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This article is from the Summer 2003 issue of Hospitality Upgrade magazine.To view more articles covering technology for the hospitality industry please visit the Hospitality Upgrade Web site or to request a free publication please call (678) 802-5303 or e-mail.
Forging a win-win relationship with your intermediary sounds like
a great idea, but do you know what to do?

by Michelle Peluso, October 2003

When we at Travelocity launched our merchant model hotel (MMH) program with seamless connectivity to hotel systems a year ago, I recall several discussions and interviews explaining the intricacies of the technology and why the advancements would be pivotal to how hoteliers and online distributors would collaborate moving forward. Admittedly, I left some of those conversations unsure whether or not my points had resonated. Not to sound cliché, but what a difference a year makes. There hasnít been a conference that Iíve attended recently where the give and take between hotels and online intermediaries regarding the best way to move merchant inventory hasnít been the hot topic. 

So whatís stirring this buzz? There are several factors, but one statistic from Jupiter Researchís 2003 Online Travel Forecast speaks volumes. They predict leisure hotel bookings through online merchants will grow from $3.9 billion in 2003 to $5.6 billion in 2008. While this may be unsettling for some of you hoteliers, the good news is that now, more than ever, you control the choice of whom you work with and how you shape the partnership. Because you no longer have to be all things to all online sites it is definitely possible to forge a win-win relationship with an online intermediary. But, where do you begin? 

1.  Why should my hotel participate in a merchant agreement with an online distributor in the first place?

Because the guy down the street is doing it is not the right answer. However, here is a shortlist of benefits to consider:

  • Location, location, location: By working with online intermediaries your brand is placed front and center to millions of shoppers per week, inevitably leading to more robust sales.
  • Differentiated marketing programs: Do you want to target mid-week shoppers? Canadian shoppers? Travelers who have taken a cruise, but have never vacationed at your Caribbean property? Such considerations should be priority No. 1 for your online partner.
  • Share shift: If the guy down the street isnít working with an online partner, a share-shift opportunity sits squarely in your lap as most online sites only work with approximately 10 percent of all existing properties.
  • What about the discount?: Yes, you are discounting to work with online players, but keep in mind that your overhead also decreases Ė commissions and call center costs, for example, are removed from the equation. You can also expect lower cancellations and no-shows as merchant fees translate into cancellation rates far below traditional booking models.
2.  How much share can you shift to my hotel?

We have found that the hotels that perform the best in our MMH program are those that work most closely with the intermediary. Did that bachelor party scheduled for this weekend suddenly cancel on you? Challenge your online partner to come through for you. Be ready and willing to devote the time to forge a deep partnership Ė the closer you work with your online distributor, the higher the returns will be. 

Plus, know how many hotels the online partner youíre engaged with has in its MMH program. The bigger-is-better mentality that a third-party site might tout may seem advantageous, but itís not likely in your best interest. Iíve argued this point before and I am inevitably asked, ďHow many then?Ē I donít think any of the major players are growing their programs too quickly at this point, but one day a less-is-more mentality could result in greater returns for all parties involved. How so? Such a philosophy places greater emphasis on tighter relationships where goals and objectives almost on a per hotel basis are being carefully considered day-to-day. 

3.  What is better for my hotelĖa CRS-based or allocation-based model?

Think about your staff, their experience and how they like to work.  These will all factor into the processes and systems that are optimal for you. Personally, Iím not a fan of the distributor faxing the hotel a reservation made on a site and then relying on the hotel to enter the reservation in the property management system. The extra labor it means for you and the margin of error that exists, however small, is still too much for both of our comfort levels. Why give overburdened hotel desk staffs another item for their to-do list when you can align with partners that have invested in building technology that works in tandem with your reservations systems rather than outside of them? At Travelocity, we offer our hotel partners the choice between seamless connectivity and single-image inventory through their CRS or the traditional allocation/fax model. More than 80 percent of our 7,000 hotel partners have chosen seamless connectivity. While there is no right answer, you need to demand choices from your online partners. You deserve to work with those that are willing to commit themselves to making technology work for you.

4.  How and when does my hotel get paid for rooms sold on your site?

Do you think this is too basic? Perhaps, but these days, the bottom line is the bottom line and sustainable cash flow is a major issue that no hotel can afford to overlook. Furthermore, why would you want to work with anyone who might take the overall health of your business for granted? There are different options to consider, but one that has worked well is paying a hotel partner immediately at checkout.  Suppliers charge a Travelocity provided credit card for the net rate and taxes of the stay, receiving payment instantly. Not only does this system eliminate 60-to-90-day waits for the check but it also alleviates headaches for accounting staff.

5.  Will this partnership allow my hotel to maintain full control of my rates and inventory?

Yield and revenue management is more critical than ever. Address this issue with your potential partner before signing the dotted line. Make sure that you are in control of how many rooms you are giving your online partner. Ask what technology they make available to you for adjusting your rates with the ebb and flow of market conditions. And if you receive puzzled looks or long pauses when you mention these terms, it might be time to head back to the office.

As consumers continue to crave the amazing deals and shopping experience afforded to them on the Web, accelerated growth online will hold true well into the future. But also keep in mind that itís an incredibly empowering time for you, the hotelier. With so many online distributors vying for a partnership with your hotel, you can choose only those that work for you. Demand great results from your online partners Ė after all itís a privilege to do business with you and if distributors arenít providing top-notch service and putting their technology at your full disposal, they donít deserve to be called your partner.
 

Michelle Peluso is COO of Fort Worth, Texas-based Travelocity and the founder and former CEO of Site59, one of the first online travel sites to embrace the merchant model. She can be reached at michelle.peluso@travelocity.com

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©Hospitality Upgrade, 2003. No reproduction or transmission without written permission.

Contact:

Geneva Rinehart
Associate Editor
Hospitality Upgrade magazine 
and the Hospitality Upgrade.com website
http://www.hospitalityupgrade.com
grinehart@hospitalityupgrade.com

 
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