is displayed on their terminals, and GDSs have evolved into a major source of business, particularly for hotels with primarily a business clientele. As can be



seen from Exhibit 1, the number of bookings processed over the GDS systems has grown to unprecedented levels, and recent studies have highlighted how such systems are likely to remain important in the near future.’

Reminiscent of the accuracy with which Gordon Moore predicted the improvement in integrated-circuit technology (i.e., Moore’s law) Emmer et al. were remarkably accurate in their forecasts. In addition to predicting the future

importance of GDS channels, they also foresaw how travel agents would decline in importance as consumers started to use technology-based systems to make bookings for themselves from their home or of&e. However, as accurate as they were, the Emmer group’s predictions were not perfect. One example is their forecast that visual-image software such as Spectrum or Jaguar (CD-ROM- based databases that allowed travel agents to see pictures, maps, and detailed marketing information about hotel properties) would become com- monplace. Today few travel agents actually use such systems. However Emmer etal’s prediction was wrong only in terms of the medium, because it is now the web (and not a CD) that allows a potential customer to see detailed, rich, graphi- cal information to improve the chances of purchase. What the authors did not foresee was the effect of the network revolution that started a few months after their article was published with the opening of the web for commercial transactions at the beginning of 1994.

The travel industry pioneered electronic com- merce long before ecommerce, business to cus-

’ Peter O’Connor and Andrew J. Frew, “The Future of Hotel Electronic Distribution: Expert-Industry Perspectives,” Cornell Hotel and Restaurant Administration Quarterly, Vol. 43, No. 3 (2002), pp. 33-45.

tomer (B2C), and business to business (B2B) became popular buzzwords. The travel product has always been the ideal product for electronic sales-whether online or by telephone or (much earlier) telegraph. As an information-based item, travel bookings are intangible, heterogeneous, and fixed geographically, making the sale of travel highly dependent on getting the right information to potential customers at the appropriate stage in their purchase decision. Luckily, providing detailed, timely, and accurate information is precisely what computer networks and the internet were designed to do!

The long tradition of hospitality ecommerce notwithstanding, many incumbents in the travel- distribution landscape stumbled while trying to figure out how to react to this new technological, social, and commercial phenomenon. In doing so, they left the door open for fast-moving start-ups to enter the marketplace and revolution- ize the way travel is being sold. In 2001 travel became the highest-grossing product sold online.’ To update the comment made by Emmer et ah: “If a hotel wants to sell its rooms, then it has to take advantage of the opportunities presented by the growing range of online web-based channels.”

The Dawn of the Net In the late 1990s the word “disintermediation” was on everyone’s lips. Because of the web, hotel companies had the potential to distribute directly to their customers, reducing or even eliminating the commission payments and transaction fees traditionally paid to intermediaries such as travel agents and the GDSs. This ability to interact directly gave hotel chains the opportunity to gather detailed data about their customers, potentially facilitating both database marketing and the devel- opment of sophisticated customer-relationship- management strategies. To take advantage of such opportunities, the majority of the hotel chains developed websites to try to sell directly to customers. For example, a 2000 study showed that over 95 percent of the major hotel brands oper-

2 D. Buhalis, eTmrism: hfoumation Technology for Strategic ihrism Management (Harlow, UK: Prentice Hall, 2003).


MARKETING: ELECTRONIC DISTRIBUTION I COMMENTARY

ated consumer-oriented websites, providing fa- cilities for potential customers to find information and make reservations online.3 In general, the major chains have been successful at encouraging consumers to book on such sites, with figures of over 60 percent of online sales being achieved by the major chains,4 although figures for independents and small chains are much lower. The increasing number of customers booking for themselves is placing increasing pressure on travel agents. Figures from the Travel Industry Association of America (TIAA) show that U.S. agents are finding it increasingly difficult to compete, with many going out of business as a result of displacement by online channels.5 Simply put, as the web has allowed every customer with an internet connection the ability to book her own hotel rooms, those travel agents whose only value add is access to availability information and booking tools have lost their raison d’he. Those travel agents that will thrive in the internet age are those who provide value based on consultation and specialized knowledge of complex travel products.

