Third-party Web sites threaten brand loyalty, bottom lines

Hotel & Motel Management, May 16, 2005 by Manhar Rama

IN THE details

Combatting third-party sites

* Create a new market

* Work with lawmakers

* Protect the bottom line

The Internet is the way of life for today's consumer, and it's a force to be valued, but also reckoned with if you're in the hotel-management business. I'm talking specifically about third-party reservation Web sites and their effect on the travel-and-tourism industry. Is it a valuable marketing stream? Perhaps, but at what cost to the operator?

The Hospitality Sales & Marketing Association International and Smith Travel Research recently conducted a survey that shows hotel-branded Web sites capture 75 percent of Internet reservations, while third-party Web sites account for 25 percent. The third-party industry is continuing to gain momentum, and we hotel operators have helped it grow. For example, in an independent study completed by Cornell University School of Hotel Administration and The Center for Hospitality Research, researchers found that Travelocity offers the lowest cost for hotel bookings.

The reality is, third-party Web sites are here to stay. Sure, franchisors don't like it, but they are being forced to wake up to the issue. Unfortunately, most didn't take it seriously when these Web sites first started coming into the market. As a result, the loyalty level for the brand has diminished, and the hotel room is becoming a commodity. Now in an effort to distinguish its product, the franchisor continues to add new amenities and freebies for the consumer and all the costs associated with these new amenities then fall back on the operator, who is receiving a double penalty--from the additional costs and from lower rates.

Deep discounting and increased costs are just small pieces of a bigger issue--and that is the bottom line of the operator. To protect that bottom line, we need to focus on creating a new market, starting with the organizations and associations that relate to the hospitality industry. Many of these entities have common issues, but those issues often are addressed independently, which is diluting the effectiveness and power of the industry as a whole. Though each group has its own agenda, there are some common agendas that we can work on together by building the bridges among ourselves.

One example is the U.S. government, which doesn't have an appropriate budget to market the tourism industry. The industry is the third largest retail industry in the United States, but the government has a budget of merely $10 million to promote tourism. Australia just set aside $400 million for its tourism budget. No wonder we are No. 3 behind Spain and France in being the most sought-after destination in the world. If we, as a group, work with lawmakers on Capitol Hill to increase its budget to promote tourism, we have a great potential to increase our share of the worldwide travel market.

hmm@advanstar.com

Rama is c.o.o. of Greenville, S.C.-based JHM Hotels, which owns and operates more than 4,000 rooms in the United States. He can be reached at (864) 232-9944.