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Online travel wars: The hotels strike back

April 13, 2004 |

Later this year, travelers won't see room rates posted on travel sites such as Hotels.com or Expedia lower than what Hilton advertises on its own Web site.

Later this year, if Hilton Hotels Corp.’s plan goes as expected, travelers won’t see room rates posted on travel sites such as Hotels.com or Expedia lower than what Hilton advertises on its own Web site. “You don’t let the customer see a rate less than a rate you sell yourself,” Hilton CIO Tim Harvey says. “At that point, you lose trust of the brand, and whoever is selling the room gains that trust.”

But customer loyalty isn’t the only thing hotel chains and operators stand to lose to the growth in third-party online bookings. In an era when consumers are more likely to make travel plans based on the best rates on the Internet rather than what a particular hotel brand has to offer, hotels have found their relationships with third-party sites have resulted in inflexible pricing practices and lost profits. While third-party sites helped the hotel industry through a tough economy"and continue to provide a valuable service by booking rooms that otherwise would go unoccupied"many say now is the time to establish more-favorable dynamics. “Everyone in the hotel industry is ready to get control of their inventories again,” says Andrew Jordan, executive VP of sales and marketing and chief marketing officer at hotel chain Wyndham International.

Online travel sites present a complicated dilemma, one hotels are addressing in two ways: by creating incentive programs and improving brand Web sites to get customers to buy direct, and by changing how they do business with the third parties. It appears the third-party sites are more than willing to cooperate. By year’s end, Expedia and Hotels.com, both owned by IAC/InterActiveCorp, and Travelocity, owned by Sabre Holdings Corp., plan to implement XML-based connections to Hilton, Outrigger Hotels & Resorts, and several more hotel chains that will completely reverse how business is conducted between the parties. Those efforts stand to have a huge impact on the industry: Expedia, Hotels.com, and Travelocity make up 74% of hotel sales by third-party Web sites, according to travel-research firm PhoCusWright.

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