November 5, 2003 *
Hotel Reservations Over The Internet - A Star Waiting
To Be Born.
9/11, SARS, Bali and the `War on Terror' have left
their mark on the region. The gloom is now slowly
dispersing and the hospitality industry is emerging
from the aftermath. The industry's `wait and watch'
attitude is slowly changing to one of cautious optimism.
In such circumstances, the focus now shifts to attracting
the largest pie of the corporate traveler and the
upwardly mobile travelers segments. Closer home, the
market is slowly evolving as the competition heats
up. Value addition and cost cutting are the operating
mantras. In this context, there is one medium which
has the potential in helping the hospitality industry
to excel in both these areas. The Internet. Across
the world, the airline and the hospitality industry
swears by this medium.
Just why is everyone raving about the Internet? As
an hotelier, if you are unaware of the potential power
of the Internet, then you could be missing something
important. You should know that the Internet has the
ability to deliver your hotel's sales pitch on the
customer's desktop wherever he may be, convert the
customer there itself and close the sale with the
customer's money safe in your bank. Even before the
customer steps into your hotel! And if you are already
choking over your tea at that, wait till you hear
this. You can close this sale at cost of about one
quarter of what it would cost you to do this by traditional
marketing methods. Impressed? So where's the catch?
The catch is in the reluctance of the industry to
adopting new methods that are still unproven.
So, can the Internet really make that much of a difference?
A good example to consider would be the online effort
of the Indian Railways. Remember the last time you
wanted to take your family to your home town for the
summer vacation and wanted to book long distance train
tickets? The arduous journey to the station, the long
sweaty wait in never-ending queues and the suspense
about whether you could still manage a reservation
by the time you reached the window. With Indian Railway's
online reservation service
(irctc.co.in) starting up, the scene changed dramatically.
Indian customers were thrilled that they could just
sit at home, check the status of berth availability,
reserve the ticket, pay for it online and have it
delivered to their doorstep. Some citizens went to
the extent of acquiring credit cards just so that
they could pay for the rail tickets online.
While nobody can deny that the process of booking
a hotel room is not as vexing as booking a rail ticket
at the station, nobody can also deny the powerful
attraction of a proposition, where the end customer
can confirm a room of his choice, in a hotel of his
choice, at a fair price along with the assurance that
there will be no surprises, or shocks, when he lands
up at the hotel. No agents, no middlemen, just the
customer and the hotel, direct interaction-one on
one.
So how does the hotel gain in all this? First, let's
start with Reach. By putting up a part of the hotel's
inventory on the Internet and empowering it with the
right tools, the hotel will have acquired the power
of a new distribution channel that is not limited
by geography, political boundaries or cultural and
language barriers. It is like having a front desk
operating 24 X 7 with the ability to close a reservation
and get paid by any customer, anytime, anywhere in
the world. In fact, even the hotel's offsite Branch
offices and Agents can login to the centralized Reservation
system and confirm to customers in their region instantly.
Second, there is the advantage of direct interaction
with the customer. When the reservation happens through
the hotel's own website, the brand communication to
the customer is unbiased and untainted by outside
interpretations. Traditional third party selling channels
tend to put up the hotel's inventory in `hotel malls'
where the hotel's pricing comes under pressure. This
could not just undermine the hotel's rack pricing
strategy, but also erode the brand identity of the
hotel in the long run.
Third, in markets where the corporate customer forms
a substantial part of the customer base (like India),
the Internet offers a tremendous opportunity to put
in a robust CRM programme. For instance, the hotel
can empower the corporate customer with a unique Corporate
Login IDs with the facility of not just booking a
room at special rates, but also making changes to
an existing booking itinerary. Such features can go
a long way in cementing the relationship with the
hotel. The hotel can also implement some innovative
promotional schemes. For example, like kicking off
a tactical email campaign to market a special package
offer to the Management of a corporate client. This
could coincide with a significant event in the client
company's history - like an annual day or even a simple
annual sales conference. The possibilities of exploiting
the direct contact nature of the Internet will be
limited only by the imagination of the hotel management
team who uses the medium.
Fourth, in a highly volatile marketplace, maintaining
flexibility in managing your highly perishable online
hotel inventory is essential. The hotel should have
the ability to put up for immediate online sale any
room, in any property, at any rate of its choosing
virtually overnight. Only the Internet can allow the
hotel to do this in a cost effective manner. To do
this, you need a good online sales partner who will
allow you to exploit this flexibility.
So what are the dangers of using the Internet to
market your hotel? The biggest danger of using the
Internet to market your hotel is false expectations.
