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Checking out: The biggest story of 2012
January 13 2012

It took less than 11 days for the most important story of 2012 to drop in the new year. It took the six brands behind Room Key quite a bit longer to get the platform up and running.

By Patrick Mayock
Editor-in-Chief
patrick@hotelnewsnow.com

10 days, eight hours, 32 minutes and 47 seconds—that’s how long it took for the biggest hotel-related story of 2012 to drop in the new year.

The events that spurred it, not surprisingly, took much longer. But more on that later.

A key to more affordable distribution
If you haven’t heard by now, on Wednesday six of the world’s biggest hotel chains joined together to launch Room Key, a new brand-direct distribution channel that allows consumers to search, shop and compare hotel rooms from all of the major brands. 

 
It’s a big, bold move for the platform’s six founding investor brands: Choice Hotels International, Hilton Worldwide, Hyatt Hotels Corporation, InterContinental Hotels Group, Marriott International and Wyndham Hotel Group. For the first time, their inventory will be combined in a new distribution platform that cuts out the middle man and allows customers to book direct on brand.com.

It’s only a matter of time before more brands sign on. In fact, Best Western International took the plunge on Thursday. I can only imagine Starwood Hotels & Resorts Worldwide and others aren’t far behind.

Room Key CEO John Davis said the platform is, in some ways, a reaction to Google’s foray into the travel space, reported by my HotelNewsNow.com colleague Jason Q. Freed.

“The concept is not a copy of Google, but we’re both going down the same path because that’s what the consumer is demanding,” he said. “I sleep well knowing Google is working on something similar to us—they have some smart people working there.”

The hotel reps Jason spoke with Wednesday stopped short of saying Room Key will allow revenue managers to reduce the amount of inventory given to online travel agencies or Google—but one could certainly infer as much. The big brands aren’t banding together to create “just another distribution channel.” This is a strategic move that (whether stated directly or indirectly) is a reaction to the competitive distribution landscape that’s left yield managers scratching their heads and owners with less money in their pockets.

A long time coming
Anyone who’s surprised by the launch of Room Key shouldn’t be. There have been murmurs and mumblings that this particular incarnation has been in the works for almost two years now—although the foundation stretches back even further than that.

Back in the early aughts when the OTAs took the downturn-pained hotel industry by storm, a number of the major hotel chains formed an entity to investigate the possibility of offering a similar platform. The efforts never reached maturity, though, as Priceline eventually bought the entity then known as Travelweb. The end result came about possibly because of the industry’s lack of familiarity with the then-new business model or possibly because of the appearance of price fixing.

That latter charge still is a potential hurdle. Any time major companies join forces in a financially beneficial partnership that shapes market pricing, it’s sure to draw raised eyebrows from the U.S. Securities and Exchange Commission and other government agencies. But Room Key, at least in its initial beta testing, appears to skirt those issues by not allowing customers to book directly on the site. Instead, consumers are presented with price and availability by hotel and then are directed to the property’s website to book.

It will be interesting to see Room Key and its hotel members tip toe through the evolution of the channel in the coming months—and perhaps more importantly, how OTAs, Google and the government will react.

Suffice to say, it’s a move that could inexplicably change the distribution landscape for the next decade, and one we’re eager to follow in the years ahead.

TripAdvisor cleans up its image
Another headline that caught my eye this week was TripAdvisor’s decision not to publish its annual list of the “dirtiest hotels” in the world.

The pulp piece has drawn a lot of attention—and ire—in recent years, kicking up storms of publicity by highlighting comments such as: “If Hell had a hotel it would be something like this.”

The review site’s chief executive, Stephen Kaufer, told The New York Times, “We want to stay more on the positive side, so we’ll continue to feature the best destinations, the top hotels. We’re slicing and dicing the ‘best of’ in different ways this year, more than focusing on the negative.”

Not to put a negative spin on Kaufer’s explanation, but his underlying motivations are suspect. How coincidental TripAdvisor decided to pull the dirtiest list this year, months after the company spun off from Expedia. Now that it’s left the cushy confines of its parent OTA, TripAdvisor seems to be taking a more measured approach.

Stat of the week I
70,291: The number of rooms the U.S. hotel industry is projected to open during 2012, according to STR,
parent company of HotelNewsNow.com. That would represent a significant bump in room openings compared to 2011, when only 38,409 rooms opened.

It is worth noting, however, that in December 2010 there were 75,747 rooms expected to open in the pipeline. That means only 50.8% of the projected supply actually came to fruition on schedule and as planned.

Stat of the week II
-1.8%: The occupancy decline reported by the U.S. hotel industry for the week ending 7 January, according to STR. The last time the U.S. hotel industry reported an occupancy decrease in the weekly performance numbers was the week ending 23 April 2011, when occupancy fell 3.8%.

But again, take this one with a grain of salt. The decrease had more to do with the year-over-year calendar shift during the holiday week than an actual drop in performance. Said Brad Garner, chief operating officer at STR: “Calendar day shifts for the holidays during the month of December created difficult week-over-week comparisons for the industry.”

Stat of the week III
130: The number of single-asset sale transactions of more than US$10 million that are not part of a portfolio allocation. The stat was compiled by Dan Lesser, a HotelNewsNow.com columnist and president and CEO of LW Hospitality Advisors. These transactions totaled approximately US$8.9 billion and include roughly 41,000 hotel rooms with an average sale price per room of approximately US$217,000.

Quote of the week I
“It seems like it’s a better time to buy than sell.”
Mark W. Brugger, CEO of DiamondRock Hospitality Company, discussing the transaction outlook for hotel real-estate investment trusts in “REITs awakening in 2012.”

After a quick exit from the buying game in August of last year, the REITs are shaking out of hibernation and are getting their paws back in the game.

Quote of the week II
“If this plan does actually come into fruition, the New York City hotel market will feel some pain.”
Alan Gonzalez, director of distribution and e-commerce for Warwick International Hotels, discussing a proposal from New York state governor Andrew Cuomo to redevelop New York’s Javits Center and build a new US$4-billion convention center 16 miles away in the South Ozone Park region of Queens in “NYC hoteliers torn on new convention center.”

It seems hoteliers are mixed on this one. Some think a new, much larger convention center will attract more business to the city. But others worry the location is too far away from Manhattan and will only deter meeting planners. I fall in the former group. While 16 miles is a far commute from Midtown, I think the city will accommodate the move with appropriate infrastructure. And if nothing else, this is just another excuse for hoteliers to develop properties in a new part of town. 

Comment of the week
“This significant step by the major brands to address the cost and commoditization challenges that the OTAs have been exploiting. It also deals fairly with taxing authorities. As this platform gains momentum, consumers will have an excellent alternative and owners and operators will have a partner they can trust rather than a third party that exploits our lack of cohesion. A big step in the right direction.”
Multi Brand Owner Operator commenting on “Brands team to launch Roomkey.com hotel search.”

Email Patrick Mayock or find him on Twitter.

 

The opinions expressed in this blog do not necessarily reflect the opinions of HotelNewsNow.com or its parent company, Smith Travel Research and its affiliated companies. Bloggers published on this site are given the freedom to express views that may be controversial, but our goal is to provoke thought and constructive discussion within our reader community. Please feel free to comment or contact an editor with any questions or concerns.

 

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