Distribution 101 2004
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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).

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Distribution 101 2004

Distribution 1012004

Resort Management Conference

Greenbrier Resort

Bill Peters

Vice President Reservations & Market Development

Outrigger & OHANA Hotels and Resorts


Traditional switching companies

Traditional Switching Companies

Global Distribution Systems (GDS)

Originally Airline Central Reservation Systems (CRS)

Sabre

Apollo

Worldspan

Amadeus

Switch companies

Pegasus

WizCom

Resort CRS


Pegasus and wizcom circa mid 1980 s

Pegasus and WizComCirca 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


Distribution 101 2004

The 2nd Traditional Method of Distribution is the Wholesale Channel

Consumer

Wholesaler Fax Server

Travel Agent

Wholesaler

Resort FAX


There is still a lot of paper

There is still a lot of paper!

Resort FAX

Paper, Paper and More Paper

Resort Agent

Resort PMS


Internet cloud arrived circa 1998

Internet Cloud ArrivedCirca 1998

Creating new Turbulence!!!


Distribution 101 2004

Traditional Model

Traditional consumer

Travel agent

commissionable rates

Dot Com

commissionable rates

Internet consumer

GDS

Switch companies Pegasus

WizCom

Resort CRS


Merchant model circa 2001

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


Distribution 101 2004

INTERNET CONSUMER

Traditional Wholesaler

Expedia.com

Travelocity.com

Orbitz.com

Hotels.com

Merchant Model and the mega dotcoms


Distribution 101 2004

No Free Lunch!

Merchant Model

25% to 35% below rack rates

Resort ADR and RevPAR decline


Distribution 101 2004

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

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 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


Distribution 101 2004

Speed Bump # 1

I need a

Vacation!

Joe Consumer


Distribution 101 2004

Speed Bump # 2

I still need a

Vacation!

Joe Consumer


Distribution 101 2004

Your hotel – finally!

I’m going on

Vacation!

Joe Consumer has run the Internet gauntlet and finally makes it to the resort Web site.


Distribution 101 2004

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

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

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

Here are some of your competitors!


Interactivecorp ten banana rating

InterActiveCorp Ten Banana Rating

  • Owns an operates the following companies:

    • Hotels.comInterval International

    • Expedia.comTicketmaster

    • Travelscape.comNewtrade Middleware

    • TV Travel Group - UKEntertainment Book

    • HSN – USAHSN – Europe

    • Match.comCitysearch.com

    • US Cable Travel NetworkUdate.com

    • Zero Degrees.com Anyway.com - France

      • (acquired 3/2004)

    • Tripadvisor.com Hotwire.com

      • (acquired 3/16/04)

    • Activity World – Hawaii

      • (acquired 3/2004)


Cendant three banana rating

Cendant Three Banana Rating

  • Travel Distribution Services

    • Galileo International Travelport

    • TravelwireLodging. COM

    • Travel 2 and 4Neat Group

    • WizcomShepherd Systems

    • Cheap TicketsCendant Travel

    • THOR RCI

    • Hotel Club.com & Rates to go.com

      • Acquired (3/2004)


Expedia com number one

Expedia.com – Number One

  • Market leader

    • Air – 46% (2003) was 36% (2002)

    • Hotel – 37% (2003) was 28% (2002)

      • PhoCusWright consumer survey

  • Merchant Model

    • % off lowest published public rate

    • % is negotiable

    • Agreed upon mark-up (margin)

  • Inventory management

    • Change at will via Extranet site


Expedia com

Expedia.com

  • Watch for:

    • Forward distribution of the Merchant Model

      • Travel agencies.

      • Corporate travel

        • Over 1,100 actively booking companies

    • Loyalty club

      • Strategic emphasis on customer loyalty

    • Direct connect to CRS via Newtrade middleware

    • Expedia hotel rating

    • Improved dynamic packaging


Travelocity com

Travelocity.com

  • Market share – 2nd in Air and 2nd in hotel

    • Air – 44% (2003) was 59% (2002)

    • Hotel – 34% (2003) was 34% (2002)

      • PhoCusWright consumer survey

  • Merchant Model

    • % off lowest published public rate

    • % is negotiable

    • Agreed upon mark-up (margin)

  • Inventory management

    • Change at will via Extranet


Travelocity com1

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

Hotels.com – Number three

  • Hotel reservations

    • Hotel – 24% (2003) was 17% (2002)

