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April 27, 2006
HOTEL-CHAIN LOYALTY POINTS AT ISSUE FOR INTERNET INTERMEDIARIES
Internet intermediaries such as Expedia and Travelocity may find it advantageous to award their customers points in the hotel chains’ loyalty programs, but so far the chains have resisted that step. A new report from the Cornell University Center for Hospitality Research examines the complex situation that hotel chains face in dealing with the online websites that sell discounted rooms using a merchant model. Cornell faculty members Bill Carroll and Judy Siguaw suggest that eventually one hotel chain may break ranks and offer loyalty points for internet merchant sales. Their report, “An Examination of Internet Intermediaries and Hotel Loyalty Programs: How Will Guests Get their Points?,” which is based on earlier research by Phocuswright, is available at no charge from the Center for Hospitality Research at http://www.hotelschool.cornell.edu/research/chr/pubs/reports/ . Carroll is a senior lecturer at the Cornell School of Hotel Administration, and Siguaw is dean of Cornell-Nanyang Institute of Hospitality Management and J. Thomas Clark Professor of Entrepreneurship and Personal Enterprise at the Hotel School. Carroll and Siguaw analyzed the complex relationship of the hotel chains and the internet merchants with regard to loyalty programs. The negotiations between the chains and the internet intermediaries have become critical because business travelers have begun to use the internet more heavily. Because of the desire to gain direct internet bookings, hotel companies would prefer not to award points to business travelers for those discounted rooms. The intermediaries, on the other hand, would like to strengthen their position by offering hotel loyalty-program points. The decision of whether to allow the intermediaries to award hotel-chain loyalty points hinges in part on whether those web merchants can, in fact, shift market share to a hotel chain that is featured on their website. A game-theory analysis of the situation suggests that a first-mover chain would gain some advantage over its competitors by offering points for the intermediaries’ sales. However, that advantage would soon be lost when competitors match that offer. As a practical matter, individual properties often grant their frequent guests loyalty points even if they haven’t technically earned them. Ironically, the actual cash-equivalent value of the points can be minuscule (although loyalty programs are costly for chains to operate). While the hotel executives interviewed for the report asserted that their loyalty programs encourage customer loyalty, those executives also admitted that most of their loyalty-program members also participate in other chains’ programs. Carroll and Siguaw point out that the customer information gleaned from loyalty-program members are a considerable benefit of operating a loyalty program. Given the cost of operating the loyalty program, Carroll and Siguaw suggest that if a chain did agree to award points for merchant-intermediary sales, that chain might create a different class of points or offer a reduced number of points for business customers who book on the internet. Despite the intermediaries’ wish to offer loyalty points (and the fact that Travelocity has tested such a program), Carroll and Siguaw do not expect them to develop their own hotel-like loyalty programs, given the expense of operating them. CHR And iPerceptions Sign Research Agreement The Center for Hospitality Research and iPerceptions are pleased to announce a new alliance under which iPerceptions will supply data that supports the School’s research into consumer behavior in the online marketplace. iPerceptions is one of North America's leading web-focused attitudinal analytics providers. Its webValidator Continuous Listening solution turns thousands of data points into easy-to-understand strategic and tactical decision support for users. iPerceptions uses a proprietary perceptual framework to evaluate key elements of the visitor experience and predictive algorithms and modeling to identify those attributes that drive satisfaction. Through this analysis, website owners know who, when, and why visitors are coming to their site. They are able to better understand the strengths and weaknesses of each visitor’s experience, and how the site can be modified to enhance visitor satisfaction. Cornell Hotel School faculty members Bill Carroll, Robert Kwortnik, and Lisa Klein Pearo are studying iPerceptions’ feedback from more than 6,000 visitors to seven branded chain web sites. "This alliance presents a unique opportunity for us to explore how consumers search for travel information and to investigate how these search methods differ across important sub-segments of the market," Pearo says. A research report on this topic will be published from the Center for Hospitality Research later in 2006. Based in New York, iPerceptions' clients in the hospitality sector include well known brands managed by InterContinental Hotels, Carlson Companies, Choice Hotels International, Cendant, Hilton Hotels and The Savoy Group as well as Fortune 1000 companies including BMW, Unilever, Volvo, Reebok, GM, L'Oreal, RCA, Mazda, and CompUSA. “By providing Cornell’s Center for Hospitality Research with access to our data, we create the opportunity to expand the general knowledge of online consumer behavior in the hospitality sector,” says Jerry Tarasofsky, president and CEO at iPerceptions. “This is a win-win opportunity for both iPerceptions and the hospitality industry." Featured Advisory Board Member
