Slide 1

Report
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)
Sabre
Apollo
Switch companies
Pegasus
WizCom
Worldspan
Amadeus
Resort CRS
Pegasus and WizCom
Circa 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
The 2nd Traditional Method of
Distribution is the Wholesale Channel
Consumer
Travel Agent
Wholesaler
Resort FAX
Wholesaler Fax
Server
There is still a lot of paper!
Resort PMS
Resort
Agent
Paper, Paper and
More Paper
Resort
FAX
Internet Cloud Arrived
Circa 1998
Creating new Turbulence!!!
Traditional Model
Traditional
consumer
Travel agent
commissionable
rates
Dot Com
commissionable
rates
GDS
Switch companies
Pegasus
WizCom
Resort CRS
Internet
consumer
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
INTERNET CONSUMER
Expedia.com
Travelocity.com
Orbitz.com
Hotels.com
Merchant Model and the mega dotcoms
Traditional
Wholesaler
No Free Lunch!
Merchant Model
25% to 35% below rack rates
Resort ADR and RevPAR decline
And it is a paper nightmare!
Resorts try to keep up with the Paper Faxes,
Room Blocks, Net Rates and Staffing.
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
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
Speed Bump # 1
I need a
Vacation!
Joe Consumer
Speed Bump # 2
I still need a
Vacation!
Joe Consumer
Your hotel – finally!
I’m going on
Vacation!
Joe Consumer has run the
Internet gauntlet and finally
makes it to the resort Web site.
How to improve ADR/RevPAR



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
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
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.
Here are some of your competitors!
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


Tripadvisor.com


(acquired 3/2004)
(acquired 3/16/04)
Activity World – Hawaii

(acquired 3/2004)
Hotwire.com
Cendant

Three Banana Rating
Travel Distribution Services

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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)
Expedia.com – Number One

Market leader


Air – 46% (2003) was 36% (2002)
Hotel – 37% (2003) was 28% (2002)


Merchant Model

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
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PhoCusWright consumer survey
% off lowest published public rate
% is negotiable
Agreed upon mark-up (margin)
Inventory management

Change at will via Extranet site
Expedia.com

Watch for:

Forward distribution of the Merchant Model


Travel agencies.
Corporate travel


Loyalty club

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
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Over 1,100 actively booking companies
Strategic emphasis on customer loyalty
Direct connect to CRS via Newtrade middleware
Expedia hotel rating
Improved dynamic packaging
Travelocity.com

Market share – 2nd in Air and 2nd in hotel


Air – 44% (2003) was 59% (2002)
Hotel – 34% (2003) was 34% (2002)


Merchant Model




PhoCusWright consumer survey
% off lowest published public rate
% is negotiable
Agreed upon mark-up (margin)
Inventory management

Change at will via Extranet
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
Hotels.com – Number three

Hotel reservations

Hotel – 24% (2003) was 17% (2002)


Merchant Model




PhoCusWright consumer survey
% off lowest published public rate
% is negotiable
Agreed upon mark-up (margin)
Inventory management

Change at will via Extranet site
Hotels.com

Watch for:

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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.
Orbitz.com

Market – 3rd for air and 4th for hotel

Air – 41% (2003) was 25% (2002)

Hotel – 18% (2003) was 10% (2002)


Merchant Model




PhoCusWright consumer survey
% off lowest published public rate
% is negotiable
Agreed upon mark-up (margin)
Inventory management

Change at will via Extranet site
Orbitz.com

Watch out for:

Forward distribution of the Merchant Model


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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
Priceline.com

Market share - 4th in Air and 5th in hotel


Air – 14% (2003) was 16% (2002)
Hotel –13% (2003) was 7% (2002)
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Opaque pricing

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Room rate offering at discretion of hotel
No agreed upon mark-up but is minimum
Over 15,000 distribution partners

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PhoCusWright consumer survey
EBay, Amazon.com, Lowestfare.com,
GoGo (static packages)
Inventory management

Change at will via Extranet site
Hotwire.com

Market share - 6th in Air and 7th in hotel


Air – 6% (2003) was 14% (2002)
Hotel – 2% (2003) was 10% (2002)
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Opaque model
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PhoCusWright consumer survey
Room rate offering at discretion of hotel
No agreed upon mark-up but is minimum
Inventory management

Rates and inventory delivered through Pegasus switch.
Priceline.com

Watch for:

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Dynamic packaging
Private label booking pages to traditional travel
agencies.
Merchant Model offerings
Travelweb.com


(HDS) Hotel Distribution System
Owned by

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Hilton, Hyatt, Marriott International, Pegasus,
Starwood, Six Continents, and also Priceline.com
Merchant model
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B2B only
Supplies merchant model rates to sites such as
lowestfare.com, Orbitz.com, Neat Group and many
more small Internet travel sites.
Sidestep.com
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New paradigm model
Privately held Internet technology company.
Commissionable Rate Program
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Core Technology
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Consumer focused
Re-directs consumer to resort site or it intermediary
site.
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
US Best Hotels.com

Direct to consumer hotel advertising firm
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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.
WorldRes.com
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Net rate program (merchant model)
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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
The battle continues for market share
or is it dominance ?
The battle continues for market share
or is it dominance ?

