Mr. Kistner

Sales & Marketing

Online Shopping Requests Burden CRSs: Balancing the Looks with the Books

By Mike Kistner, President, Chief Executive Officer & Chairman of the Board, Pegasus Solutions

Hotel transaction volumes in 2009 increased by nearly 50%. Did your hotel realize a 50% increase in bookings as a result, or even close? It’s doubtful.

Odds are, you saw quite a different picture. Odds also are, not only did you see fewer guests, but you also saw even fewer guests willing to pay what they would have paid in 2008.

There’s much behind what we’ve seen here, all set in the context of the global economic turmoil we’ve experienced these past couple of years. Consumer behavior is radically different these days and we’re seeing the consequences. Processing anywhere from three to five billion transactions per month last year, Pegasus Solutions handled 48% more shopping transactions in 2009 than we did in the travel heyday of 2008. The reason comes down to one issue: changing online consumer shopping behavior.

This online “bargain shopping” trend is the key contributor to your hotel’s look-to-book ratio, and it hugely influences the number of rate and availability requests your hotel receives for every individual booking generated. Today’s common ratio of 3,000 to 1 means that your hotel was considered by 3,000 shoppers, and received only 1 booking as a result. A look-to-book ratio as high as 3,000 to 1 should be a point of deep concern.

Issue #1: Bargain-hunting technology

Online travel sites hold as much promise as peril to hoteliers as these sites become increasingly more efficient at letting travelers quickly and easily compare features and prices for everything travel-related. For example, the meta-sites find all of the places where a potential guest can obtain information about hotel rates—everywhere from the hotel’s own site to participating online travel agencies like Orbitz and Octopus—and display the results using advanced search technology. Some draw information from dozens of sites for a single request, even going so far as to “watch” itineraries, resulting in repeated requests into your system, “chewing” through information and clogging response times. Most recently Google has entered the game, as the advent of substantially increasing levels of mobile booking has further complicated the shopping environment.

On one hand, your hotel gains more points of distribution to a fragmented shopping public. On the other hand, rate and availability requests for your hotel are multiplied exponentially as information is distributed on your site and through thousands of online travel agencies (OTAs), including the meta-search sites. Regardless of the source, each of these requests generates a rate and availability request into your hotel’s central reservation system (CRS). This can be through Pegasus Solutions’ UltraDirect interface, which connects nearly 100,000 hotels worldwide to the alternative distributions systems (ADSs). If your system isn’t equipped to handle this increased volume, returning the correct rate and updated availability in the expected response time, then shoppers will quickly move on.

To further complicate this issue, most of the online sites are drawing information through the same source, again Pegasus’ UltraDirect. So your hotel’s system can essentially respond to the same rate and availability request hundreds of times for one traveler shopping competitive rates through multiple online sites.

Issue #2: Bargain-hunting travelers

At the end of 2009, Pegasus Solutions saw year-on-year look-to-book ratios for the ADS grow 17.8% over 2008, and, most notably, 54.7% over October 2008. All indications at the time pointed to looks-to-books continuing to rise, as travelers became increasingly rate conscious and savvy. In the short-term, the culprit was likely the recession-weary traveler hunting for the best deal, which led to the +48% increase in transaction volumes for the year.

Online consumers are much more discerning today than they were three or even two years ago. They expect to be presented with comprehensive details about the hotel products shown to them on their search results pages. What’s the total price including tax? What are the deposit, payment and cancellation policies? Are meals included? What about wifi and parking?

Additionally, they want to know all this for all properties on the first search page so they can compare “apples to apples” to make an informed purchasing decision. They certainly don’t want to drill down into other Web pages for each hotel to find this information. Essentially OTAs have had to adopt a retailing perspective in merchandising the hotel stay experience. This means they have to “mine” the hotel CRS via a number of simultaneous transactions in order to extract the data that they need to put the right products in the right way in front of the customers.

These rising look-to-book ratios will continue to put more pressure on technology infrastructure for hotel suppliers. The extremely competitive shopping environment requires an aggressive dynamic rate strategy, and the ability for hotels to handle an immense number of rate and availability requests. As a result, technology providers need to ensure they are capable of returning the high volume of requests in the expected time, which some studies say is as little as two seconds.

Resolution: Intelligent transaction processing

The truth is that technology providers are going to continue to find ways for consumers to shop hotels more competitively. And, travelers are going to continue to watch what they spend on travel. However, there are some things we are doing at Pegasus Solutions to try to abate the impact looks-to-books have on hotel CRSs, including:

• Enhancing shopping transactions to provide all the relevant data fields in a single transaction, minimizing the number of requests made to the hotel CRS
• Providing more structured data in the responses so online travel sites can easily compare and differentiate products
• Optimizing cache configuration settings to improve the hit rate, allowing more responses to be delivered from our cache rather than burdening hotel CRSs with identical “looks”

Tapping these solutions alone will significantly reduce the current look-to-book ratios by enabling hotels to present more structured and comprehensive data to distributors in an efficient manner. Benefits to both hotels and OTAs, however, will only be achieved if there is consistent and timely adoption of this new functionality. To this end, Pegasus has adopted a leadership role in the industry to actively engage suppliers and distributors, providing them with greater insight into and influence on our development plans. Another key objective for Pegasus is to provide technical solutions that support a variety of business models to ultimately enable hotels to satisfy a number of business models and consumer shopping behavior through a single architecture. Through this kind of solution, hotels can avoid building and supporting multiple distribution interfaces, either direct or through intermediaries, which can be costly and difficult in terms of budgeting and staffing.

We’re also exploring more revolutionary ideas with key customers that will dramatically alter the distribution landscape—ranging from additional solutions for intelligent processing from a distribution standpoint, to added functionality on our next generation CRS, RezView® NG, designed specifically to dynamically handle these huge volumes of shopping transactions.

Ultimately, the goal is to return our industry to an environment where news of a 50% increase in transactions for the year can once again be good for hoteliers.

Mike Kistner is Chairman, President and Chief Executive of Pegasus Solutions. He joined Pegasus from Best Western, where he was CIO and SVP of distribution. Mr. Kistner holds a BS from Northern State University, Aberdeen, S.D., and a MS in Information Systems from Colorado State University. He is the past Chairman and current member of the e-commerce committee of the AH&LA. From 2000 to 2005, he served as Chairman of the Open Travel Alliance (OTA) and has been recognized as one of the leading CIOs in the hospitality industry. Mr. Kistner can be contacted at 480-624-6450 or mike.kistner@pegs.com Extended Bio...

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