Roomkey.com - Keys to the Castle for Hoteliers?

Roomkey.com, a new hotel metasearch site created by six of the largest hotel chains launched this morning.

With industry vet John Davis at the helm and backing from Choice, Hilton, Hyatt, IHG, Marriott and Wyndham, it somewhat resembles the industry's efforts to drive down costs and create consumer choice several years ago when a similar group created Travelweb.com - same CEO, slightly different group of hotel brands (noticeably absent from the group this time around is Starwood Hotels and Resorts Worldwide.) Travelweb was sold to Priceline.com and formed the basis of their non-opaque hotel product in North America.

Different this time around is metasearch. Roomkey is a pure meta play with room results returned in a nice, clean tile format:


Prior to the launch, the group purchased hotelicopter which had built a nice technology platform and user interface (as well as the awesome flying hotel ad that you may remember)

Clearly, and as expected, the call to action is a link to book at the sponsor's branded websites.

Roomkey (thus far) is a tool for comparing prices between hotels, not prices from different channels for the same hotel a la Kayak. Kayak pulls together disparate prices from various sources:


Multi-channel search, which Kayak never really delivered on the air side, is actually quite strong for hotels - and apparently, still an important issue judging from the sample above in which several of the founding members appear to be undercutting their own websites in various channels which Kayak is able to find and display.

Inventory today appears to be limited to the founding chains but we are sure that will grow, at least in critical markets such as New York and Las Vegas.

Hotel descriptive content on the beta site is decent with the usual photos and descriptions, although some brands (who shall remain nameless here) still seem to be returning content in ALL CAPITAL LETTERS. Given it is a beta, there are some photos with slightly strange descriptions: "NYCGH_P015 Exterior" but this will no doubt be cleaned up in due course.

That said, a great feature is the clear link to the hotels' property page where the rich content (and booking opportunity) lives.



Oddly, star ratings are included in the search results but it isn't clear how those stars are determined. In the past, the sometimes seemingly arbitrary OTA star ratings have been a source of frustration for hotels and brands alike. Roomkey promises to add user reviews shortly which should provide another, often more reliable way for guests to gauge hotels.

The hotel chains are not resting on their laurels after their past distribution wars with online travel agents (OTAs) and other distribution channels. Once fully built out with a mobile site, more inventory, reviews, Roomkey could be a potent weapon for consumers who want to be able to compare locations, features, rates across multiple chains and brands. With Google rapidly moving into the travel (and hotel) space and OTAs continuing to gain share, Roomkey will be another arrow in the chain's quivers to drive branded website growth and control distribution.

Ctrip and Home Inns: How Different China Really Is

Just heard Ctrip CFO Jane Jie Sun speak here at the Goldman Sachs Technology and Internet Conference in San Francisco.

Obviously, as we all know, Ctrip has been growing like crazy and sees lots of room to continue those numbers - and for good reason. A few snippets in no particular order:

• Only 2% of travel in China is booked online today - and Ctrip has 50% of that market

• 80% of air travel is sold by agents - and airlines are generally happy with this "outsourced" distribution model
  

• High speed rail presents a minimal threat because main stations are located far from the city center, stations themselves have few amenities and the trade-off just isn't there yet on a time or money basis

• In fact, CTrip sees rail as a growth opportunity - not from selling train tickets but from selling more hotels as rail travel increases

• Ctrip feels that at least 50% of hoteliers would pay more than the average 15% commission they currently ask for but Ctrip believes this is poor for the long-term partnership

• The Shanghai World Expo is expected to be very positive because, unlike the Olympics, it is a six-month long event. The Olympics were so concentrated that many people stopped traveling to Beijing. The opposite is expected for the World Expo - business travel will continue into Shanghai and Ctrip expects large amounts of domestic tourism, particularly families with children to visit during the Expo.

