Andrew Morsi, Co-CEO & Founder of eRevMax addresses the debate on IDS (Internet Distribution Systems)- an upcoming technique in Distribution

One of the great benefits of being a member of the HSMAI Hudson Valley Chapter is a dual membership with the HSMAI Big Apple Chapter. In 2002 the Big Apple Chapter took us on as a "sister chapter" affording our members a dual membership. What this means to our members is that you can go to all the functions and events of the Big Apple Chapter as if you were a member there as well!

Following are the highlights of the recent Big Apple Chapter luncheon held on May 8, 2003 as reported by our member Shaun Johnston, President of Fair Street New Media. Thank you Shaun for your input!

Shaun writes:

TOPIC: "Navigating the New Distribution Jungle--How to be a Winning Survivor"

Panel

o Andrew Morsi, Co-CEO & Founder of eRevMax Technologies Inc.
o Chris Connar, National Sales Manager of Travelweb.com
o Jeff Osborne, Ozone Strategic Marketing
o Jim Struna, Hotwire
o Philip Saims, PS Hospitality

Chairperson, Lorraine Sileo, VP Information Services, PhoCusWright
Lorraine lives in Hudson Valley, incidentally, in Dover Plains.

Lorraine: "Only 10% of hotel rooms are sold online. So why is there so much fuss about it? Because the percentage is growing rapidly. And half of those rooms are sold through intermediaries, through channels we don't control. Having given away the store, we may want to take back control of our distribution."

Below are panelists' remarks grouped by topic.

RATE PARITY
"First step in regaining control of our own distribution is rate parity, selling the same rooms at the same prices in different channels."

"Price needn't be the same in every channel, as long as it's appropriate to the channel. I want to be represented appropriately within each channel."

"Depends on degree of transparency. If your price is concealed, included as part
of a package for example, then you have some flexibility. But in the published rates there should be parity."

"The key is moderation. Don't price very differently in different channels. Need to look realistically at fixed costs, and cover them at every price. Don't sell below cost."

ROLE OF GDS
"I was managing a 1200-room hotel in Manhattan. Mid week I had spare rooms for the weekend. I gave them to a IDS. For Friday they sold 120 rooms, Saturday they sold 160 rooms. There was no other way I could move so many rooms. Use channels when appropriate."

"Some Internet sites can sell where you can't. So you need them."

"Hawaii and Europe are farther ahead in working with intermediaries. US is behind, is having difficulty making the adjustment."

"Some channels were charging a 30% markup. Now set back to 25% and is going even lower."

Reference was made to the deal Hilton made with Expedia at a lowered rate. "Hilton has taken hotels.com out of their program."

"GDS won't go away. Under stress they reinvent themselves. They're too useful. They're here for at least the next five years. Hotels have to take account of them."

LOYALTY
GDS. "Our audience is more interested in price than in brand. We say, let us bring you the customer. But then you can make them loyal, we're happy with that."

"The situation is a triangle. Work with the GDS, but also work with the customer. Regain connection with the customer."

"There's been a shift in our customers from loyalty to price. Maybe that will shift back when the economy improves."

"Disagree. When people are dealing with third parties online, loyalty is never important."

"Consumer buying pattern has changed." (General agreement.)

WHO'S MOST VULNERABLE asked Lorraine
Individual hotels. "Some IDS are spending $300,000 a week on marketing their sites. If you don't have a brand you can't compete."

"Hotel chains. The brands. They claim that they can drive business to the individual hotels. But they can't afford to advertise at the levels of the IDS. The IDS can do it better."

"IDS. There are too many of them. There'll be consolidation."

"IDS. Hotels will win by spending more on their own sites and reclaiming sales."

MANAGING DISTRIBUTION
"Need a full-time manager to handle all the channels. Hard to build a culture for e-commerce."

"The more you can plan ahead the more you can benefit from deals with intermediaries."

"Revenue Management is the art of turning business away."

"Play in channels that are friendly"

"Hotels can leverage good partnerships with online partners. Select IDS partners carefully."

"Reduce reliance on third parties. Attract people back to your own web site."

"Last few years, we've seen the airlines improve their sites, provide more services. Hotels need to do the same."

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Below are highlights from some dinner-table conversations.

300-room Manhattan hotel gets around 300 bookings a month from its web site, but that's only 4% of total sales. Intermediaries bring many more. Does not see own site ever delivering a significant amount of business.

90-room individual hotel works with several intermediaries and maintains a copy of own site on each one. All these copies are kept up to date. Not too much work. Implication was, this is essential, so you get manpower for it.

Complaint, not having enough freedom to adjust pricing on rooms sold by intermediaries.