Hotels follow airlines into online bookings

This spring, Chris Hsu decided to spend more time than usual finding a good deal on a Boston hotel room for his vacation.

Mr. Hsu, a native of Taiwan, followed a friend's advice by looking for lodging on the Internet. He surfed to Hotwire.com and found a room at a Hilton hotel in Boston's Back Bay district. The price: only $80 a night. Hsu then called the hotel itself and found out it wanted $260 for the same room. He took the $80 deal.

By the end of his vacation, Hsu had saved $1,080 on a six-night stay.

Unlike Hsu, most vacationers don't use the Web for hotel deals. This year, hotels are projected to generate $4 billion of their revenue from leisure bookings online, while airlines are expected to earn $13.2 billion, according to Forrester Research in Cambridge, Mass.

This lack of interest is draining consumers' wallets. Websites operated by individual hotels often feature discounts of up to 20 percent. The savings can be considerably higher on third-party consolidators' sites, such as expedia.com and hotels.com, which advertise savings between 30 and 70 percent.

At the same time, hotels are in need of the extra bookings. Hotels filled only 56 percent of their rooms the first three months of this year – a 5.6 drop compared with the first quarter of 2001. Still, expectations for more online reservations in the future are high. Forrester Research predicts that hotels' revenue from leisure bookings online will jump from 4.5 percent to 7.9 percent by 2006.

This summer, a consortium of national hotels will launch a joint website for bookings that some experts compare with Orbtiz, the online ticket distributor launched last year by five major airlines. Hilton, Hyatt, and Marriott, among other hotels, are joining to form the Hotel Distribution Network, an online clearinghouse of hotel reservations. The site will try to rent cut-rate rooms that return a higher percentage of revenue to the hotels themselves.

Many experts believe the increased competition will make booking hotels online more common. "We're expecting phenomenal growth," says Henry Harteveldt, a senior analyst with Forrester Research. "People looking for a broad choice of hotels will be coming to the Internet."

Already, more than two-thirds of Internet users go online for travel-related reasons, says Robert Diener, president of Hotel Reservations Network (HRN), which operates hotels.com. But compared with airlines, online hotel booking has been slow to mature. Travel experts point to the poor quality of the websites themselves, which, up until a year ago, were difficult to navigate and offered little selection.

And unlike the airline industry, which is dominated by a handful of carriers, more than 85 hotel chains operate in the US. Most hotels are independently operated franchises. That complicates travel websites' efforts to track room rates, which can vary depending on the owner's preferences.

Yet some travel sites have begun to draw consumer traffic. They let consumers witness the large gap between what hotels charge directly and what they are willing to accept. According to Harteveldt, hotels often mark up their base prices by as much as 60 percent. They also turn to Internet consolidators to sell rooms that, according to statistics, they would not otherwise be able to book. Groups including Expedia and HRN buy these rooms at wholesale rates. Last year, HRN booked 4 million "room nights" at more than 5,000 hotels.

Page: 1 | 2