Executive Summary

GuestCentric is developing a series of surveys on its main markets (US, UK and Spain) to assess the industry status regarding the main issues related with the upcoming GuestCentric offer. These surveys come at a specific time where the US economy is facing tough times. The war, the rising oil prices, the unemployment, the deficit, and the weakened dollar are all causing a change in the travel market. This crisis is having a direct impact on who is traveling and what they demand. The survey was conducted by GuestCentric in February 2008 and 300 hotels located in the US were polled showing dramatic differences in terms of leveraging their online websites to book consumer and business travel online between independent hotels with less than 80 rooms and branded chain hotels. In a nutshell, this gap could be represented as follows:

The differences are clear and substantial. One could say it doesn’t look good for the independents and that they would be the first one to really be affected by the growing sobering economic environment.

On the positive side, this recession brings a tremendous opportunity to the small independent hotels. The new traveler is more demanding than ever, wanting a more personal connection with his providers. He wants to be recognized through individualized service. This is exactly what small independents are known for, but the question is: Can they do it online and survive this challenge?

Online presence gap between independent hotels and chain hotels drifts further

In times of economic uncertainty independents need to turn to online to control costs and increase revenue

Some academics may still debate whether we are experiencing an economy slowdown, a crisis or a recession. In January, according to The New York Times, “The current crisis is a hangover from a half-decade of heady speculation in both housing and home mortgages and does not necessarily admit to a speedy fix. Moreover, it has fallen into Bernanke’s1 lap just as oil prices have spiked to a record $100 a barrel, the dollar has hit an all-time low against the euro and unemployment has ticked upward”. Since then the oil price raised more than 45%.
The travel industry has been expanding and capitalizing on the constant increase in traveler’s budgets, internet developments, and the amazing growth of low-cost companies, but last year a red flag was raised when for the first time ever, online bookings declined in the US. According to the latest Forrester research, more than two-thirds of travelers said that in financial terms, they came out of 2007 the same or worse than 2006, and only 5% stated that they were substantially better off. Travelers are holding back. According to the same source, three in every ten travelers are considering cutting back on their travel budget and one in four is thinking about taking fewer trips. One in four is considering taking shorter trips and one in six is considering cutting back on hotel quality.
Despite these harsh conditions, “43% of US online leisure travelers view travel as an area in which they are willing to indulge themselves, 39% continue to say they’ll pay an affordably higher price for a travel product or service that delivers noticeably better quality, and 37% remain open to paying more to save time or reduce hassle”, states the same report by Forrester.
Big hotel chains have been working intensely to face these challenges. The amazing work developed by Marriott on enhancing the online shopping experience aptly exemplifies this. Knowing your customer and creating a personalized experience is the key to gain reservations, may this be at the ease-of-use level or at the sensory level like the rich-media example of the MGM Grand Las Vegas.
Now, what are the small independents doing to face these challenges and engage these new demanding travelers?
1 Roger Lowenstein article “The Education of Ben Bernanke“(Chairman of the Board of Governors of the Federal Reserve)

The independent gap

We set out to understand the current status of hotels with its main differences and concerns. To do so, we’ve surveyed 300 hoteliers in the US in February 2008. In this survey we specifically targeted small independents with less than 80 rooms, inns and B&Bs that represent over $25B in overnight stays in the US alone.

Website

Although overall everyone answered that they are happy with their own website (chains 86% vs. independents 86%), when asked about their main concern about the current website, 33% of the independents answered it didn’t generate business for the hotel. The second was related with cost (developing/maintenance). This would suggest that independents are struggling with the basics of their website, not really knowing what to do with it and feeling that they can’t afford the right tools to develop  and manage it. Chains worry about providing up-to-date information to the visitor:  The number one concern for chains is updating content on their website (41% of respondents). Next, chains are worried about ease of use (15%) and updating pictures (13%). This indicates that chains have realized that keeping the website fresh with promotions and providing a rich online experience is required to capture the online traveler.

From 1(low) to 4(high) how satisfied are you with your current website

Main concerns about your website

Online reservations

When asked about online reservations, the differences between chains and independents became more evident: 93% of the chains are able to receive online reservations as opposed to only 44% of the independents. From the independents that receive online reservations, 50% receive e-mail inquiries compared to a meager 7% of chains. The overwhelming majority of chains (81%) rely on booking engines to automate their booking process, while only 13% of independents have a booking engine. This can easily explain why only 32% of the independents have more than 25% of their reservations made online versus 49% of the chains. If this isn’t bad enough, 30% of the independents receive less than 10% of their reservations online.

