Online distributors hitting hotel profits

The increasing use of online distributors such as Expedia is the biggest threat the hotel industry has ever faced, delegates were told at the Deloitte & Touche European Investment Conference in London last week.

"We're giving too much of the profit away to distributors," said Robert Cotter, chief operating officer at Starwood Hotels and Resorts Worldwide. "You may think you control your pricing, but you don't - they do. This is as serious a threat to our industry as there's ever been. These guys play to win and they play to win with our profits."

Cotter said that to win in the online space, operators should aim to generate at least 75% of their bookings through their own websites, and that would require increased investment and a focus on content.

Richard Hartman, managing director (Europe, Middle East and Africa) for Six Continents Hotels, said that using intermediaries increased customer acquisition costs and hit achieved room rates.

"We need to get back in the retail business and take control of our destiny. We are not wholesalers," he said.

Concerns were also raised by Pascal Voyame, vice-president of finance at Mövenpick Hotels and Resorts, who said hotel operators should monitor online intermediaries' and their market share "very closely".

Meanwhile, Wolf Hengst, president worldwide hotel operations at Four Seasons Hotels and Resorts, cited the firm's decision not to work with online intermediaries as a major reason for its strong performance in the recent hardened trading conditions, during which it has not discounted rates.

"We decided we needed to be in control of our rates and we never gave it away," said Hengst. "We've been able to maintain our own destiny in this regard."

Source: Caterer & Hotelkeeper magazine, 30 October - 5 November 2003