SHERMAN, CT— With overall room bookings over the Internet growing exponentially each year, hotels are expected to utilize their own branded websites more to reclaim some of this market from the burgeoning third-party sites. According to a recently published report by PhoCusWright Inc. titles “Online Travel Overview: Market Size and Forecasts 2002-2005,” hotels currently represent 22% of the online travel business. That number projected to increase to 23% by the end of 2003 even as the overall online travel market increases, the report stated. Within three years online leisure/unmanaged business hotel bookings, which represent all travel that is not corporate, will increase from 9% of total gross bookings to roughly 20%. The resulting volume underscores the increasing importance of this channel of distribution going forward. PhoCusWright estimates that online hotel sales rose 49% in 2002 to reach $6.3 billion and expects this to increase by 43% in 2003, to $9 billion. In addition, in 2002, branded web sites maintained a 51% share of online hotel sales, or $32 million, with third-party. “discount” sites garnering 49%, or $31 million of the market. By 2005, it is expected that branded web sites will represent some 53% of online hotel sales, or $80 million, according to the report. One of the ways that hotels will increase their online market share is by being a little more selective with their site affiliations, paring down the number of third-party sites to five or six from as many as a dozen in some cases, according to Lorraine Sileo, vp/information services at PhoCusWright. “In the near future, they [hotels]are going to be a little more particular. They will not work with the smaller ones, but they’ll continue to work with the larger ones. So there will be some consolidation there,” said Sileo. Some of those larger sites include Hotels.com, Expedia, Travelocity and Priceline, to name a few. In fact, based on January to September 2002 gross bookings, Online Travel Agency Hotel Sales by Market Share were broken down as such: Hotels.com 30%; Expedia 28%; Travelocity 16%; Priceline 11%; Orbitz 6%; Worldres 6%; Hotwire 3%. The report cited Cendant’s purchase of Lodging.com for its merchant inventory as an example of some of the consolidation expected. While only a few online agencies will remain key partners for hotels, Sileo said do not expect those major sites to disappear any time soon. “They are nearly profitable, they’re not losing millions of dollars,” Sileo said. “They are owned by larger corporations so they have large resources.” In fact, some of them are actually pooling their resources in an effort to broaden their reach. For example, Priceline.com and Travelweb LLC have forged a distribution agreement that gives web sites owned and operated by priceline.com access to Travelweb’s network of more than 4,000 brand name hotels and their net rate inventory. Sileo added that some of the other ways that hotels plan to differentiate their own web sites and steer customers in their direction is through price guarantees, loyalty club incentives for repeat guests, and a continuing commitment to CRM. “Hotels are investing heavily in making their web sites the place to get the best offers, and frequent travelers are slightly more inclined to use the hotel-branded sites,” said Sileo. The report also cites an overwhelming majority of hotel executives acknowledging the advantages of wholesaling and the merchant model as a means to move inventory, but also stating concerns about the effect on pricing and the negative impact on ADR. Nevertheless, until occupancy picks up considerably, which many say may not happen until well into 2004, hotels will maintain a considerable amount of reliance on these intermediary sites. Marriott, for example, despite claims that 80% of its online sales come from its own web site, signed a three-year renewal of its marketing agreement with Priceline.com. As part of the dea
