CHR

Hospitality Leadership Through Learning
CHR

Evolution in Electronic Distribution: Effects on Hotels and Intermediaries

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Vol 3 No 5
By: Bill Carroll Ph.D. and Judy Siguaw D.B.A.

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Executive Summary:

With the migration of hotel-room distribution to the internet, a host of players old and new are vying to gain (or retain) control of distribution channels. In addition to the hotels and chains themselves, the operations that distribute hotel rooms include global distribution systems (GDSs), distribution service providers (DSPs), third-party websites (e.g., Expedia, priceline.com), and traditional travel agencies. Many of these channels use price as a principal parameter. Hence, a strategic problem for hotels is to avoid having price be customers' main (or only) consideration for a room booking. One chief way to offset the trend toward commoditization is to provide customers with considerable information to distinguish properties based on their provision of services.

While hoteliers seek to drive bookings to their own proprietary websites, the third-party sites (notably, Expedia) have created strategic approaches to encourage hoteliers to distribute rooms on their sites. As a practical matter, hoteliers almost always use some kind of discounted distribution to clear their inventory of unsold rooms. To gain hotel-room listings, some intermediaries, such as travel agents and GDSs, have developed a value-added strategy of providing additional services to their customers and packaging hotel rooms as part of travel packages. One reason that travel agencies have become so interested in distributing hotel rooms is the demise of airline commissions. All intermediaries are attempting to provide services or incentives to encourage customers to book through their channel. One competitive advantage that third-party intermediaries can provide is to shift market share toward a particular hotel or chain.

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