Online hotel bookings are on the rise, with researchfirm Forrester(Nasdaq: FORR) predicting that consumers will spend US$30billion between 2002 and 2006. But according to aForrester report, the new Hotel Distribution System(HDS), a cooperative effort between five major chains,will not challenge the top players in the market.
HDS — formed by Hilton, Hyatt, Marriott, SixContinents Hotels, Starwood and hotel technologyprovider Pegasus Solutions — is the hotel industry’sanswer to Orbitz, which was launched last year by airline heavyweights American, Continental, Delta, Northwest and United. Orbitz’s stated goal is to cut airline costs and challenge online travelagents such as Expedia (Nasdaq:EXPE) and Travelocity(Nasdaq: TVLY).
In an effort to help hotels control distribution costs and expand their reach, HDS said it plans to sell hotel rooms through multiple Websites. The company already has signed a deal with Orbitz and is indiscussions with several other sites, according tointerim CEO Joe Humphry. Eventually, HDS plans to opena direct-to-consumer site.
But according to the Forrester report, HDS will notevolve into an Orbitz look-alike. “Like Orbitz, HDSwill be a low-cost provider. But any similaritiesbetween the two end there,” Forrester analystHenry Harteveldt said.
According to Harteveldt, HDS faces several challengesthat will prevent it from wresting the top spot awayfrom competitors like Hotel ReservationsNetwork (HRN) (Nasdaq: ROOM), Expedia andCendant’s Trip.com.
Among those challenges: there are many more hotel companies than airlines;hotel pricing varies widely, unlike the centralizedprices offered by airlines; and hotels alreadysell discounted rooms through various sites, whileairlines sell Web deals only through their ownsites and Orbitz.
In addition, HDS will not be a full-service travelagency that sells airline tickets, cruises and othertravel products as Orbitz does. “HDS, in contrast,will be a one-trick pony, selling just lodging,”Harteveldt said.
Even though it will not reach the level of the biggesthotel sites, Harteveldt said HDS still could be a”significant contender” if it offers a personalized,upscale experience for bookers and creates a strongconsumer brand, perhaps by taking over Pegasus’TravelWeb site.
The company also should resist the temptation to focus onthe cheapest rates. “Not only will this help HDS tocompete against sites like Travelocity, it willalso help protect hotels’ brand reputations,”Harteveldt said.
The site will have plenty of competition, both fromthird-party sites and from hotel chains themselves.
HRN saw a 74 percent increase in rooms booked in 2001and set a company record in January with $2.5 millionin sales and 22,000 room nights booked. According toHRN president Bob Diener, the company plans tolaunch a new brand and Web site by summer, accompaniedby a $10 million ad campaign.
In addition, more and more consumers are using hotelWeb sites to make travel arrangements. The Leading Hotels of theWorld saw online bookings increase more than 140percent from 2000 to 2001. And Wyndham International said its Januarybookings were up 100 percent year-over-year.