      • PhoCusWright consumer survey

  • Merchant Model

    • % off lowest published public rate

    • % is negotiable

    • Agreed upon mark-up (margin)

  • Inventory management

    • Change at will via Extranet site


Hotels com

Hotels.com

  • Watch for:

    • 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

Orbitz.com

  • Market – 3rd for air and 4th for hotel

    • Air – 41% (2003) was 25% (2002)

    • Hotel – 18% (2003) was 10% (2002)

      • PhoCusWright consumer survey

  • Merchant Model

    • % off lowest published public rate

    • % is negotiable

    • Agreed upon mark-up (margin)

  • Inventory management

    • Change at will via Extranet site


Orbitz com1

Orbitz.com

  • Watch out for:

    • Forward distribution of the Merchant Model

      • 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

Priceline.com

  • Market share - 4th in Air and 5th in hotel

    • Air – 14% (2003) was 16% (2002)

    • Hotel –13% (2003) was 7% (2002)

      • PhoCusWright consumer survey

  • Opaque pricing

    • Room rate offering at discretion of hotel

    • No agreed upon mark-up but is minimum

  • Over 15,000 distribution partners

    • EBay, Amazon.com, Lowestfare.com,

    • GoGo (static packages)

  • Inventory management

    • Change at will via Extranet site


Hotwire com

Hotwire.com

  • Market share - 6th in Air and 7th in hotel

    • Air – 6% (2003) was 14% (2002)

    • Hotel – 2% (2003) was 10% (2002)

      • PhoCusWright consumer survey

  • Opaque model

    • 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 com1

Priceline.com

  • Watch for:

    • Dynamic packaging

    • Private label booking pages to traditional travel agencies.

    • Merchant Model offerings


Travelweb com

Travelweb.com

  • (HDS) Hotel Distribution System

  • Owned by

    • Hilton, Hyatt, Marriott International, Pegasus, Starwood, Six Continents, and also Priceline.com

  • Merchant model

    • 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

Sidestep.com

  • New paradigm model

  • Privately held Internet technology company.

  • Commissionable Rate Program

    • Consumer focused

    • Re-directs consumer to resort site or it intermediary site.

  • Core Technology

    • 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

US Best Hotels.com

  • Direct to consumer hotel advertising firm

    • 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

WorldRes.com

  • Net rate program (merchant model)

    • 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 ?


The battle continues for market share or is it dominance1

The battle continues for market share or is it dominance ?

  • 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

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

Who Will Win?

  • 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

3 Key Issues in Hotel Electronic Distribution

John Burns

Hospitality Technology Consulting


Web now drives travel decisions

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 decisions1

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

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 environment1

Mega Agencies are Reshaping our Environment

  • Initially targeted individual leisure traveler

  • Now active in:

    • corporate

      • Expedia Corporate Travel, Orbitz for Business, Travelocity Business

    • tour

      • Expedia Classic Custom Vacations

    • dynamic packaging

      • WWTE, Neat .. + .. TicketMaster, etc.


Mega agencies are reshaping our environment2

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 environment3

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

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 manage1

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 manage2

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

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


Distribution 101 2004

Resort Management Conference

Greenbrier Resort

Dwight Gould


Internet usage

US Internet Households Will Reach 84M by 2008

Internet usage

Forecast

Actual

Source: Forrester Research, April 2003.


Online usage will keep growing

Online Usage Will Keep Growing…

- Millions of Users -

Source: IDC, February 2002 (ICMM 8.1)


Online vs radio television daypart breakdown online

Media MixSynchronization

Online vs. Radio / TelevisionDaypart Breakdown Online

Source: TV: Nielsen Media Research (2+), Radio: Arbitron (12+), Internet: Nielsen//NetRatings (2+)


Change in offline media consumption with addition of online

Change in offline media consumption with addition of online…

21% of users

Consumed less TV due to increased Internet Usage

Source: Forrester Research, Technographics Database, 2003 – Base 18+ U.S. Adults (online+offline)


Media consumption

Media Consumption


Growth of media usage 1998 2003 w25 54

Growth of Media Usage1998 - 2003 (W25-54)


Online trends soccer moms

Online Trends - “Soccer Moms”

  • 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)


Television campaigns reach the law of diminishing returns

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


Why the internet efficiently targeted mass reach

Why The Internet? Efficiently Targeted Mass Reach


Effectiveness of online advertising

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


Distribution 101 2004

Thank you


Time for q a

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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