Online travel sites and booking engines including Travelocity, Expedia as well as opaque sites such as Priceline provided a conduit for the airlines to expand their distribution of their inventory. However this exposure and distribution conduit costs the airlines in terms of commissions and contracted rates. Many of the airlines began guaranteeing best-rates on their own web-sites as well as developing Orbitz to compete directly with other distribution conduits and subsequently reclaim client share.
Major hoteliers are now follow the airlines lead in their attempt to connect with their clients direct and avoid paying commissions and/or providing discounted net rates or similar. Now entering the market is in beta form is www.RoomKey.com
Roomkey.com was founded by six major hotel chains, all household names for many travelers including Hilton, Hyatt, Wyndham, Choice, Marriott and InterContinental all which brand multiple entities offering travels options from economical to luxury, hotels to resorts worldwide. The intention of Roomkey.com, the site sends visitors to the chain’s own websites to book rooms thus bypassing third parties including Travelocity, Priceline and other major online travel sellers and resellers.
The site in beta testing at present provides the founding entities mission statement in a concise one paragraph entry as follows “Founded by a group of leading hotel companies, Room Key’s mission is simple: offer travelers direct access to a broad network of hotels around the globe, provide accurate and comprehensive information, make it easy for travelers to discover what’s right for them. Room Key’s experienced hospitality management team has partnered with great hotel brands to provide this one-of-a-kind search and booking experience.”
According to PhoCusWright Inc, one of the major travel research firms, of the estimated $33.83 billion in hotel rooms booked online in 2011, about 55 percent (or $18.67 billion) came directly through hotels’ own websites. The remaining 45 percent, or $15.2 billion, was booked through online travel agents. Of note, how a decade can make a difference. In 2001 online travel sites generated just over $2 Billion and their growth has been exponential ever since.
What most consumers do not realize, a commission is paid for most online hotel bookings generated through an online travel agency. This commission can be as high as 30% of the rate a consumer pays. For a market such as New York with an average room rate in Midtown Manhattan close to $300.00/night, 30% would equal $90.00 paid in commissions. In Denver, with a downtown room-rate at $160.00/night, the commission payable could potentially capture close to $50.00.
While Roomkey.com will also charge a commission, as the founding partners are the major hotel operators, the commissions will be much less allowing the hoteliers, their franchisees and partners to generate higher revenues per booking even if rates are at parity with the online travel agencies. If Roomkey is successful, there may be a reduction of inventory provided to the online travel agencies who most will agree were a savior of the industry during the travel downturn following the attacks of 9/11/01.
History will be the final arbiter concerning success of failure. The airlines have been successful in their drive to attract consumers to their sites by offering guarantees for the “best-rate” and offering bookings san service fees.
The online travel agencies have realized this day may come when the hoteliers would try to recapture revenues. Thus, the major sites have been pushing dynamic packing i.e. bundling flights, lodging and transportation into a package. Note to hoteliers, consider adding 24/7 concierge availability.
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