It would be very unwise to get taken in by the hype
surrounding the success of the Internet and expect
it to be a panacea for all your troubles. Industry
figures have indicated that worldwide, booking over
the Internet accounted for 10% to 12% of the annual
sales last year. This figure is expected to go up
to about 18% - 20% in four years or so. So clearly,
online sales are not going to replace the traditional
channels of sales. However, the cost effective nature
of the Internet as a marketing medium definitely makes
it an attractive proposition to invest in. In India,
this is especially true. The Corporate customer forms
a significant chunk of the client base in India. This
customer can be rated high in terms of willingness
to spend as well as comfort with technology. Using
the hotels website to build franchise with this segment
would bring in significant dividends in the medium
to long term.
Now let's look at some of the guidelines for a healthy
strategy to market a hotel on the Internet. A good
Internet marketing strategy is the one that builds
on the Ps of traditional marketing and applies it
to the Internet. The 7P Strategy is a balance of:
Product, Pricing, Place, Promotion, Pace, Partnership
& Perseverance.
Product: Define clearly what your brand
experience stands for and reinforce it in all aspects
of the communication on the Internet. Your hotel website
should truthfully reflect your brand experience for
what it is - no more, no less.
Pricing: It is cheaper to reach customers
over the Internet and to market to them. A judicious
policy in rewarding the regular online customers will
go a long way in cementing relationships. The temptation
to offload excess inventory at discount pricing in
third party trade channels for short term gains may
be strong. But they do have serious repercussions
on not just the rack rates but also on the brand identity
in long term.
Another important aspect in managing pricing is optimizing
the cash flow. Your online model has to generate funds
quickly, efficiently and cheaply. It is a good idea
to seek partnership with an efficient payment gateway
to ensure that the money flows in smoothly. A good
payment gateway is the one that offers your customers
multiple payment options and, given the global nature
of the hospitality industry, one that offers multiple
currency denominations with no hidden currency conversion
costs. The fine print to watch out for is the commitment
that a payment gateway makes with respect to the payout
period and the Transaction Discount Rate (TDR) it
levies. The faster the payouts and lower the TDR,
the better it is for the hotel.
Place: A smart online distribution
strategy is the key to the success of the operation.
Deciding how much of the inventory to release online
and for how long and at what terms can be very tricky
initially. But going by the experience of the global
online majors, it is just a matter of time before
the hotel's management team gains enough expertise
to manage this aspect of the business profitably.
Promotion: Probably the best feature
of the Internet is your ability to strike a one-on-one
relationship with your end customer. This opens up
immense possibilities for you as a marketer. As your
database of information on the preferences of regular
customers keeps growing, your ability to create customized
offers to strengthen your relationship - and your
bottom-line - will grow.
Pace: Since the basic hotel product
is highly perishable, your ability to push your unutilized
inventory at very short notice becomes imperative.
Choosing an ideal balance in the placement of your
inventory between the direct channel and the indirect
third party channels to speed up sales is tricky.
In such a situation, if you have invested in developing
your hotel's website, and have made it very visible
online among your core target customers, then short
notice selling of your inventory directly becomes
easier.
Partnership: Currently, in India,
what most hotels do is put up a website with a reservations
page on it. When the customer wishes to book a room,
the entire process moves offline and confirmations
happen through expensive faxes and telephones. The
better hotels do it with email. But the truth is,
a reservation is not a reservation until the money
is in the bank. Your bank. A mere reservations page
on the website is not good enough. You need to provide
a payment link on that reservations page so that the
sale is closed there and then. To do this you need
enable your website to handle eCommerce. And there
lies the problem.
It is a fact that the cost of putting up an eCommerce
component to your hotel website is heavy. It is an
exercise that involves high entry costs, integration
of complicated software components and maintenance
of huge hardware infrastructure, technical staff and
complicated logistics. The smart thing to do is to
outsource it and yet, exercise total control. This
is where the right partnership can be invaluable.
A good multi-lingual Internet Reservation Solution
with a multi-currency, multi-payment options payment
gateway built-in such as ResAvenue
can be make a big difference. The good thing about
such a partner is that it hosts the entire operation
on its secure servers and manages the back end operations.
It empowers you with all the management tools and
functionalities you will need to manage your online
sales and payments. Such partnerships are also more
cost effective for the hotel, since the internet reservations
and online payment partner has multiple hotel clients
and it can spread the cost of the infrastructure across
multiple properties and enjoy the economies of scale.
Thus as a hotel, you can start your eCommerce operations
at a fraction of the cost of what it would normally
cost you to set up a system of your own and with practically
no effort.
Perseverance: The Internet as a medium
of commerce is just gathering momentum in India. It
is important to understand that it will take some
time to achieve its full potential. In such a situation,
it is natural that the early adopters will gain from
the experience and the head start. However, those
who wish to enter this arena with short term gains
in mind may well be disappointed. Hotels who intend
to be long term players must invest in building a
strong web presence. They need to work on creating
a website that is highly visible to their target customer.
They need to invest in the study of customer behavior
and to track his methodology of hunting for a hotel
room. They need to invest in Search Engine Optimization
Campaigns with good partners to maximize their presence
on the web. The road is not easy, but the rewards
are worth the effort. Success will come to those who
persevere.
2003