Hotels finding room at the inn for Web sites
Analysts say the hotel industry is finally devoting big bucks to revamping and promoting its online presence in order to keep up with the travel industry.
As owners of Inn on the Beach, a 24-room hotel in Ventura, Calif., the Thomases considered paying for a Web site but decided against it when they added up the costs.
They may have to reevaluate that decision, as large and small hotel chains slowly catch the Internet wave that has already lifted the two other key areas of the travel industry.
While millions of consumers have rented cars and booked airline tickets online, the lodging industry has lagged.
But that appears to be changing. While some independent hoteliers are getting by with sites unequipped to take reservations, or with having no Web presence at all, much of the rest of the industry is waking from its indifference, analysts said.
"The Internet is going to be saving the hides of a lot of travel companies this year, especially hotels," said Henry Harteveldt, an analyst with Forrester Research.
Forrester says it expects hotels to do $2.7 billion in business over the Web this year. While that is just a fraction of the estimated $11.1 billion in online ticket sales this year, the hotel industry is among the fastest-growing areas in Internet travel services.
Although e-commerce has failed to live up to its hype in areas such as pet supplies, groceries and toys, online sales of airline tickets are so strong that the airlines themselves have gotten into the game. Online travel agency Orbitz, backed by American Airlines, Continental Airlines, Delta Air Lines and others, launched last month to strong consumer response.
On its first day, Orbitz said it had 175,000 registered members and sold about $3.5 million in tickets. A company representative declined to specify its current sales figures.
PhoCusWright, a research group that studies the online travel sector, projects that airline tickets will top $14 billion this year and $19 billion next year. Consumers will spend $2 billion online for rental cars in 2001 and more than $3 billion in 2002.
Hotels are slowly, almost reluctantly, pulling up the rear.
Several large chains have completed extensive site redesigns, including Marriott International, Hilton Hotels and Starwood Hotels & Resorts Worldwide, which operates Sheraton and Westin hotels, among others.
The three companies expect online bookings to constitute between 3 percent and 5 percent of total room sales this year, representing in some cases a doubling from last year.
For the hotels, their booking costs are cut almost in half, Harteveldt said. Hotels spend about $6 doing an offline transaction, but around $3.50 online. That type of savings also holds for agencies that sell airline tickets or for rental car companies.
Web sites use automated systems that do not require human travel agents, allowing the companies to save on labor costs.
Suzi LeVine, marketing director for online travel agency Expedia, said selling hotel reservations online was "one of the keys" to the company reaching profitability in March.
The money that companies put into their Web sites now will pay off in the future as greater numbers of travelers become accustomed to searching for their lodging and other travel services online, Harteveldt said.
Hotels are also boosting their Internet sales by doing business with companies that combine information on multiple hotels.
Hotel Reservations Network, a consolidator of hotel accommodations, contracts with hotels to book rooms online on a volume basis at cut rates. The company then attracts travelers by offering discounts.
These "aggregator" sites, which include Hotelguide.com, TravelWeb and Expedia's Travelscape.com, are good places for lodgers to pinpoint the best prices, said Lorraine Sileo, an analyst with Web travel research group PhoCusWright.
"Leisure travelers don't really have brand loyalty," Sileo said. "They won't necessarily visit the site of a particular chain. They want to compare prices so they can find the best deal."