• The Chinese government in general "likes travel" and has designated travel as a "pillar of economic growth" which is always nice

But the biggest take away, however, was her discussion of Ctrip's recent investment in lodging operator Home Inns. If you are not familiar with Home Inn, you should be - they operate nearly 600 moderate hotels in China.

She said the investment has allowed Ctrip to gain access to deeper inventory and that Ctrip and Home Inns are in the early stages of connecting their systems to allow electronic distribution. She also mentioned that she saw this reservations connectivity and inventory management as a catalyst for other domestics chains - as Home Inns goes, so goes the industry.

We've known that business in China is different for a long time, but can you imagine if Expedia was to invest in Intercontinental Hotels? Or Choice? Even back when Cendant owned Wyndham and Orbitz/Cheaptickets etc, many in the supplier community thought that back door dealings were probably going on. (I've been since assured that Cendant was way too dysfunctional for that to actually happen.)

It will be interesting to watch how this relationship develops - but I'm not looking for it to be replicated here anytime soon.

Expedia and Choice Hotels Kiss and Make Up

Expedia (EXPE) and Choice Hotels (CHH) tonight announced they have signed a new, long-term deal that will return Choice's inventory to Expedia's global family of websites including Expedia and Hotels.com. The three year term is even included in the press release but maybe that is standard for a deal negotiated in the press.


More of note, the jointly issued press release begins with a quote from Dara Khosrowshahi, CEO of Expedia Inc, that makes it very clear to anyone wondering about the deeper issues of the dispute (LRA and rate parity as we discussed here) as where the two sides ended up: "We’re pleased to be working with Choice in an agreement that respects the guiding principles which we operate under." In other words, Choice agreed to similar terms that everyone else has: coup averted.


Choice Hotels CEO has a line as well but not nearly so telling: "Choice Hotels and Expedia worked together to establish a new agreement that is mutually beneficial and enables hotels in the Choice system to effectively manage their businesses."


Glad this thing is over - relationships negotiated in the press are never positive for either side. A public spat like this does little for the industry (hoteliers or OTAs) and takes the focus away from what everyone should be concentrating on in times like these - generating revenue.

Expedia and Choice Hotels: Spencer Has His Say

In Part Two of our Ghosts of the Internet Past interviews, we caught up with former Expedia executive Spencer Rascoff. Spencer is now the Chief Operating Office of real estate website Zillow.com but was ran hotel supplier relations during the IHG/Expedia stand-off six years ago. Prior to Exedia, Spencer and I worked together at Hotwire.com where Spencer ran the hotel side of that business and I brought him coffee and donuts.

TomBotts: “Spencer, first off, do you miss travel?”

Spencer Rascoff: “Well, of course I miss travel. Real estate is fun – things are going very well here at Zillow. But I still follow the travel industry closely – several of us who were at Expedia during the IHG smack-down have been emailing back and forth and reliving the old days.”

Tom: “So, has anything changed this time around in your opinion?”

Spencer: “The biggest change is that the suppliers have developed much stronger direct selling capabilities. Six years ago, the brand sites were pretty much second class sites. That has changed radically. The brand sites are a lot more reliable alternatives to the OTAs now and the brands have developed tactical marketing capabilities to successfully drive traffic directly.”

Tom: “When it comes to the current breakdown between Choice and Expedia, what you see as the major issues based on what you know?”

Spencer: “It seems that the negotiations are almost exactly the same as they were six years ago - you can copy and paste “IHG” for “Choice”. So little has changed. Amazing that the industry has changed so little that they are arguing about the same 3 issues – LRA, sell rate and margin – it’s been the same for ten years!”

Tom: “Does it make a difference this time around that it is Choice rather than IHG?”

Spencer: “In my opinion, IHG was more important in 2003 than Choice is to Expedia in 2009. I would give the edge to Expedia in this bout. The dirty little secret out there in the OTA space is that they don’t really need all hotels for leisure consumers. They need to have a good mix of star levels and locations but they don’t need every single hotel for this customer base. The OTAs are focused on the key cities that make up the bulk of their business and there are several key properties – about ten or so in each that are fundamental must-haves. For example, you can’t sell hotel rooms in New York and not have the Waldorf=Astoria. IHG has (or had) many of these key assets – I’m not convinced that Choice is in the same position of strength and brand power.

