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Internet intermediaries are more friend than foe

May 29, 04 | 12:55 am

TRI Hospitality Consulting

The majority of people in the hotel industry believe internet intermediaries such as Expedia and Lastminute.com are a help to business rather than an impediment, according to a survey by TRI Hospitality Consulting.

When asked if the help provided by internet intermediaries, such as by making yield management easier, was on balance a benefit to hoteliers, 52.3% agreed it was indeed a benefit.

But, while no respondents strongly agreed that such intermediaries were a benefit, 11.4% strongly disagreed and 27.3% disagreed. “The balance of opinion within the hotel industry just favours intermediaries being a benefit. But there remains a substantial minority that believes the likes of Expedia are a serious threat,” said Jonathan Langston, managing director of TRI Hospitality Consulting.

Controlling rates essential

There is strong consensus that hotel companies must control their own rates with
88.6% of respondents agreeing or strongly agreeing with the view that intermediaries
should not be allowed to offer prices that are below rates offered on hotel company
web sites. The strongest supporters of this view are hotel group executives with
85.7% saying they strongly agree and another 7.1% agreeing.

And there is agreement that consumers who traditionally booked through agents are
increasingly switching to the internet. Just 2.2% of respondents said they did not
know and all the rest agreed or strongly agreed.

There was less agreement about whether customers should be offered the same rate
through whichever channel they book. Fractionally more respondents (51.1%) agreed or strongly agreed that offering the same rate was essential. But almost as many (48.9%) disagreed. “Hoteliers rightly wish to retain control of setting their own rates but they appear divided on how to exercise this power,” said Langston.

Responding to the threat
More controversial were issues relating to the ability of the industry to respond to the
internet threat.

There was an exactly even split of opinion between those that believe hoteliers
understand how to use the internet and global distribution systems to maximise
revenues.

The impact of the huge advertising spending of intermediaries such as Expedia also split opinion down the middle with 42.2% of respondents agreeing or strongly
agreeing that it means hotel companies cannot effectively compete online. The same proportion disagreed or strongly disagreed. But a significant minority, 15.6%, were unsure.

A small majority believe that small to medium sized hotel companies have financial constraints that prevent them from fully exploiting opportunities presented by the internet and information technology to reach new customers.

The proportion agreeing or strongly agreeing was 57.8% compared to 33.3% who disagreed or strongly disagreed. “The hotel industry has clearly woken up to the threat posed by the internet. But it has
a far from uniform view on how to counter this threat,” said Langston.

Business prospects
There has been a continued turnaround in business optimism within the hospitality
industry. The proportion of respondents who state that the current business
environment is pleasing or very pleasing is 71.4%. Just 5.7% believe it is disappointing.
In the last survey published at the start of this year, just over half of respondent
(55.3%) said the current business environment was pleasing or very pleasing and 13.1% said the environment was disappointing or very disappointing.

The overwhelming majority of respondents (85.7%) say their business has performed
better, in terms of sales, over the last three months than they had forecast three
months ago. Just 2.9% said it was worse.
Looking ahead for the three months from March 2004, nine out of 10 (91.5%) of
respondents said they were optimistic or very optimistic.

Looking further ahead, the level of optimism remains the same. For the six months from March 2004, 91.4% of respondents are optimistic or very optimistic. “The optimism that our survey detected at the start of this year has been converted into an actual improvement in trade. The continued optimism of respondents suggests we have a period of sustained recovery ahead for the industry,” says TRI’s Langston.