Eleven years on, six US hotel groups – Hilton Worldwide, Hyatt Hotels Corporation, InterContinental Hotels Group, Marriott International, and Wyndham Hotel Group – are attempting to do it again with Room Key. This time though, on a larger scale – it is understood that each group is putting in US$5 million each into the new venture – and perhaps with more urgency.
In that last decade, while hotels dithered, the huge OTAs have indeed become juggernauts. Look at how Priceline is peforming. Fourth quarter gross travel bookings for the Priceline Group reached $4.96 billion, an increase of 51.8% over a year ago. Revenues rose 35.5% to $991 million. International performance was even more stellar – its international operations contributed revenues in the fourth quarter of $610 million, a 62.7% increase versus a year ago. The Group’s gross profit for the fourth quarter was $725 million, a 51.5% increase from the prior year.
In 2010, Booking.com, part of Priceline, overtook Expedia as Europe’s largest online travel agency. Both companies continue to see growth as consumers in Europe increasingly move online and their commission levels – sometimes up to 25% – continue to cause grief for hoteliers.
In Germany, a row has erupted between hoteliers and HRS, when the latter attempted to increase commission levels from 13% to 15% and it added a clause “that denied hotels the right to offer better prices through any other booking channel”. Read this report.
“HRS felt they could do it because they control a huge chunk of the market,” said one CEO of a hotel group based in Europe. “Intermediaries are becoming too powerful.”
Hence, when Room Key’s chief executive officer, John F Davis III , the former CEO of Pegasus, flew into Berlin to attend a dinner with about 25 hoteliers, hosted by Trust International, he was warmly received.
Following on from that meeting, Preferred Hotel Group became the first commercial partner supplier of independent luxury hotel inventory to Room Key.
Trust CEO Richard Wiegmann also said his hotel CRS would become the first to establish direct connectivity with the new site. “We are giving it a go. It should be done in two weeks.”
As for whether Trust would invest in the venture, he said it was too early to say.” Worldhotels, part of the same IHS family as Trust, is also understood to be signing on.
Ted Teng, CEO of Leading Hotels of The World, said he was still going to wait and see. “When I first heard the news of Room Key, I wrote down three things – join them, form our own or wait and see. I want to understand better what it is and whether it’ll be a net positive for our independent hotels.”
Hoteliers support the sentiment behind Room Key of course. They need to reduce the power of the OTAs and lower the costs of distribution. “This is positive. There is more to gain from brands working together than competing,” said Teng.
There’s also a feeling that Room Key has a better chance of taking off than andbook.com. The technology is different, the urgency is there and the six major brands have enough clout to make it work.
According to press statements issued by the company, Roomkey.com will provide “travelers with a search and book experience tailored for ease of hotel shopping through an uncluttered and trustworthy site”.
“It gives consumers confidence that they have made the right choice by providing accurate hotel information straight from the source. From searching through to booking directly with the hotel, Roomkey.com enables consumers to search, book and relax.”
The theory is, if only a small percentage of the hundreds of millions of visitors who visit the six branded websites can be persuaded to book within roomkey.com, then the venture would have achieved its purpose. And its user interface is clearly designed to make it simple for consumers to search and book.
Room Key will be launching its first three international sites early this spring in the UK (www.roomkey.co.uk), Canada (www.roomkey.ca) and Australia (www.roomkey.com.au) and Davis said more commercial partnerships will be sought.
At a panel at etravelworld at ITB Berlin, Remko West of Xotels said there is reason why online distribution is expensive. “Online marketing is expensive, there is no way to do it cheap and that’s not going to change.”
It is said that between Expedia and Priceline, the two companies spend up to $1 billion on search marketing and will Room Key be prepared to invest that amount?
“The people who use this argument though are wrong,” said another hotel chief executive. “Room Key is not meant to compete with the OTAs, it is meant to provide another channel for consumers to book direct with hotels.”
The critical question of course remains – would the customer rather book with an OTA where he feels he gets access to a wider, unbiased choice of inventory or a hotel website where his choice is limited to participating brands, no matter how many partners come into Room Key?
