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.

Consolidators generally impose a 30 percent markup. But consumers benefit too, from lower prices that are often fixed. "We've taken the hassle out of bargaining for hotel rooms," says Mr. Diener.

What would it cost to book a single room in Boston for a Monday in early May? To find out, the Monitor tried five approaches, settling on a Back Bay stalwart, the Fairmont Copley Plaza. We included one 'consolidator' website that specializes in hotel accommodations and one that handles all aspects of travel, including airfares and car rentals. No discounts (such as AAA or AARP) were requested. Figures exclude applicable taxes. Budget travelers who start with a discount hotel will find considerably less savings by shopping online. We ran the same test on an Econo Lodge in Charlottesville, Va., and the most we could shave off the stated price was $5.

The site lists close to 200 hotels under Boston, though most are located in the surrounding suburbs. Scanning through all the listings can be time-consuming, and pages on the site loaded much more slowly than at hotels.com (below). It lists one average room rate. If the customer can prove within 24 hours of purchase that another website offers a lower rate, Expedia promises to refund the difference.

The site lists more than 60 hotels under Boston, though most are located in the surrounding suburbs. After we found our hotel and clicked on 'book,' the site listed one room type: an economy with one double bed. The room priced at $179.95 listed no restrictions. The site features a gallery of photographs from the hotel's website.

We attempted to speak with an employee at the hotel itself, but were diverted to Fairmont's 1-800 customer service line. The rep quoted a $269 daily rate. We asked if there were any discounts available. He quoted a $3 corporate or AAA membership discount. Asked if that was the best rate the hotel could offer, he revealed a 'where to stay' discount, knocking the price down to $229. The rep said all customers were eligible for the discount.

We walked up to the reservation counter and asked to hear the hotel's lowest rate. The clerk quoted $269. We asked if that was as low as the hotel could go, and she said they could drop to $229. The clerk was not sympathetic when we said we preferred to pay around $150. She said the hotel sometimes offers a $199 rate between November and February, but that $229 was now the best rate available. Experts note that negotiating later in the day or evening can often yield better prices.

The site offers four room types, ranging from $269 for the 'Fairmont Room' with one queen bed, to the $549 suite which includes one king or two double beds. There are no discounts available.