Mr. Carr

Finance & Investment

How Booking Engines Increase Revenue and Capture Market Share

By Bob Carr, Chairman & CEO, Heartland Payment Systems

Co-authored by William Collins, Executive Director, Vertical Market Strategy, Heartland Payment Systems

As many hotel operators know, when most travelers go to book their hotel rooms, they grab their mouse instead of their phone. During the third quarter of 2010, nearly 56 percent of hotel bookings were made online. Today, the idea of calling a hotel to make a reservation seems outdated to a lot of people, especially with the proliferation of online booking tools which compare prices and deals across a variety of properties at a specific destination. These tools make it easy for customers to look, book and pay.

Unfortunately, while extremely useful for guests, popular online travel agents and aggregator websites tend to sap profits from independent hotels. With commission fees as high as 25 percent of the total stay, many small and independent properties are simply losing much-needed profit when using these third party sites. Some small and independent operators have chosen to forgo an online booking presence all together. A 2008 industry survey found that 28 percent of independent hotels see no point in receiving online reservations, while 43 percent saw no point in being present on online travel agencies. Yet, nearly 50 percent of travelers overall use the Internet to plan and buy travel according to Forrester Research. The data and indicators show that independent operators are not embracing the online trend as tightly as their larger or chain counterparts — although this is increasingly how consumers want to book reservations. It is essential for independent properties to understand the importance of implementing direct online booking capabilities as the key to their success and improving property profitability.

Eliminating the Middle Man

Successful businesses have always managed to increase their profits by cutting out the middle man, and in the hotel industry, that middle man is the online travel agency and other third parties. In order to increase both revenue and profitability, independent operators must look beyond such websites and instead direct their efforts to enhancing and developing their own sites. The simplest and most effective way independent hotels can move away from online travel agents is to establish a way for guests to book reservations directly through the hotel website.

Contrary to popular belief, implementing booking engine software is neither costly nor difficult. There are numerous companies that specifically cater to small and independent hotels, motels, lodges, cabins and resorts and provide them with complete property management systems, including a direct website booking system, or independent booking engines that will work with an existing PMS. Not only do these systems eliminate the dependence on third parties, they free up your staff’s time to focus on other important duties.

Increasing Revenue While Increasing Credit Card Security

Sandy Patel, operator of the America’s Best Inn in Anaheim, Calif., recently revamped the hotel’s website to enable guests to book directly. Since the change, she has seen a significant increase in revenue — nearly 15 percent in gross sales. Not only is Patel able to charge a deposit for the rooms prior to check-in, she is also able to verify that the credit cards used for reservations are valid and not fraudulent. In the past, the hotel was losing money due to the lack of direct website booking capabilities, but also because they were unable to verify credit cards at the time of booking. The hotel lost nearly $1,000 over the course of a few months as a result of bookings using fraudulent credit cards. As Patel points out, “The ability to process payment for bookings directly from our website has made my life so much simpler — and more secure. I can’t imagine going back.”

It may not be enough to ensure you can “accept” payments from your guests. Hackers have turned their attention to hotel operators to gain access to guest credit and debit card information. It is important for you to ensure that your property management system (PMS) and online booking engines are secure. There are a couple of ways for you to do this. First, choose partners that understand credit card processing and the nuances that exist for the lodging industry. Second, ensure that your PMS provider and payment processor are working together to ensure you are PCI compliant. When you accept credit and debit cards at your business, you are subject to the standards of the PCI Council and security standards that regulate how sensitive data is stored, processed and transmitted. Establishments who are not PCI compliant can face large monetary penalties and may find themselves restricted from accepting card payments.

Because of these risks to both hoteliers and their customers, it is crucial that independent operators ensure the online booking engine vendors they select are working with a payments processor who can provide unparalleled security and business-continuity protection. A desire to provide convenience to their guests should not put those same guests at risk.

Enhancing Overall Operations

Companies that develop and operate online booking software often offer additional services that allow hotel operators to run more efficient establishments on many fronts. One of the most important services, as it relates directly to the online booking component, is increased Search Engine Optimization (SEO).

By definition, SEO is the process of improving website ranking and visibility in search engines by figuring out what terms or phrases people are searching, and using those terms on your website so you will routinely rank among the top results in nearly every search. Industry research shows the top three results get 79 percent of the total clicks. For example, are prospective guests searching “cheap hotel” vs. “budget hotel?” What terms will lead them to your website and entice them to make a reservation?

While SEO is more art than science, when implemented correctly, it can boost a hotel’s search ranking significantly and help prospective guests find them more easily when searching online. Various hotel SEO case studies point to revenue increases anywhere from 37 percent to over 100 percent once the website and its usability have been updated and improved. These steps can increase a hotel’s visibility on the Internet and can be achieved with help from the site’s web designer or a company specializing in SEO. After all, what’s the point of implementing a direct online booking system with state-of-the-art payments security if no one finds the hotel during their online search?

The Bottom Line? Get online

Competition within the lodging and hospitality industry is stronger than ever, according to the U.S. Bureau of Labor and Statistics. While independent and smaller operators work hard to capture their share of the traveling public, it is important they explore all the tools available to enhance their operations and customer satisfaction. Developing or enhancing the property’s website to allow guests to book reservations directly is one of the most important steps an independent operator can take. The increase in revenue as a result speaks for itself.

William Collins contributed to this article. Mr. Collins is the executive director of Vertical Market Strategy for Heartland Payment Systems® ― the nation’s fifth largest payments processor and the official preferred provider of card processing, gift marketing, check management, payroll and tip management services for the American Hotel & Lodging Association and 39 state lodging associations. Collins has over 20 years experience in developing and implementing sales, marketing and technology strategies for businesses across multiple industries, including lodging and hospitality. In line with Heartland’s commitment to merchant advocacy and education, Heartland spearheaded The Merchant Bill of Rights to promote fairness and transparency in credit, debit and prepaid card processing. To learn more, visit MerchantBillofRights.org

Bob Carr is chairman and chief executive officer of Heartland Payment Systems ¯ the nation’s fifth largest payments processor and the official preferred provider of card processing, gift marketing, check management, payroll and tip management services for the American Hotel & Lodging Association and 38 state lodging associations. In line with Heartland’s commitment to merchant advocacy and education, Mr. Carr spearheaded The Merchant Bill of Rights (www.merchantbillofrights.org) to promote fair credit and debit card processing practices for all business owners. He has also been a driving force in the enhancement of payment card security with E3™ (www.E3secure.com), Heartland’s end-to-end encryption technology. Mr. Carr can be contacted at Bob.Carr@e-hps.com Extended Bio...

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