However, many of the distribution-related benefits promised by the web are under threat. A large number of online intermediaries have developed and collectively are beginning to domi- nate the sale of travel online (see Exhibit 2). From the consumer’s perspective, the appeal of such sites is clear. Travel products in general (and hotels in particular) are rarely bought in isolation. While supplier sites tend to focus on just a single product, the online mega-agencies offer consumers a one-stop travel-shopping experience, allowing them to book hotel, air, car rentals, and a large variety of other travel-related services in one seamless transaction. Online agencies also pro-

3 l? O’Connor, “On-line Pricing: An Analysis of Hotel Com- pany Practices,” Cornell Hotel and Restaurant Administra- don QuaTter& Vol. 44, No. 1 (2003), pp. 88-96.

* Market Wire, “Brand Sites Produce 67% of All Major Hotel Chain Internet Reservations,” Market Wire, Incor- porated, October 9, 2003.

5 Travel Industry Association of America, “Travel Agencies Still Preferred Source for Travel Information” (press release viewed in 1998), www.tia.org/research/summinternet 97.asp.

Leading online agencies, 2002

Expedia $4,860

Travelocity $3,240

Orbitz $2.430

Priceline _____--.- Hotels.com

$1,080

$810

Hotwire $810

WorldRes ~-.-- Lastminute.com

$270

$476

Ebookers $431

Note:Agencies arrayed by gross booking revenue in millions of U.S. dollars.

Sources: Compiled from multiple sources, including: C. Marcussen, “Trends in the U.S. Online-travel Market 2000-2002,” Centre for Regional and Tourism Research, Bornholm, Denmark, 2003; and 0. Jager, “European Online Travel Marketplace: Focus on France,” PhoCusWright, 2003.

vide a wider choice of brands than does any individual supplier site, and research has shown that they tend to be competitive in terms of price.G Several have introduced innovative methods of operation (e.g., Priceline.com’s name-your-own- price concept, Lastminute.com’s sale of distressed inventory, and Ebay’s auction of travel packages) that have attracted customers’ attention and helped develop their reputation as the place to book travel. In the lucrative arena of business travel, the online mega-agencies provide corporate travel managers with enhanced levels of service in terms of travel-policy enforcement, ex- pense reporting, and control. In both realms, the emergence of the merchant model has sent powerful shockwaves through the electronic-distribution chain. Hotel companies now face the threat of loss of rate control on a large scale. Thus, both leisure and business clients are being driven toward the major online intermediaries, replac- ing the promise of disintermediation with the threat of re-intermediation.

The result of these developments is a hotel electronic-distribution arena infinitely more complex than that discussed by Emmer et al. As can

6 O’Connor, op. cit.



be seen from Exhibit 3, both the number of routes to the customers and interconnections among these routes have grown substantially. (A good overview of the current situation can be found in the article by Carroll and Siguaw in the previous issue of the Cornell Quarterly..3 Under- standing how to distribute the hotel product over this complex network has become a challenge- one that must be faced by every hotelier. Par- ticularly when considered together, electronic channels now make up a considerable propor- tion of the hotel-sales mix. A lack of awareness of how to manage these channels is resulting in lost opportunities, and, as we discuss below, several important issues need to be addressed to ensure that it is the hotel rather than the intermediary that benefits from the current growth in the sale of travel online. No longer can hotels sit back and wait for business to come to them. Ac- tive management of the distribution process has now become essential.

Challenges with Hotel Distribution Today As the distribution environment has become more complex, several issues have emerged that will affect the nature of the hotel business. Per- haps the most pressing is the growth in the power of the online mega-agencies mentioned above. Companies such as Expedia, Travelocity, Hotels.com, and others make a valuable contri- bution by providing their hotel partners with substantial numbers of bookings. However, as they have developed, such mega-agencies have gradually captured a considerable share of the hotel rooms sold online. As was discussed earlier, most offer one-stop-shopping services that are highly attractive to customers. For example, Expedia.com has as its objective to become the world’s largest retailer of travel services by offering “everything in travel.” Already it sells airline seats, car rentals, hotel rooms, condominiums, cruises, corporate travel services, ground trans-