Perhaps the most differentiating fact is that 28% of the independents still see no point in receiving online reservations. Analyzing this group specifically, their main mistrust about online reservations comes from fear of:

• Overbooking – not being able to cope with traditional bookings (travel agencies, phone, fax) along with online reservations (i.e. “If I sell a room over the phone and someone books the same room online, what then?”)
• Cancelations – considering cancelations and no-shows as a complete loss due to non-existing cancelation policies and lack of credit card validation
• Time to manage inquiries – being flooded with inquiries and not being able to answer them in due time

Independent Hotels Require Online Customer Intimacy

The main concerns regarding the online booking process differ widely between chains and independents. While chains are mostly concerned about booking engine issues (23%) and managing their online offer (19%) a wide set of concerns troubles independents from booking engine issues (16%), booking validation (12%), credit card validation (12%), lack of human contact in an online booking (12%) and security (12%). Independents feel the lack of customer intimacy of online transactions as a major obstacle to embracing online.

% online reservations received

Able to receive online reservations

Type of online reservation available on website

Concerns about online reservations

Internet Distributions Systems (IDS/OTA)

Regarding presence on internet distribution systems, sites which are the main source of hotel visibility and research by online travelers, 77% of the chains are present at least in one IDS/OTA (i.e. expedia.com, booking.com, hotels.com) only 26% of the independents are present and 19% aren’t even familiar with the service. Again, 43% of the independents see no point in being present on the IDS’s. When asked about their concerns about the IDS’s, there is more of a mixed feeling. Even though 46% of the chains said to like them due to the number of reservations gained and/or hotel exposure, 23% dislike the IDS’s due to high rates and commissions charged and/or problems with inaccurate information from the IDS part. 14% strongly dislike them. From the independents’ view, the numbers seem to show somewhat the opposite where 29% dislike the IDS’s and 6% strongly dislike them. Only 18% like them due to exposure and/or reservations. A similar number, around 17% seem to use IDS’s because somehow they feel they have to either gain visibility or reservations but would prefer not to use them if they had other options.

These results indicate that independent hotels have not recognized the importance of being present in internet distribution systems for visibility of their property and are rather concerned with the high commissions that these sites demand. However, this strategy is limiting access of their property to the online traveler. Because almost 50% of the users prefer to book directly on the hotel website being present in distribution sites will not only create reservations, but also increase direct bookings on the hotel’s website.

Is your hotel connected to any IDS?

1^st main thought regarding the IDS’s

2^nd main thought regarding the IDS’s

Occupancy

One could say that the right strategy for an hotel, whether it is a chain or independent, could be derived from the occupancy rate. By now you’re probably guessing the results…

When asked about their average occupancy, 35% of independent hotels have occupancy rates below 50%, while only 6% of the chain hotels.  On the opposite side, 55% of chains have occupancy rates above 75%, while only 34% of independent manage to have healthy occupancy rates.

The prices

Regarding the average room prices, the chains and the independents are not too far apart with 70% of the prices being between $50 and $150. Looking at the average, one could say that the price is not really a differentiator.

Conclusions

The economy is having an unexpected impact on the travel industry. Travelers are changing and they are being more demanding. Meanwhile the gap that separates the online strategy between the big chains and the small independent hotels is constantly growing. While chains are now more prepared to respond to increasingly demanding guests, their main concern seems to be improving their service. Independents still have mixed feelings about the online channel. They seem to struggle with what to do and how to do it. Not having access to the right technology due to high prices or complexity, they still mistrust the online guest because they don’t know him, they can’t verify his credit card, and they can’t cope with online reservations and traditional reservations at the same time due to overbookings and time to manage the reservations.

The good news is that all these changes create a huge opportunity for small independents to gain some advantage over big chains hotels..

• Speed – Independents are much more flexible which enables them to test and adopt new technology at much more ease than chains.
• Free knowledge – Gaining insight on all the online strategies already in use by the big chains can help independents leverage the gap, implementing easy-to-do but powerful features that can engage the online visitors.

• Customer intimacy – The new online-savvy travelers feel that they should be recognized by hotels through personalized treatment. Small independents tend to provide visitors with a more intimate experience than most chains, hence independent hoteliers already know how to promote this one-to-one relationship. The new challenge is to implement it online.