The Web, made for luxury

CEO of Small Luxury Hotels, Paul Kerr, tells Yeoh Siew Hoon how the Internet saved a brand like his and yet made life more complicated for it.

The Internet has been a saviour for a company like Small Luxury Hotels of the World which is why CEO Paul Kerr rarely goes to bed without thanking "Bill Gates and all the Internet guys for all their efforts to help our business".

"Without them, we wouldn't have built the international brand we have," he said. The Internet has also helped "deliver identifiable reservations at the most cost efficient manner to properties - which has been our core mission since the beginning of our company".

"Customers coming to us on the Web - that's the cheapest way of delivering business," said Kerr, who was visiting Singapore to open the new SLH Asia Pacific office in the city. The channel split in SLH business is roughly10% voice, 60% GDS and 30% web.

But even as Kerr, who joined SLH in 1991, thanks the Internet, he said it has also fragmented distribution and "made things far more complicated".

"Before there were nine GDS channels, now there's really only three to speak of. Guests are also coming from all over the place. Before a guest came in and when he checked out, you said, ‘see you next year', and you get your bedrock of occupancy and then you wait for the rest.

"Today, because of all the information out there, the customer has almost perfect information, a perfect market for their shopping around and they don't have to rely on the travel agents anymore because their question was, who's the travel agent working for?"

Kerr said SLH's entire marketing efforts were focused on driving people to their www.slh.com website and then "people can see what choice we have and book". It recently launched an iPhone application and developed an ad campaign around the new service.

The most complicated thing that hotels have to tackle online is the issue of rate parity, said Kerr.

"I don't think hotels do it on purpose. It's too complicated, too many rates, too many room types and hotels fall down and end up making mistakes. Of course, they don't want a customer to get the room for less money than they can sell it for themselves - it makes them look silly."

SLH has a lowest rate guarantee on its website. "We have had to do a few refunds and it costs the hotel because they end up paying the difference."

Kerr said the Internet channel is best for a simple offering which is why low end hotel chains like Holiday Inn Express or low cost airlines like Easyjet do so well on the web. "The simpler the offering, the easier to book and our hotels have to make their offers simpler."

The challenge of course is simplifying the luxury hotel sell and Kerr said this can be done by "putting everything into one package, one experience".

He feels that hotels tend to complicate things by having too many room types. "In the luxury segment, the hardware is a given - people expect certain things. People are looking for experiences, things to do, that they can't do in their normal lives and that they can only get from a certain hotel."

There was no doubt however that it was a tough year for the luxury travel market. SLH's revenues dropped 17% in 2009 compared to 2008. "It wasn't a good year for anybody," said Kerr. Its average rate was US$320, a drop of 20% from 2008.

Kerr, who is looking at a 5% growth this year, is not unduly worried about any longterm impact of the global financial crisis on the luxury market in which some people think has changed the way people look at luxury.

To Kerr, the luxury customer that comes to SLH has fundamentally not changed. The profile of SLH's Club members is average 45-60 years ago and is usually American or British. "The interesting fact - and I only know the business that comes through SLH - the biggest business that goes to hotels direct is usually British. That's true across our hotels across the world."

Of customers coming through the SLH system, British make up 25% and another quarter comes from the US.

However, this could change over time, admits Kerr. "Post-the financial crisis, this has to change. There is overwhelming evidence that the new wealth is in Asia and Brazil and Russia."

Asked if SLH would alter the way it selected its hotels to attract these new customers who might want a different experience, Kerr said, "People aspire to the same things - good service, good quality. If anything, standards have to be higher because I think people in Asia are less forgiving."