’ See: B. Carroll and J. Siguaw, “The Evolution of Elec- tronic Distribution: Effects of Hotels and Intermediaries,” Cornell Hotel and Restaurant Administration Quarterly,

Vol. 44, No. 4 (August 2003), pp. 38-50.

portation, insurance, show tickets, and lots more-and it is constantly expanding its portfolio of products in innovative ways. These online travel supermarkets are also currently experiment- ing with “dynamic packaging,” taking advantage of their product portfolio and technological ex- pertise to allow customers to interactively as- semble their own made-to-measure travel packages. Individual supplier sites simply cannot compete in terms of breadth of service and depth of functionality. The mega-agencies are also investing millions in offline and online advertising to build brand awareness, and have to a large ex- tent succeeded in convincing consumers that the best bargains and best service can be had on their sites. Thus, despite recent efforts by hotel companies, the mega-agencies’ strategy of combin- ing features, brand, and pricing is accelerating the trend towards re-intermediation, with the big winners in the growth of the sale of travel online likely to be the mega-agencies rather than the travel supplier.

Already there has been evidence of mega- agencies’ taking advantage of their dominant market position to change the nature of supplier- intermediary relationship. For example, many have introduced the merchant model-a business process whereby the intermediary negotiates al- locations of inventory at net rates with suppliers and subsequently sells these rooms to customers at a mark up, taking as profit the difference between the rate negotiated and the price at which it sells the room online.8 While this might look like a good deal for the hotel (no commissions or other transaction costs combined with the ability to set net rates to reflect the minimum amount it is prepared to accept for a room on a particular night), the negotiating power of the online merchants means that they can demand net rates lower than what the hotel might freely wish to give. By careful management of their margin, the intermediaries can then sell such rooms at highly competitive prices-in many cases cheaper than the rates being offered on the hotel’s own website!

’ I? O’Connor, “Online Intermediaries-Revolutionizing Travel Distribution,” Travel & Tourism Analyst, Vol. 1 (2003), pp. 54-78.



COMMENTARY

An updated overview of the global distribution network

4 Property website ’

Chain 4 consumer I

1 website 1

-I 1-1 Travelocity kI- - - - - 7 - - - - - -

-*d Sabre f

4 ~ Expedia +------;

v-1 World- GDS

q-Travel-agents’ terminals - span e- switches ~ (e.g., Thisco. -

4 Travel-agent

Wizcom

sites Galileo +

Corporate- travel t-

solutions

t

your-own-price sites, auction sites, r-i 4

1 late-availability sites) k

t - - - - - - -

t

_ _ _ _ _ _ _ .

Tour

= On-line interface - - - - - = Extranet-based merchant model



(O’Connor’s study of online pricing found that the mega-agencies frequently offered the cheap- est prices for hotel rooms, particularly at the up- per end of the market.9) Of course, hotels are always free to refuse to participate, but, in classic fashion, nobody wants to be the first to leave the online agencies and thereby risk losing out on large numbers of potential (if low-yield) bookings. Recently, and perhaps belatedly, the industry has started to react to this threat on both an individual and a collective basis. Many of the larger chains have begun to actively discourage their properties and franchisees from giving low rates to the online merchants, and have started to promise consumers the lowest price on their own branded website.” In addition, the hotel chains have begun acting together to try to fight the dominant power of the mega-agencies and regain control over electronic distribution. Fol- lowing a similar strategy to Orbitz in the airline sector, Hilton, Hyatt, Intercontinental, Marriott, and Starwood have joined technology provider Pegasus to establish TravelWeb, in a bid to wrest control of online pricing and merchant- model arrangements back from the online intermediaries. (A similar initiative-WorldRes-is underway in Europe.) By facilitating direct connectivity to multiple small online channels at a reasonable cost, the chains hope to reduce the power of the large mega-agencies and help hotels achieve a wider distribution of their product.

The ease with which consumers can find information has also made pricing over multiple channels problematic. There is evidence that customers search several online channels before com- mitting to making a reservation.” In addition, a variety of online tools (for example, Sidestep,

9 O’Connor, pp. 88-96.

lo The structure of the hotel industry though makes concerted action difficult. See: G. Piccoli, l? O’Connor, C. Capaccioli, and R. Alvarez, “Customer-relationship Management-A Driver for Change in the Structure of the U.S. Lodging Industry,” Cornell Hotel and Restaurant Administration Quarterly, Vol. 44, No. 4 (August 2003), pp. 61-74.

