Distribution 1012004

Resort Management Conference Greenbrier Resort

Bill PetersVice President Reservations & Market Development

Outrigger & OHANA Hotels and Resorts

Traditional Switching Companies

Global Distribution Systems (GDS)Originally Airline Central Reservation Systems (CRS)

Switch companiesPegasusWizCom

Resort CRS

AmadeusWorldspanApolloSabre

Pegasus and WizComCirca Mid 1980’s

Switch companies bring to the table Single image inventory Instant confirmation Auto availability & auto rate update Electronic transactions, less paper Reduction in processing agents

Consumer Travel Agent Wholesaler Wholesaler Fax Server

Resort FAX

The 2nd Traditional Method of Distribution is the Wholesale Channel

There is still a lot of paper!

Resort PMS

Resort FAXResort

Agent

Paper, Paper and More Paper

Internet Cloud ArrivedCirca 1998

Creating new Turbulence!!!

Travel agentcommissionable

rates

Dot Com commissionable

rates

GDS

Switch companies PegasusWizCom

Resort CRS

Traditional consumer

Internet consumer

Traditional Model

Merchant Model Circa 2001

Paradigm changes Many dotcoms became more like traditional

travel wholesalers Net rates 25% to 35% below rack Multi-million dollar consumer advertising

campaigns Tremendous volume when it was needed

post 9/11

INTERNET CONSUMER

Merchant Model and the mega dotcoms

Hotels.comOrbitz.comTravelocity.comExpedia.com Traditional Wholesaler

25% to 35% below rack rates

Merchant Model

No Free Lunch!

Resort ADR and RevPAR decline

And it is a paper nightmare!

Resorts try to keep up with the Paper Faxes, Room Blocks, Net Rates and Staffing.

2003 -2004 Resorts Respond

Millions of dollars are being invested to enhance resort Web sites regain control of the market

The transactions on these sites will grow but the mega dotcoms are here to stay

Speed bumps ahead!

Speed Bump # 1 Mega dotcoms are way out spending the hotels in

consumer advertising and Web placement

Speed Bump # 2 Traditional wholesalers are also out spending the hotels in

consumer advertising and Web placement

I need a Vacation!

Speed Bump # 1

Joe Consumer

I still need a Vacation!

Speed Bump # 2

Joe Consumer

Joe Consumer has run the Internet gauntlet and finally

makes it to the resort Web site.

Your hotel – finally!

I’m going onVacation!

Focus on the amount of business you are willing to allocate to the dotcoms

Carefully monitor all channels in regards to price and availability

Invest in your Web site

How to improve ADR/RevPAR

New Distribution Concepts

Rate parity in all consumer channels Live chat Electronic permission based marketing Convergence of voice, data & video over IP Links out – transparent sites in Low price guarantee

Low Price Guarantee

Does it work? The jury is still out. According to PhoCusWright Inc, Marriott, Holiday Inn

and Hilton have seen a significant increase in transactions on their web sites since the introduction of their low price guarantee.

Here are some of your competitors!

InterActiveCorp Ten Banana Rating

Owns an operates the following companies: Hotels.com Interval International Expedia.com Ticketmaster Travelscape.com Newtrade

Middleware TV Travel Group - UK Entertainment Book HSN – USA HSN – Europe Match.com Citysearch.com US Cable Travel Network Udate.com Zero Degrees.com Anyway.com - France

(acquired 3/2004) Tripadvisor.com Hotwire.com

(acquired 3/16/04) Activity World – Hawaii

(acquired 3/2004)

Cendant Three Banana Rating

Travel Distribution Services Galileo International Travelport Travelwire Lodging. COM Travel 2 and 4 Neat Group Wizcom Shepherd

Systems Cheap Tickets Cendant Travel THOR RCI Hotel Club.com & Rates to go.com

Acquired (3/2004)

Expedia.com – Number One

Market leader Air – 46% (2003) was 36% (2002) Hotel – 37% (2003) was 28% (2002)

PhoCusWright consumer survey

Merchant Model % off lowest published public rate % is negotiable Agreed upon mark-up (margin)

Inventory management Change at will via Extranet site

Expedia.com

Watch for: Forward distribution of the Merchant Model

Travel agencies. Corporate travel

Over 1,100 actively booking companies

Loyalty club Strategic emphasis on customer loyalty

Direct connect to CRS via Newtrade middleware Expedia hotel rating Improved dynamic packaging

Travelocity.com

Market share – 2nd in Air and 2nd in hotel Air – 44% (2003) was 59% (2002) Hotel – 34% (2003) was 34% (2002)