Tom: “Does an OTA need to have all hotels for business customers?”

Spencer: “Yes, business travelers are a different breed – they book much more on location, loyalty program, habit and of course negotiated rates. If all of a sudden the hotel where their company has a negotiated rate is gone this presents a major issue for the supplier, the company, the TMC and the traveler.”

Tom: “So when IHG pulled GDS inventory from what was Expedia Corporate Travel (now egencia) how big of a deal was that?”

Spencer: “It was a nuclear bomb – we didn’t see it coming and it took us and our mutual customers by total surprise. It was the one thing that really brought Expedia back to the negotiating table. I don’t think Choice has the same amount of leverage, however. Their hotels are just not as important to the corporate travelers that use a booking tool as the IHG properties were and are.”

Tom: Any other key levers you see either player having in this game?

Spencer: “The other lever is understanding how much control the franchisor has over the franchisees when it comes to distribution. Negotiating with IHG was a three legged stool between corporate, the owners and Expedia. Jim and IHG did a great job of ensuring that the franchisees would toe the corporate line. The franchisees were unhappy but IHG was really effective at keeping them in line. I’m not sure Choice has the same power.”

Tom: “Do you think Choice can replace the demand through other channels?”

Spencer: “It will certainly be easier this time around but it is still really hard. One key fact that is hard to ignore is what we used to call the ‘billboard effect.’ I’m not sure what the recent research shows but we found, back in the day, that for every booking that occurred on Expedia.com, the supplier site generated a direct booking as well. Consumers were exposed to the hotel on Expedia and then went off to book it on the supplier site. This demand generation is nearly impossible to replace.”

Tom: “Yes, we saw similar results in testing when I was at Starwood. So, does the lack of Choice hotels really hurt Exedia?”

Spencer: “I highly doubt Expedia’s conversion will take a hit. Consumers just book a similar hotel from a different brand. Now, this would not be the case if we were talking about a key marquis property – but for run of the mill hotels, consumers simply book something else.”

Tom: “Any parting thoughts?”

Spencer: “Well, in my mind, the wild card here is really egencia. It is very difficult to grow that business if potential customers see the TMC as at war with the suppliers. I’m not sure where things stand between egencia and Choice, but it is certainly Expedia’s Achilles Heel in this negotiation.”

Choice Hotels and Expedia: Former IHG Exec Jim Young Strolls Down Memory Lane

As we discussed earlier, all of the relevant parties to the last major public flare-up between an OTA and a major brand (Expedia and IHG) have moved on to new challenges. However, we’ve tracked the two key witnesses down, and they both have agreed to discuss the current situation between Choice and Expedia. First, we are talking with former IHG SVP Jim Young. We’ll follow shortly with a discussion with Spencer Rascoff, former VP of Supplier Relations at Expedia, and now COO at Zillow.com

Tom Botts: “Jim, you lived through a similar situation a few years back when you were with IHG. What has changed since you went to the mat with Expedia?”

Jim Young: “It feels like the industry hasn’t learned a thing. Suppliers seek leverage in the good times when demand is high and Distributors take advantage when demand is low. I suppose you could argue that is just capitalism, but it sure isn’t sustaining and somewhat unproductive”

Tom: “Is the landscape still the same in your opinion?”

Jim: “Some things are different. I think there is greater price transparency and channel awareness with meta-search now in the mainstream. Hotels have greater ability to communicate with customers through social networks like Twitter and Facebook. Finally, I think that both hotel companies and OTAs have done a better job establishing their brand position in the market.