‘r See: Forrester Research, “Travel North America Consumer Technographics Survey &Data” (Cambridge, MA: Forrester Research, August 2000).

TravelAxe, and Kelkoo) are also available to help travel buyers comparison shop among multiple sites with practically a single click. Such price transparency places downward pressure on rates, even though research has shown that this type of reactive discounting rarely results in higher vol- umes of bookings in the long term.12

The downward rate spiral is amplified by the business practices of the online intermediaries, who employ “market managers” to encourage hotels to further reduce their negotiated rate in re- turn for better placement on hotel listings. Con- sumers are also learning that they can often find better prices by waiting until the last minute to make their booking. In fact there is some evidence that this is leading to channel cannibalization. While the web promised incremental business by allowing hotels to reach customers whom they could otherwise not have attracted, in prac- tice many of the customers who book online would have booked the hotel in any case. The difference is, however, that the price that those customers have obtained online results in a far lower yield for the hotel than if the booking had been made in the “normal” fashion. Even worse, some of the more street-smart customers are booking rooms far in advance, monitoring the online channels for better prices, and, when possible, cancelling their original reservation to rebook at a cheaper rate closer to the ar- rival date. Failure to discourage or prevent such practices could potentially have a drastic effect on profitability.‘3

Ownership of the customer is also an issue that hoteliers urgently need to address. As has been discussed above, the online intermediaries are attractive to consumers as a result of their conve- nience, their rich feature set, and their competitive prices. Consumers booking on these sites are nearly always likely to find a product that meets their needs. In most cases, the mega-agencies offer them choices, in contrast to hotel chains’ sites that may not have a property in the desired loca-

‘a C. Enz, “Hotel Pricing in a Networked World,” Cornell Hotel and Restaurant Administration Quart&y, Vol. 44, No. 1 (February 2003), pp. 4-5.

I3 Ibid.



CCIMMENTARY

tion or may be booked for the dates requested. Given such a performance, where are customers likely to look the next time they want to make a booking? In addition, many of the online agencies are trying to enhance brand loyalty by developing customer-relationship-management solutions that recognize frequent and high-value customers and use electronic-marketing techniques to develop a closer relationship with those customers. While hotel companies may be investing millions developing and enhancing their brands, is that money well spent if consumers end up using the online intermediary as the solution to their travel booking needs?

Cdl to Action The 1993 article presented an important call to action to hotels to start using the developing GDSs to sell rooms lest they be put out of business by those competitors that do so. Today the situation has changed. Not only does a hotelier face competition from other hotels as to which room will be bought by the consumer, hotel brands also face competition from the online intermediaries as to how that room will be sold. Given all the benefits that such sites offer the travel purchaser, hotels urgently need to take action to regain control over the distribution of their product. As interested industry observers, we would suggest that hoteliers concentrate on the following:

l Develop an understanding of the electronic- distribution environment. It is only by being aware of the options available and the implications of using or not using each one that hoteliers can start to develop an effective distribution strategy. Different channels serve different customers and are best suited for use at different times and with different objectives. Which online intermediaries are most important in the geographical markets that you actively target? What type of business model do those intermediaries use? What are the costs (initial, periodic, and transaction) associated with using each channel? Does using the channel tie you into a room al- location or does it operate on a free-sale

basis? Does the online intermediary provide an electronic interface with your ex- isting reservation system to obtain inventory and rates, or must you manage them manually using an extranet-based interface? These are just some of the key questions that must be answered.i4 Develop a clear and logical electronic- distribution strategy. Currently most hotels use a shelf-space approach to electronic distribution-presuming that being present on as many channels as possible is the best position. However, this tactic largely ignores the issue of complexity. As the number of channels increases, the cost of the infrastructure necessary to sup- port those channels increases, and inventory and rate have to be managed in multiple locations, again leading to higher costs.‘j Instead of trying to be everywhere, select those channels with the most potential for addressing your markets, and work actively and closely with the chosen vendors to try to maximize exposure on these channels. Distribution strategy is as much about deciding where not to be and who not to serve as it is about seeking broad representation and setting prices. Once the strategy has been set, make sure everyone in your company is on board so that everyone speaks with a unified voice and implements the same policies. Finally, re-evaluate your strategy periodically in light of developments in technology and the fast pace of change in the electronic- distribution arena. Set your strategy, but be prepared to change when the environment changes. Develop a comprehensive pricing strategy. Two approaches are common. One approach relates the cost of using the channel to the rates shown there-with lower