Mark Lomanno is President of Smith Travel Research (STR), the leading authority on current trends in occupancy, room rate and supply/demand data for the U.S. and the North American lodging industries. Each month, STR obtains revenue data from over 23,000 US properties accounting for over 3.2 million rooms. In addition, STR collects daily lodging performance data from over 18,000 U. S. hotels with over 2.3 million rooms as part of its daySTAR program. Through daySTAR PLUS, STR tracks daily customer segmentation data for upscale properties in all major US markets. Through its worldwide marketing alliance with Deloitte in the UK, STR provides a global perspective for all lodging trends. Mr. Lomanno serves on the advisory boards of the HSMAI Foundation, Travel Industry of America, The Center for Hospitality Research at Cornell University, and Priceline.com. He writes a monthly column for Hotel & Motel Management magazine. Because of his in-depth understanding of current industry issues Mr. Lomanno is asked to give numerous speeches at industry seminars and hotel company meetings throughout the year. He is also a frequent guest lecturer at the School of Hotel Administration at Cornell University. Prior to joining STR, Mr. Lomanno was National Director of Research for Laventhol & Horwath and has over twenty years of experience in lodging industry research. Mr. Lomanno holds an MS degree in Marketing from LaSalle University and an MBA in Marketing Research from Temple University. He lives in Nashville, TN, with his wife and two daughters. He is an avid runner and loyal Philadelphia Eagles fan. Research Fellows and Staff at Industry EventsCornell's Center for Hospitality Research is pleased to announce its participation in the 2006 National Restaurant Association Restaurant Hotel-Motel Show on May 20-23, 2006 at the McCormick Place in Chicago. The show is the restaurant-and-hospitality industry's premier venue to explore the latest trends in food and beverages, equipment, technology, training, and more, and will bring 73,000 attendees and 2,000+ exhibitors from all 50 states and 100+ countries to Chicago. We invite you to stop by the Cornell booth, # 3234, to pick up a copy of CHR Reports, as well as connect with Cornell alumni. For more information regarding this event, please visit: http://www.restaurant.org/show/. The Center, together with the Cornell Hotel Society's Chicago Chapter, looks forward to seeing you at the annual Cornell reception held in conjunction with the National Restaurant Association Show, on Monday, May 22, 2005 at TheChicago Club. For more information, please email Nancy Wilson at: nmc3@cornell.edu.
Reception sponsors include: Barclay’s Capital, Cornell School of Hotel Administration, Cornell Hotel Society New York Chapter, and the Cornell Institute for Hospitality Entrepreneurship. To learn more about this event, or participate as a corporate sponsor, please contact Christine Natsios, Director, Alumni Affairs at 607.255.2987 or via e-mail at: cdn24@cornell.edu or visit: http://www.hotelschool.cornell.edu/alumni/CornellReceptionSponsorBenefits2006.pdf .
HITEC 2006, the largest hospitality technology exposition and conference, will be held June 19-22 at the Minneapolis Convention Center in Minneapolis, Minnesota. Produced by Hospitality Financial and Technology Professionals (HFTP), HITEC features a 664 booth exposition displaying the latest hospitality technology products and services geared to the hospitality industry. HITEC also offers an exceptional education conference with presentations from experts representing all segments of the industry. New to HITEC 2006 is GUESTROOM 2010, a 90 x 40 ft pavilion that will feature a guest room prototype with the latest and near-future technologies for the modern hotel room. For more information, visit www.HITEC.org. With record attendance in Monte Carlo in 2005, the 4th Annual International Hotel Conference moves to the spectacular Rome Cavalieri Hilton from 11-13 October 2006. The conference, co-sponsored by the Cornell School of Hotel Administration, focuses on hotel financing, development and management in Europe and beyond. The program will feature superb networking, deal making, and 100 industry expert speakers presenting 40 interactive sessions designed to engage the audience of executive level hoteliers, managers, owners, developers, lenders, members of the media, and those who service the hotel industry. Cathy A. Enz, Ph.D., Associate Dean of Industry Research & Affairs and The Lewis G. Schaeneman, Jr. Professor of Innovation & Dynamic Management, will be presenting at the conference.
Additional information about the event, registration, sponsorships, and related activities can be found at the event’s web site www.internationalhotelconference.com, or by contacting the
conference organizers, Morris Lasky and Mary Lou Koys of Lodging Unlimited, Inc. at mlasky@aol.com Upcoming ReportsThe CHR will be releasing the following new reports and tools in the upcoming months:
CHR reports and tools are available free of charge from the Cornell Center for Hospitality Research website at www.chr.cornell.edu. Featured Corporate Partner
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