Tom: “Talk about the role of hotel brands in this puzzle”

Jim: “Hotel brands are in the business of franchising their trademarks, providing development and marketing expertise, as well as reservation services. They make money by charging fees, normally based on a percentage of total rooms’ revenue. Hotel owners sign franchise agreements in order to be part of a bigger system. It gives them access to services and scale they either can’t get or are too costly to procure on their own. As far as room distribution is concerned, the brand represents all their system hotels and negotiates the participation terms with all major travel sellers, offline and online and processes them through the reservation system. Some brands have very strong franchise agreements that clearly establish the brands rights to set the terms of these agreements. Other brands are just glorified representation companies with minimal design, quality, and compliance standards.

Tom: “What is the power of a brand in your mind?”

Jim: “A hospitality brand is a lot more than just the sign, the room decor and the attitude at the front desk. The brand is the market power you give to hotel owners to sell rooms. That is what it is all about, after all. If you are a 200 room hotel in a big city crowed with many competing properties or an 85 room hotel at an interstate exit with 5 other hotels on the same strip, having a strong brand is a big deal and it helps you beat the competition. If, however, an owner perceives that they can get better marketing, distribution and reservation production by going direct to the distributor, then the brands value starts to diminish. That is what keeps franchisors up at night. If they are not perceived as a strong well marketed brand, then they can’t grow their system”

Tom: “So, why now? Why is this fight happening at a time when most hoteliers are pretty happy to get any revenue at more or less any price?”

Jim: “Like I mentioned earlier, I don’t think the industry learned anything from the last exercise. The cyclical nature of the business constantly creates winners and losers in contract negotiations. Expedia’s timing is dubious – kicking hoteliers when they are down is a tough card to play. Choice and Expedia were operating under the previous terms of their agreement which had, apparently after a number of extensions, expired. It sounds as if Expedia saw an opportunity to bring Choice’s corporate agreement into the realm of what they claim is their accepted norm with other chains. Both would have been better served to build an agreement that would survive the normal cyclical nature of the business – building an agreement that survives good times and bad for both.”

Tom: “And so what of Expedia’s attempts to bypass Choice and go directly to the owners/franchisees?”

Jim: “As you said in an earlier post, ‘we’ve seen this movie before.’ It is exactly what they attempted with IHG. We had tough guidelines in place that prevented our franchisees from deviating from the corporate strategic position. I’m not sure if Choice has those same standards in place. Going directly to the hotels is disingenuous if you really want to do a deal at the chain level. Expedia could drop a whole bunch of market managers if they focused on the chain level relationships rather than focusing on the hotels.”

Tom: “Choice has talked a lot about other efforts they are pursuing to replace the lost revenue from Expedia. Steve Joyce has placed the number at around $100M per year – not a small number given that it probably flows to a disproportionate number of hotels. You worked hard to replace the business you lost when you were dark on Expedia – did you make it up?”

Jim: “Well, we came pretty close. I can’t share exact numbers of course, but we were able to leverage some other key strategic partners to drive some pretty impressive numbers which demonstrated to its hotel owners the power of its brand system."

Tom: “So, could you have driven those numbers and retained the Expedia business for a net overall share gain?”

Jim: “Great question – the answer is probably somewhere in the middle. Some things are only possible when you switch allegiances and create the burning platform that forces everyone to react to the change – just look at Continental and SkyTeam vs. Star! I’m sure Continental will get an early benefit from being a full partner in such a large alliance.”

Tom: “Old airline guys (myself included) never get the Jet A out of our veins, do we? What is the net net of this situation?”

Jim: “I think, in the current state of mind of both hoteliers and OTAs, that this will end up as a giant, zero-sum game for both. Expedia will look a little less complete when their customers realize that Choice’s 5000+ hotels are missing from the display and Choice won’t have access to Expedia’s distribution reach. Something has to change.”

Tom: “What needs to change in your opinion, Jim?”

Jim: “I think there is a balance somewhere out there. In market segments where Choice has a strong brand presence and can easily tap the demand directly to their website, they don’t need to rely on the OTAs as much and should focus their efforts there. However, where Expedia can demonstrate that they can more cost effectively merchandise and deliver a room reservation to a hotel in a market that Choice is not as strong in or not targeting directly, then Choice should find a way to pay for that value delivered.”