PhoCusWright consumer survey

Merchant Model % off lowest published public rate % is negotiable Agreed upon mark-up (margin)

Inventory management Change at will via Extranet

Travelocity.com

Watch for: Loyalty club Forward distribution of the Merchant Model

Corporate travelers via GetThere.com *Sabre equipped travel agents* Dynamic packaging for Site59

Hotels.com – Number three

Hotel reservations Hotel – 24% (2003) was 17% (2002)

PhoCusWright consumer survey

Merchant Model % off lowest published public rate % is negotiable Agreed upon mark-up (margin)

Inventory management Change at will via Extranet site

Hotels.com

Watch for: Creation of a loyalty club. Dynamic Packaging Corporate Travel Forward distribution of the merchant model

Conferences and Meetings Weddings and social events Airline sites such as Mexicana Airlines

Latest news Provides hotel accommodations for Delta Airlines

customers “Bill me later” service.

Orbitz.com

Market – 3rd for air and 4th for hotel Air – 41% (2003) was 25% (2002) Hotel – 18% (2003) was 10% (2002)

PhoCusWright consumer survey

Merchant Model % off lowest published public rate % is negotiable Agreed upon mark-up (margin)

Inventory management Change at will via Extranet site

Orbitz.com

Watch out for: Forward distribution of the Merchant Model

The business traveler Traditional travel agents as an alternative to GDS

connections Group Weddings Social Events

Loyalty club Latest news

Cashing in with Las Vegas Casinos by offering packages for all Caesars Entertainment casino resorts

Priceline.com

Market share - 4th in Air and 5th in hotel Air – 14% (2003) was 16% (2002) Hotel –13% (2003) was 7% (2002)

PhoCusWright consumer survey Opaque pricing

Room rate offering at discretion of hotel No agreed upon mark-up but is minimum

Over 15,000 distribution partners EBay, Amazon.com, Lowestfare.com, GoGo (static packages)

Inventory management Change at will via Extranet site

Hotwire.com

Market share - 6th in Air and 7th in hotel Air – 6% (2003) was 14% (2002) Hotel – 2% (2003) was 10% (2002)

PhoCusWright consumer survey

Opaque model Room rate offering at discretion of hotel No agreed upon mark-up but is minimum

Inventory management Rates and inventory delivered through Pegasus switch.

Priceline.com

Watch for: Dynamic packaging Private label booking pages to traditional travel

agencies. Merchant Model offerings

Travelweb.com

(HDS) Hotel Distribution System Owned by

Hilton, Hyatt, Marriott International, Pegasus, Starwood, Six Continents, and also Priceline.com

Merchant model B2B only Supplies merchant model rates to sites such as

lowestfare.com, Orbitz.com, Neat Group and many more small Internet travel sites.

Sidestep.com

New paradigm model Privately held Internet technology company. Commissionable Rate Program

Consumer focused Re-directs consumer to resort site or it intermediary

site. Core Technology

Can access all of the travel inventory available on the Internet, which conventional search engines, crawlers and shopping bots cannot.

5 million membership since 2000

US Best Hotels.com

Direct to consumer hotel advertising firm Resorts pay annual fee per property One year of unlimited advertising through site Consumer can link directly to resort site and

book a reservation Resorts do not have to allocate rooms Lessening dependence of mega dotcoms.

WorldRes.com

Net rate program (merchant model) Distributes net rates on retail Web sites

worldwide Set room night limits Rates based on seasonal or daily demands Adjust rates in real time No long term contracts and pricing

The battle continues for market share or is it dominance ?

The battle continues for market share or is it dominance ?

Airline against airline Destination against destination Mega dotcom against mega dotcom Traditional wholesaler against mega dotcom Travel agent against mega dotcom and

traditional wholesaler Internet sites

The battle rages

Traditional media advertising against Internet advertising

Traditional hotel distribution channels against the new Internet distribution channels

Traditional challenge of resort against resort for occupancy, ADR and RevPAR.

Who Will Win?

1. You will, after you listen to the next three speakers

2. It is your product that the consumer wishes to purchase

3. You control your sales and inventory strategies

4. You make your resort and destination stand out among all others

3 Key Issues in Hotel Electronic Distribution

John BurnsHospitality Technology Consulting

Web Now Drives Travel Decisions

“Most” travelers research their options on the Web prior to bookingeither on or off-line

Search engines play a key roleoptimization is a top priorityDo you know where you display? With

various phrasings? In each engine?

Web Now Drives Travel Decisions“Informative, appealing presentation of

the resort is decisivedecisions are based on Web content; you

won’t get a second chanceResort travelers seek experiences, fond

memoriescan you help them?do you say so?sell benefits, not features!

