Maintain control with online contracting

April 19, 2004 |

Increasingly, hotels gearing up for traditional peak-season occupancy are faced with floors of empty rooms, while others are suddenly filled to capacity.

Instability in global politics, climate and economies is having an enormous impact on the tourism industry. Like modern financial markets, where billions of dollars in “hot money” is transferred on an instant’s notice to maximize yield or escape risk, easy access to situational information at a destination and increasing flexibility in air fares and schedules allow tourists to make last-minute changes in itineraries. Increasingly, hotels gearing up for traditional peak-season occupancy are faced with whole floors of empty rooms, while hotels at another formerly less-popular destination are suddenly filled to capacity.

Unfortunately, many hotels are unable to fully capitalize on such unexpected good fortune. The practice of hedging against low occupancy by allocating large blocks of rooms to wholesalers and large agents at discounted rates can compel a hotel to refuse last-minute reservations by direct guests and small agents, though they would be willing to pay premium rates. In effect, the hotel has surrendered control over room rates to a third party.

To avoid this situation, many hotels have turned to online contracting. Basically an automated system of spot contracting with agents and corporate clients, online contracting uses an Internet-based database application to accept and instantly confirm reservations made through the hotel’s own website. As opposed to a standard online reservation system, in online contracting the agent or corporate client requesting a reservation uses a unique hotel-supplied login/password to confirm their identity, which makes the transaction legally binding. The instant confirmation and secure transmission capabilities of an online contracting system enable a hotel to share room allotments among a large number of agents and clients, accepting reservations on a “first-come, first-served basis.”

“Hotels often do not realize that manual contracts with agencies to set room rates and allotments for a fixed period means that they are surrendering a measure of control over their product,” said Hartono Liman, Director of Pelican System, an online contracting provider. “Online contracting allows hotels to set rates and allotments as the situation demands, as well as providing better service to agents and other clients.”