Best Western Makes the Same Expedia Choice?

Hotel News Now has an interesting story describing the recent Best Western owners meeting. According to the story, Dorothy Dowling, Best Western's SVP of Marketing and Sales asked the members in attendance if they would be willing to join Choice in the fight against Expedia by pulling their hotels from the site. According to the story, applause rang loudly from the attendees.

Now, before this becomes a conspiracy against Expedia, lets examine the facts. Best Western, by the nature of the business model, does not have the power over its membership that IHG or even Choice Hotels has - they can't force their members (not franchisees, mind you) to actually toe the corporate line as IHG did six years ago.

And of course the hotel owners are opposed to the terms which Expedia is asking for - who wants to give up 25% of revenue per booking? The question is, can they make it up elsewhere?

Best Western suggests working with "receptive tour operators and other online travel agency partnerships" to drive revenue instead of relying on Expedia. Fair enough, but IHG and Choice would both say it takes a lot more than looking at other channels. And we've never seen a receptive that offers lower (or more flexible) margins than an OTA. As for looking to other OTAs - it comes down to size and scale. And for better or worse, Expedia has everyone beat in both categories.

So, is Best Western ready to step up and drive revenues direct? This is the true power of the brand.

CHH CEO on EXPE: LRA and MFN

Choice Hotels' CEO Steve Joyce just spoke with Hotels Magazine about the current issues at hand - taking the fight into the streets.

According to Joyce, it sounds as if the issues came down to six letters: LRA and MFN. In other words, Expedia is asking for Last Room Availability whereby they will have access to the entire hotel's inventory during both periods of market strength and weakness. MFN refers to a Most Favored Nation clause by which Expedia is asking for parity vs. other channels.

Choice is concerned that they will still have to offer rooms to Expedia (at the standard margin) even when the hotel is expected to sell out, depressing yields. In contrast, Expedia's concern focuses around providing consumers with inventory at all times, not just when the hotel "needs" business - it is about product consistency.

Choice would also prefer not to offer Expedia all rate plans and programs - possibly to allow special rates or packages on their branded websites etc. Obviously, Expedia would like to always have competitive pricing in order to keep consumers coming back in a hyper-price competitive marketplace.

These are gross simplifications of the issues at hand - Expedia is certainly not getting any style points right now in what is being pitched as a David vs. Goliath war.

Choice Hotels and Expedia: We've Seen this Movie Before

Hotels Magazine just broke a nice story on a squabble that has erupted between Choice and Expedia that is eerily reminiscent of a fight between Expedia and IHG several years ago.

This time around, Choice Hotels brands are no longer showing on Expedia and Hotels.com. This even includes white labels such as Expedia's co-branded AARP product. It is unclear if Egencia users are also shut out from Choice properties. It also isn't clear (yet) if Choice made the move or Expedia did but one thing is for sure - it is lights out for Comfort Inn et al on Expedia.

As you may recall, the last time we saw a major, public hotel riff was when Intercontinental Hotels (IHG) and Expedia went to war several years ago over a number of issues including display, content and, of course, margin. All the parties closely involved in that dispute (on both sides) have moved on to bigger and better things (think real estate site Zillow for the Expedia gang) but everyone we've talked to would largely like to forget the incident. There were no real winners in the long term.

The timing of this fall-out is interesting. The lodging sector is hardly strong right now - most hoteliers are looking for every penny of revenue they can scrape - harder to do when you are not appearing on the world's largest online travel agency. And Expedia has been working hard to cultivate a new culture of positive supplier relations. On the other hand, the budget-oriented chains such as Choice have fared better in this downturn than the up-scale brands so maybe Choice felt they could withstand going dark in order to make a point.

So, did Expedia make a choice or did Choice make a choice? We'll be watching this closely....