Mega Agencies are Reshaping our Environment

InterActiveCorp (Expedia, Hotels.com), Travelocity, Orbitz, Cendant (Lodging.con, Cheaptickets, etc.)

Merchant Model produces approx. 5% of bookings influence of MM rates extends far

further; impacting ALL rates

Mega Agencies are Reshaping our Environment

Initially targeted individual leisure travelerNow active in:

corporateExpedia Corporate Travel, Orbitz for Business,

Travelocity Businesstour

Expedia Classic Custom Vacationsdynamic packaging

WWTE, Neat .. + .. TicketMaster, etc.

Mega Agencies are Reshaping our Environment

The Future?meetings and convention, groups...

All based on MM rate structureOur initial attitude: “They are the

enemy”Our first reaction was denialsome softening in approach

movement (slowly) toward partnership

Mega Agencies are Reshaping our Environment

Think about a “wholesale-based” rate structure

Remember, you have what the Megas need most: Content

A Footnote:role of representation companies in

jeopardy

The Challenge to Manage

Electronic distribution is re-testing every resort’s skills and processes in:pricing inventory allocationdistribution management

The average hotel attempts to maintain inventory in 7 electronic outletsRes managers say they can effectively

manage 5

The Challenge to Manage

Begins with a thorough (highly detailed) forecasting processmay utilize revenue management

technologyIncludes consideration of daily

potential of each channel -- including cost overhead and guest profitabilitywho are your most valuable guests?

The Challenge to Manage

Competitive intelligence is vital“robots” are coming to our rescue

Single point of management options - via CRS and “dashboards” - are emerging

Options are changing and evolvingreview - and revise - your processes

often

In Summary:

1. Powerful presentation: essential2. Understanding, working with, and

anticipating the “Megas”: imperative3. Effective inventory management

processes: a necessityJohn BurnsHospitality Technology Consulting

Resort Management Conference

Greenbrier Resort

Dwight Gould

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Internet usage

US Internet Households Will Reach 84M by 2008 US Internet Households Will Reach 84M by 2008

Source: Forrester Research, April 2003.

112.4111.2110108.8107.7106.6105.5104.3103.2102.110110099.19896.9

76.8 79.481.8 84

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1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

US

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Total US householdsInternet households

Actual Forecast

1 2 3 4 5 6

Online Usage Will Keep Growing…

145 175 201 208 217 232

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400

600

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Worldwide

Source: IDC, February 2002 (ICMM 8.1)

- Millions of Users -

1 2 3 4 5 6

Source: TV: Nielsen Media Research (2+), Radio: Arbitron (12+), Internet: Nielsen//NetRatings (2+)

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RadioTelevisionInternet

Online vs. Radio / TelevisionDaypart Breakdown Online Media Mix Synchronization

1 2 3 4 5 6

Change in offline media consumption with addition of online…

21%16% 16%

12%

0%

10%

20%

30%

40%

50%

60%

70%

80%

TV Newspapers Magazines Radio

Decreased No Change Increased

21% of usersConsumed less TV due to increased Internet Usage

Source: Forrester Research, Technographics Database, 2003 – Base 18+ U.S. Adults (online+offline)

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Media Consumption

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Growth of Media Usage 1998 - 2003 (W25-54)

MediumMedium 19981998 20032003 % CHG% CHG

Magazines 54.2M 55.1M 2%

Newspaper 49.3 50 1%

Radio 55.2 54.2 -2%

TV 54.2 57.6 6%

Cable 40.8 47.6 17%

Internet 17.3 44.9 160%

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Online Trends - “Soccer Moms”

Per AOL, Moms spend up to 17 hours, per week online

Moms’ time constraints account for increased Internet usage

TV time is diminished

Advertisers should consider increased online marketing to reach women 25-54 ( per Harris Interactive Study -May2003)

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Television campaigns reach the law of diminishing returns

BrandingEffect

Frequency of ad exposures

Television

Internet

(The Web can give you incremental reach -- especially if your target is higher income, better educated, etc.)

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Why The Internet? Efficiently Targeted Mass Reach

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Effectiveness of Online Advertising

Key Findings Across Industries • Adding online advertising to media mix expands reach and coverage• Reallocating budget produces better overall results by increasing the

ROI from advertising• Optimal results are achieved when online advertising is 10 to 15% of

the marketing mix

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Thank you

Time for Q & A !

Web drives travel decisionsMega agencies reshaping environmentChallenge to manageOnline vs. radio / television marketingGrowth of media usageMarketing on the InternetRevenue management and the Internet