Asian Hotel and Catering Times

January 2000

The Internet --- A Smooth Transition?

Judy Smith speaks to Jon Stonham of asia-hotels.com about issues arising as hotels assess the viability of the Internet as a reservations and marketing tool.

In the past, many hotel groups have viewed the Internet with scepticism --- and with just cause. Poor industry performance in recent years has meant that day-to-day profitability has been a more immediate concern than future planning, and few players have been in position to stick their necks out. No one really knew if the World Wide Web (www) was really going to take off; issues such as security, cost and viability were discussed, only to be put on the back burner --- each waiting for others to make the first move.

As 1999 drew to a close, a surge in global confidence in the web led to an apparent volte face on the part of most hotel groups, and suddenly 'commitment to the Internet' at the top of every agenda. Suddenly the race is on, and with the shift from traditional channels to the electronic medium come a number of significant issues for the hotel industry to come to grips with.

E-normous Potential

In Asia alone, the hotel market is worth US$17.9 billion. In 1998, as little as two per cent of bookings, less than US$200 million, were handled through the Internet. By 2004, this is estimated to be as much as 30 per cent of US$5.4 billion, "Before they do anything, hotels have to be aware of these figures, and be prepared to accommodate the growing number of hotel guests who expect the convenience of Internet booking." Ex-Hongkong Telecom channel manager Stonham set up asia-hotels.com in 1997 with two partners, went into profit within one year, and in October 1999 announced investment from Melco International Development Limited, which has taken a 7.5 per cent stake in the company. The site is currently booking 14,000 room nights per month for Asia based hotels over the Internet, and is well placed to assess how hotels in the region are embracing the electronic medium.

"Many hotels have now grasped the importance of e-mail. Unfortunately, the emphasis is on product for the customer. It is amazing how many hotels in the region provide sophisticated e-mail offerings to their guests either in-room or through the business centre, but fail to even hook up their front line staff, explains Stonham. "E-mails to reservations often lie unanswered for days or take the tortuous route of being printed out at the business centre, dropped into the recipients in-tray, a typed response is prepared and either faxed using expensive IDD or e-mailed eventually. By the time such tardy responses are received the potential client is firmly booked in a more responsive hotel."

In explaining how important it is for hotels to understand the value of e-mail and train their staff on the importance of timely response, Stonham makes the interesting point that hotels in Thailand and Vietnam are users of e-mail, primarily in a drive to maintain a low cost structure.

Pricing Polices

Investing in hardware and training is not the only hurdle in the path of hotel groups looking to the Internet as a reservations tool: Pricing is also an area of concern. The main issue is that the Internet can be accessed by anyone with a computer and modem, leading to transparency in terms of pricing. This contrasts with the segmented system of pricing possible through the traditional channel of hotel-consolidator-agent-client. Hotels are therefore faced with the problem of placing competitive prices in a public forum, while trying to maintain their margins in existing market segments.

Stonham cites such an example in a recent article in PricewaterhouseCoopers' Trends in the Hotel Industry: "In this case, a luxury resort chain provided its Asian rates, which were lower than those offered to the US market, to several Asian-based travel websites. The websites were successful at bringing in good business until a number of US based agents complained. Not wishing to erode their US margins, the Internet rates were changed to the higher US rates. Unfortunately, the hotel became uncompetitive to the Asian market which then booked through other channels, or worse, booked other competitively-priced properties on the web."

In another example, a hotel is represented by a number of websites, but because the hotel has rewarded volume producers with larger discounts, each of the sites offers a different price for the same product. The ensuing confusion leads to multiple bookings, higher levels of cancellations and a greater workload for the hotel and the websites.

The solution is not simple, and one that hotels, justifiably, are shying away from. "In the end, the current structure of multiple pricing will have to go," sophisticated loyalty programmes, and staggered commission structures (instead of cheaper prices) for channel vendors, present themselves as viable alternatives.

Managing the Net

Another crucial issue for hotels in the Internet age is information management. It is not enough for a hotel to simply post its website, prices, special offers and facility status on its web page; or communicate such information to a third party web-based reservations company. The Internet has a long shelf life and in addition to the pricing conundrum, out of date information and prices confuse potential guests rather than encourage them. Effective maintenance of a website is crucial if it is to remain effective.

In order for this to happen, it is important for hotels to budget for Internet marketing in the long term, and realise that an attractive and up to date web page is as crucial to business as a glossy brochure. What's more the very nature of the Internet's 24-hour, seven-days a week accessibility means that hotels have to be more proactive in monitoring and updating their marketing campaigns. " Experience shows that hotels are slow to inform all their channels of promotions and latest deals --- even high yielding channels. What's more, most sophisticated web reservation systems are complex date-driven databases that automatically remove a hotel from the public domain if the information becomes dates and then the hotel wonders why the reservations suddenly dry up," says Stonham. "Internet marketing is no longer an add-on issue for a busy marketing department, but a subject which requires planning, attention and understanding at a senior level."

Judy Smith