Dealing with the Impact of Online Reservation Systems

By Andrew Glincher Office Managing Partner, Nixon Peabody LLP | February 16, 2009

These services also pose serious challenges for hotels, threatening to commoditize hotel rooms, dilute the value of brands, and place too much influence over pricing in the hands of third parties. Leaders of the hotel industry are now beginning to understand those issues - both management and legal issues - and develop tactics for dealing with them and harnessing the power of Internet marketing to their advantage.

Online travel services today account for approximately five percent of all hotel bookings. Some experts estimate that about 15% of all bookings will be made through these services by the year 2006. Clearly, while it is not cutting into the majority of bookings, this phenomenon is touching a significant portion of the market, as properties find themselves having to compete with themselves for bookings offered at their own properties by third party reservation services at lower prices.

Unfortunately, the advent of online reservation services and their increased accessibility to a traveling public with widespread access and greater comfort with Internet purchasing, has come at a time when the hospitality industry has gone through a major slump. Initially, faced with steep declines, many properties were happy to sell blocks of rooms at deep discounts to online resellers, who would then market and sell them to the public. But as travel industry began to recover, and these third party services began aggressively advertising and selling rooms at deeply discounted prices, the hotel industry quickly realized that they were, in effect, competing against themselves.

How can properties adapt to this new reality? What issues should concern them and how should they deal with them?

The first issue involves the relationship between the hotel and the reservation service. If a guest arrives believing they have a reservation that was booked through an online service, and the hotel reservation system has no record of it, who's responsible? Does the hotel have to honor it? Does the hotel have to offer a refund if a room is not available?

Agreements to purchase bulk rooms at a discount must make it clear that the service is doing no more than just that. It should be clear that the service is not an agent of the hotel and cannot hold itself out as one. Whatever terms and conditions it attaches to the resale of rooms to travelers should be its own - in no way binding on the hotel itself. The hotel's contract with the online service should make it clear that the service is an independent entity, that is merely buying and reselling blocks of rooms, and that the reservation service must place a disclaimer to that effect on its website.

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Coming up in June 2019...

Sales & Marketing: Selling Experiences

There are innumerable strategies that Hotel Sales and Marketing Directors employ to find, engage and entice guests to their property, and those strategies are constantly evolving. A breakthrough technology, pioneering platform, or even a simple algorithm update can cause new trends to emerge and upend the best laid plans. Sales and marketing departments must remain agile so they can adapt to the ever changing digital landscape. As an example, the popularity of virtual reality is on the rise, as 360 interactive technologies become more mainstream. Chatbots and artificial intelligence are also poised to become the next big things, as they take guest personalization to a whole new level. But one sales and marketing trend that is currently resulting in major benefits for hotels is experiential marketing - the effort to deliver an experience to potential guests. Mainly this is accomplished through the creative use of video and images, and by utilizing what has become known as User Generated Content. By sharing actual personal content (videos and pictures) from satisfied guests who have experienced the delights of a property, prospective guests can more easily imagine themselves having the same experience. Similarly, Hotel Generated Content is equally important. Hotels are more than beds and effective video presentations can tell a compelling story - a story about what makes the hotel appealing and unique. A video walk-through of rooms is essential, as are video tours in different areas of a hotel. The goal is to highlight what makes the property exceptional, but also to show real people having real fun - an experience that prospective guests can have too. The June Hotel Business Review will report on some of these issues and strategies, and examine how some sales and marketing professionals are integrating them into their operations.