‘* O’Connor & Frew, op. cit.

‘ j D. Connolly, “Understanding Information Technology Investment Decision Making in the Context of Hotel Glo- bal Distribution Systems: A Multiple-Case Study,” Hotel and Tourism Management, Blacksburg, Virginia, 1999.

than “normal.‘”



Peter O’Connor, Ph.D. (pictured above), is an associ- ate professor at IMHI (Cornell ESSEC, [email protected]). Gabriele Piccoli, Ph.D. (pictured below), is an assis- tant professor at the Cornell University School of Hotel Administration igp45@cornell. edu).

prices in low-cost channels and higher prices on high-cost ones. (Tools such as TravelClick’s RateView allow you to monitor multiple channels to ensure that the strategy is being implemented effectively.) The other approach focuses on maintaining price consistency across different channels so that irrespective of where the booking is made, the customer always sees the same price. In either case, the objective is to divert the customer away from the mega-agencies. Take particular care to develop fences in your rates to prevent the channel-cannibalization problem mentioned earlier. Either by placing restrictions or by creating packages you need to limit the comparability of your product. The web is great at effi- cient comparison of similar things, but breaks down quickly as the product be- comes more complex.

l Drive business to your own branded website. Although the mega-agencies can deliver volume in the short run, their price- driven customers are fickle and can be diverted by competitors offering slightly lower rates. Moreover, mega-agencies’ adoption of the merchant model means that the cost of distribution over such channels is comparatively high. Instead you should encourage customers to book through your own branded website- a difficult proposition. As we speak, the mega-agencies continue to invest heavily to ensure that any search for travel online ends up on their websites. In fact, it can be quite illuminating to pretend to be a customer and try to find your own hotel online, as invariably you will end up on an online intermediary’s site. While simple steps such as listing your website’s address on all promotional material and correspondence, developing reciprocal links with selected websites, or bidding on highly specific keywords can be effective in making some customers aware of your site’s existence, the biggest potential lies in taking advantage of the key facet of the

hospitality business-a closeness with the customer that allows hoteliers to develop a real and lasting relationship. Hospitality operators’ ability to know the customer in a way that the online intermediary cannot gives the hoteliers an advantage on which they must not fail to capitalize.

l Know the customer. More than any other medium that has gone before, the internet fosters communication and dialog. Thus, the web provides operators with the potential to develop a personal relationship with each individual customer, a relationship that lasts over multiple transactions and is beneficial for both parties. By adopt- ing sophisticated customer-relationship- management techniques, operators have the opportunity to increase the complexity of the product-through personaliza- tion, for example-and combat the ease with which a meaningful web-based comparison can be made. By doing so, operators can lock in loyal customers who are uninterested in shopping and reduce the effectiveness of mega-agencies. A focus on quality, not only quantity, of market share, and the judicious use of loyalty programs, can help in this regard.

In summary, the key success factor for using electronic distribution channels today is active management. The GDSs discussed by the authors of the 1993 article have not gone away. Instead they have become more powerful and have been supplemented by a highly complex series ofweb- based channels. This network of electronic- distribution channels (shown in Exhibit 3) provides an outstanding opportunity for those who manage it effectively, but also danger for those who fail to recognize its importance or do not invest the time and effort needed to take advantage of its potential. Complacency in the past has resulted in a situation where hotels collectively have come close to losing control over the sale of their product in the online environment. Comprehensive, well designed, and relentlessly implemented strategies will curtail this problem, help operators regain control over inventory and price, and benefit from the potential of direct sales over the web.


marketing hotels using global distribution systems revisited

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