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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
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.
Who Will Win?
1.
2.
3.
4.
You will, after you listen to the next three
speakers
It is your product that the consumer
wishes to purchase
You control your sales and inventory
strategies
You make your resort and destination
stand out among all others
3 Key Issues in Hotel
Electronic Distribution
John Burns
Hospitality Technology Consulting
Web Now Drives Travel Decisions

“Most” travelers research their options
on the Web prior to booking


either on or off-line
Search engines play a key role
optimization is a top priority
 Do you know where you display? With
various phrasings? In each engine?

Web Now Drives Travel Decisions

“Informative, appealing presentation of
the resort is decisive


decisions are based on Web content; you
won’t get a second chance
Resort travelers seek experiences, fond
memories
can you help them?
 do you say so?
 sell benefits, not features!

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
Mega Agencies are Reshaping our
Environment
Initially targeted individual leisure traveler
 Now active in:


corporate


tour


Expedia Corporate Travel, Orbitz for Business,
Travelocity Business
Expedia Classic Custom Vacations
dynamic packaging

WWTE, Neat .. + .. TicketMaster, etc.
Mega Agencies are Reshaping our
Environment

The Future?

meetings and convention, groups...
All based on MM rate structure
 Our initial attitude: “They are the
enemy”

Our first reaction was denial
 some softening in approach


movement (slowly) toward partnership
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
The Challenge to Manage

Electronic distribution is re-testing every
resort’s skills and processes in:
pricing
 inventory allocation
 distribution management


The average hotel attempts to maintain
inventory in 7 electronic outlets

Res managers say they can effectively
manage 5
The Challenge to Manage

Begins with a thorough (highly detailed)
forecasting process


may utilize revenue management technology
Includes consideration of daily potential
of each channel -- including cost
overhead and guest profitability

who are your most valuable guests?
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 evolving


review - and revise - your processes often
In Summary:
1. Powerful presentation: essential
2. Understanding, working with, and
anticipating the “Megas”: imperative
3. Effective inventory management
processes: a necessity
John Burns
Hospitality Technology Consulting
Resort Management Conference
Greenbrier Resort
Dwight Gould
US Internet Households Will Reach 84M by 2008
Internet usage
120.0
US Households (millions)
100.0
96.9
99.1
98
100
101
102.1
103.2
104.3
105.5 106.6
80.0
70.7
63.5
107.7
73.8
108.8
76.8
110
79.4
111.2
112.4
81.8
84
67.2
59.2
60.0
44.3
40.0
33.3
21.7
20.0
25
Total US households
Internet households
12.7
5.8
0.0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Forecast
Actual
Source: Forrester Research, April 2003.
1
2
3
4
5
6
Online Usage Will Keep Growing…
- Millions of Users -
1,053
United States
1,000
941
837
Worldwide
(in millions)
800
731
615
600
500
400
200
175
145
201
208
217
232
0
2001
Source: IDC, February 2002 (ICMM 8.1)
1
2
3
4
5
6
2002
2003
2004
2005
2006
Online vs. Radio / Television
Daypart Breakdown Online
70
40
35
60
30
50
25
40
20
30
15
Source: TV: Nielsen Media Research (2+), Radio: Arbitron (12+), Internet: Nielsen//NetRatings (2+)
1
2
3
4
5
6
12
m
10
p
8p
6p
0
4p
0
2p
5
12
n
10
10
a
10
8a
20
6a
Internet - Reach %
45
Radio
Television
Internet
Radio - AQH RTG / TV - PUT%
80
Media Mix Synchronization
Change in offline media consumption with addition of online…
21% of users
Consumed less TV due to increased Internet Usage
80%
70%
60%
50%
40%
30%
20%
10%
21%
16%
16%
12%
0%
TV
Newspapers
Decreased
Magaz ines
No Change
Increased
Source: Forrester Research, Technographics Database, 2003 – Base 18+ U.S. Adults (online+offline)
1
2
3
4
5
6
Radio
Media Consumption
1
2
3
4
5
6
Growth of Media Usage
1998 - 2003 (W25-54)
1
2
3
Medium
1998
2003
% 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%
4
5
6
Online Trends - “Soccer Moms”
1

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)
2
3
4
5
6
Television campaigns reach the law of diminishing returns
Internet
Branding
Effect
Television
(The Web can give you incremental reach -especially if your target is higher income, better educated, etc.)
Frequency of ad exposures
1
2
3
4
5
6
Why The Internet?
Efficiently Targeted Mass Reach
1
2
3
4
5
6
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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2
3
4
5
6
Thank you
1
2
3
4
5
6
Time for Q & A !
Web drives travel decisions
 Mega agencies reshaping environment
 Challenge to manage
 Online vs. radio / television marketing
 Growth of media usage
 Marketing on the Internet
 Revenue management and the Internet


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