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Room Key: Operators like site, question costs
January 20 2012

While many hotel operators are excited at the prospect of saving money on commissions by using RoomKey.com, some are concerned they will have to fork over additional funds to make it work.

Highlights
  • “It will be a huge impact and a huge savings,” Katherine Steed, director of marketing for The Hotel Group, said of the decrease in commissions the company will pay after moving room inventory onto RoomKey.com from some of the channels they currently use.
  • Shaun Burchard, executive VP of sales and marketing at Marshall Hotels & Resorts, said he cannot picture the brands subsidizing marketing efforts without having to pass some of the costs along.
  • Marriott already started rolling out webinars at their branded properties to familiarize GMs and revenue managers with the site.

REPORT FROM THE U.S—As major hotel brands are rejoicing at the launch of RoomKey.com, several hotel operators are pondering whether the negatives will outweigh the benefits.

Choice Hotels International, Hilton Worldwide, Hyatt Hotels Corporation, InterContinental Hotels Group, Marriott International and Wyndham Hotel Group announced last week they joined forces to launch RoomKey.com, a new portal for consumers to search and shop for hotel rooms. Best Western International signed on with the group the day following the announcement.

Scott Pusillo, corporate director of revenue management and ecommerce for Crestline Hotels & Resorts, said he and his colleagues haven’t seen anything about RoomKey.com they don’t like.

“It’s too early to tell how well it’s going to go, but we love the concept,” Pusillo said.

In addition to the site’s user-friendly interface, Pusillo said he likes that RoomKey.com is launching as a supplement to the other distribution channels rather than as a substitute.

Katherine Steed, director of marketing for The Hotel Group, said a lot of the company’s room inventory currently goes to online travel agencies and opaque channels, which charge at least 18% on commission for branded properties.

“It will be a huge impact and a huge savings,” Steed said of the decrease in commissions the company will pay after moving room inventory onto RoomKey.com from some of the channels they currently use.

Shaun Burchard, executive VP of sales and marketing at Marshall Hotels & Resorts, said the new site possibly could give operators a leverage point to go back to the established OTAs and ask for better deals on commissions.

He also hopes to save on commissions if the site gains traction against the already-established travel sites, but said he is unsure how long it will take Room Key to become a fierce competitor in the industry.

RoomKey.com marketing
“It will take time to establish the brand, and it will take dollars to establish the brand,” Burchard said. The question for Room Key executives will then become, “Where do the marketing dollars come from?”

Burchard said he cannot picture the brands subsidizing marketing efforts without having to pass some of the costs along.

Patrick Goddard, president and COO of Trust Hospitality, said he believes Room Key will need a contribution of marketing dollars from the hotels to benefit from the system.

“Without substantial investment in creating awareness to consumers about the new portal … they are going to have a hard time competing against the traditional OTAs,” Goddard said.

Burchard said several of his peers in the hotel industry are concerned that the Room Key concept seems similar to the defunct site TravelWeb.com.

“Probably everyone in the industry remembers TravelWeb and the fact that it was largely a failure,” Burchard said.

The short-lived site, partly owned by Hilton, Hyatt, InterContinental, Marriott and Starwood, was sold to Priceline.com in the early 2000s.

Consumers need to have a compelling reason to buy from RoomKey.com instead of using one of the familiar OTAs, he said.

Steed said there will be tremendous benefits for the consumer: “With RoomKey.com, they will have the flexibility, the best rate guarantee and still have the same function of the OTAs to be able to compare rates.”

The site also could help eliminate consumers’ confusion on hotel cancellation policies, changes and deposits owed, among other issues that arise for customers using the traditional OTAs. It would remove the middle man as RoomKey.com customers will book directly with the brand instead of a third-party site, Goddard said.

Steed said Marriott is starting to roll out webinars to their branded properties to familiarize GMs and revenue managers with the site. She expects the other six other brands will follow suit and also begin providing education to hotel staff at their properties.

COMMENTS   Show All
VikoB
4/10/2012 2:04:00 PM
The 'experts' interviewed for this story probably dont excel in their Revenue Management responsibilities. I am owner of multiple properties, and had the foresight in 2010 that operating margins would be negatively affected with the push towards OTAs by ALL brands. At the time, Hilton would repeatedly threaten our hotels that if we didn't accept OTA terms, we would be blacklisted and lose out on OTA demand. However, being an owner, I dug a little further and found out that as long as you close out their merchant/opaque (18-30% commissions), then they will pull from your GDS inventory, just like every Travel Agent does, and they only receive a 10% commission. OTAs realized they could exploit the arbitrage created by the Hospitality Industry's lack of innovation and leadership in IT. Take away, CLOSE ALL OPAQUE/MERCHANT INVENTORY FOR OTAs AND THEY WILL BECOME A 10% COMM TRAVEL AGENT!
jfreed
1/24/2012 1:21:00 PM
@Joe V, thanks for taking the time to post your thoughts on Room Key. I'm working on a follow-up story along those lines and would love to chat. If you're interested, email me at jfreed@hotelnewsnow.com
SRC
1/24/2012 9:39:00 AM
This great new idea of a hotel booking portal, brand agnostic existed before with the same person at the helm...John Davis and the company then was called Pegasus Solutions. The website they created was called TravelWeb. The chains eventually sold Travelweb to Priceline and promptly came out with website price guarantees and then quickly provided inventory to Orbitz, Expedia and the like to compete against Priceline. They now have seen the branding capability of these websites (using the chains branded hotels) vs. their own branding efforts for which they charge franchise fees to the hotel owners. The hotel chains created their tormentors, their Frankenstein monsters, and now they vilify them. Good luck with that old /new website.
Joe V
1/23/2012 2:03:00 PM
1) Sill no verification that there will be "sub-markets" for bigger markets (example - Austin Northwest, Round Rock, etc.) - when a person seaches Austin, the listings are sorted by proximity to "city center" (another problem), with no way to filter by sub-market... 2) See article below - no TV ads... There is simply no way this will take off without a MAJOR advertising campaign. 3) The only advertising, at this time, will be "pop up windows" that appear to potential Guests who are ALREADY on the brands websites! (I know, I am scratching my head on this one, too...the whole goal of RoomKey is to drive reservations directly to the brand websites; yet, the only way the Guests will know about this "great" tool is to actually already be on the brands websites!) Basically, this means that if a Guest is on the Hampton brand site, though has not booked a reservation, an ad will appear directing the Guest to RoomKey...so they can spend awhile searching for the right hotel in the right market (could be pages down), then be directed back to a brand website - Hampton, though, instead of possibly having that Guest come back to their page to book later, now has to go up directly against 5 other major hotel companies (20+ brands!)...and Hampton is paying for part of this! It would appear to me to be much more prudent to simply spend more money on the brand websites so the retention / conversion rates increase significantly...instead of investing in a platform designed to drive the users away from your brand site when they were already there! 4) Furthermore, as Marc Z. pointed out, let's say they book through RoomKey for your hotel...you pay 10% commission to RoomKey, 4.5% on average for the brand loyalty program, and a potential AAA / AARP discount...I am no genius, but it would appear to me that the brands would be MUCH better served to simply negotiate better terms with the OTA's (14-15% would be perfectly fine!)...plus then they would still get the massive marketing prowess of the OTA's. 5) Finally, I imagine this will severely impact our placement on the OTA's websites - the "big six" hotel companies participating will surely suffer the likely ramifications of being "pushed down the list", with non-participants in RoomKey (Starwood, etc.) will enjoy better placement, and thus market share shift... Time will tell, but unless some major changes are made, I simply cannot see this being any success whatsoever...
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