The rapid growth of the number of reservations made through the Internet continues as hotel companies try to drive more traffic to their own Web sites.

"There is a definite trend among travel suppliers—hoteliers, rental car companies and airlines—to book through their own branded Web sites," said Henry Harteveldt, v.p. of airline and travel research for Forrester Research. "They are cheaper for hotels to process than reservations made through call centers."

A survey conducted by Smith Travel Research and the Hospitality Sales & Marketing Association International earlier this year reported that branded hotel sites account for 75 percent of Internet reservations. The survey covered 34 branded hotel chains representing almost 1.2 million rooms. It compared 2002 data against 2003 results of all online reservations by brands, third-party Web sites and Global Distribution System sites.

The year-over-year number of reservations on hotel branded Web sites increased 32.5 percent to 14.8 million in 2003, according to the survey. InterActive Corp., which owns Expedia, www.Hotels.com/ and Hotwire, accounted for 11 percent of the total online reservation volume last year.

The survey said the total third-party share of online reservations increased to 25 percent in 2003 from 23 percent in 2002, which represents 4.9 million reservations.

Internet reservations at Choice Hotels International are up this year and account for 36 percent of total central-reservations-system traffic, according to Mary Beth Knight, v.p. of e-commerce.

"We forecast that we will receive about 40 percent of our reservations over the Internet in 2004," Knight said. "Our strategy is to drive as much traffic as possible to our Web site."

Reservations made on Best Western International's brand Web site are up 40 percent this year over last year, and third-party Web site reservations are up more than 20 percent, according to Beth Delci, director of e-business initiatives.

"Slightly more than 22 percent of reservations are made on our own Web site and 21 percent are made on third-party Web sites," Delci said. "We expect to see continuing increases—especially from our brand Web site—due to all of our marketing initiatives."

Carlson Hotels Worldwide has seen an Internet reservations growth rate of 60 percent over last year, according to Chris Brosnahan, v.p. of distribution and reservations.

"About 60 percent of our Internet reservations come through our brand sites and the other 40 percent come through third-party Web sites," Brosnahan said. "A year ago, it was 45 percent through our own sites and 55 percent through third parties."

"We have seen incredible growth on the e-commerce channel in our brand Web site," said Paula Drum, v.p. of revenue management and reservation sales for Cendant Hotel Group. "About 51 percent of rooms [that are sold on the Internet] are sold on our brand sites and 49 percent through third-party Web sites. As more consumers migrate from the phone and travel agents to the Internet, we've seen growth of the e-commerce channel."

Excluding Internet reservations made through opaque third-party Web sites, such as Hotwire and Priceline, about 80 percent of Internet reservations are made on Starwood branded Web sites, according to Tom Botts, v.p. of distribution strategy and operations for Starwood Hotels & Resorts Worldwide. 

"We've seen a dramatic increase in our branded Web site bookings and they are holding steady in third-party Web site sales," Botts said. "A lot of the increase is incremental and some is coming out of the call center, which is down a little bit."

It's not disappointing that call-center reservations are down, Drum said.

"We are getting incremental business through the Web sites," she said. "When you look at what used to be direct through 800 numbers, the brand Web site increases have offset declines there."

Knight said part of Choice's strategy is to offer a better rate online than it does through its call centers.

"Call centers are more expensive to run than Web sites," she said. "It's up to individual hotels what their rates are, but typically it's 10 percent less online, but in some cases the difference is much greater."

Choice's Web site prominently features its toll-free number, so customers can contact the call centers if they choose to do so. Customers who find a lower rate on the Choice Web site and contact the call center to make a reservation are able to book the lower Internet rate, Knight said.

But some changes are less obvious than price differentials.

Choice conducted two major television ad campaigns this year offering guests who stay at two Choice-branded hotels within a certain time the opportunity to stay a third night for free.

"Our voice-overs on those ads were for www.choicehotels.com/ not the 800 number, which is a recent change," Knight said.

Industry trends

In 2004, more than 20 percent of all revenue in hospitality will be generated from the Internet, compared with 15 percent in 2003, according to PhoCusWright, a travel intelligence organization that specializes in strategy, research and forecasting for the travel, tourism and hospitality industries. Another 20 percent of hotel bookings will be influenced by the Internet but done offline.

The Internet's actual impact goes beyond the number of rooms booked, according to Max Starkov, chief e-business strategist for Hospitality eBusiness Strategies, which advises companies about their Internet distribution and electronic-marketing strategies.

"Of all the online lookers who become hotel bookers, about 50 percent will make reservations online and the other half will book offline, such as through a call center," Starkov said.

This indicates there still are a lot of customers who have issues with Internet security or who would rather do business with people instead of computers, he said.

In 2004, for the first time, Internet hotel bookings will surpass GDS hotel bookings, according to Starkov. Two years from now, the Internet will contribute more than 27 percent of all hotel bookings, according to PhoCusWright.