They communicate online, they research online, and they book their hotels online. Say hello to the next generation of your hotel's guests.
While e-commerce and its application to the hotel industry is not a new concept, industry experts are tipping an accelerated growth in the business during the next five years, driven by new technology and increased user familiarity. Indeed, all three experts taking part in a presentation named ‘mega trends and challenges' at the Arabian Hotel Investment Conference earlier this year highlighted society's growing dependence on technology as a key challenge - and opportunity - for the industry to tackle.
Cashing in
Although e-commerce did not take off as quickly as some predicted it would in the dotcom boom, the hospitality industry is making some serious money from e-commerce today.
Marriott Lodging International president Ed Fuller says the company made US $4 billion from bookings on the company's website last year - 16% of total booked room nights, up from 11% two years ago.
"We're doing a lot more when you throw in other websites, I think we are doing another billion plus," he says.
"We are genuinely focused on all our travel agents as well - we are working every channel. But the internet is our highest growth mechanism out there today. On January 8 [2007] we generated more than 55,000 bookings [on Marriott.com] in one day, generating $17 million gross revenue."
Fuller says much of the growth was driven by English speaking countries that were comfortable with booking online, with the Middle East lagging behind other markets such as the US and England.
Fairmont Hotels Middle East and Africa regional director of sales and marketing Kent Cooper says the rate of bookings online was almost halved when comparing the Middle East to the more mature markets.
"In North America and Europe, 15% to 20% of bookings are done over the internet," he says.
"Here the Middle East is trailing by half of that - it's not as strong. In addition to that, the global booking system trails by 75%. It comes back to the booker - those based in the GCC are more comfortable booking by the phone. Our goal is to create a comfort level to drive people to book online."
Cooper says the hotel company had also created custom ‘vanity' pages for travel agents, which kept the same corporate image as the agent while using the functionality of the Fairmont site.
"We have seen a tremendous uptake in the last six months," he says.
"Now we are getting 500 bookings per month."
Book a seat, book a bed...
US-based travel research firm PhoCusWright's senior analyst Ram Badrinathan says although the United States' growth in e-commerce had been driven by the airline industry, less mature markets such as the Middle East and Asia were being driven by hotels.
"To have a good healthy market you need a good range of online travel products, such as hotels, airlines and car hire," he says. "When you have lots of choice, then you have the rise of the intermediary, such as the online service. But in many markets where you only have one dominant carrier, it reduces the value of the intermediary."
Badrinathan cites the example of Australia's tourism industry - a very fragmented market - where website wotif.com.au was able to set up a successful dynamic contracting sales model.
"It has gone to a very supplier friendly model, which in the US happened several years ago," he explains.
"It will be a global phenomenon: the power of the [online] intermediary."
But intermediary websites, where hotels are possibly presented in a list format ranked by factors such as location and price, would create their own challenge for hotels, who would now need to differentiate themselves from other properties in the list, Badrinathan says.
"I think the larger chains will prefer to work directly [with their own websites], but smaller hotels would want to work with these portal-type sites, they would definitely see their value," he adds.
Clicking forward
Hotel Reservation Service product manager Hüseyin Gençsoy says the US was pioneering e-commerce in hotels, which was mirrored in European markets five years later and the Middle East three years after that.
"In European markets at the moment we are experiencing a lot of low-cost carriers at the moment, which is pushing people who don't normally travel to go everywhere in Europe," he explains. "These low cost carriers are increasing hotel demand. Everyone is planning new projects in the next three or four years [in the Middle East], but all these developments need flight capacity."
Already the Middle East is starting to take up the low-cost carrier concept with the introduction of airlines such as Air Arabia and Jazeera Airlines.
Gençsoy says his company was increasing its business by 30% each year in the Dubai market alone as hotels faced increasing competition from growth in the number of available properties.
Booking.com account manager Middle East hotels Ali Kansou says there is an education process involved with convincing hotels to utilise online distribution systems, because some were concerned that they were signing over blocks of rooms.
"We need to make it clear that the hotels are in complete charge of all their rooms," he says.
"But what we offer them is flexibility, and also marketing - we have 20 million unique visitors, which gives great visibility. It's complementary to their sales channels, because if they are selling it through their site then they will block it on our site, whereas if they have any last minute availability they can put that up on our site and it gives them another channel."
Fairmont's Cooper says he believes the Middle East will follow the path of the US when it comes to e-commerce, and that it will gradually become a genuine alternative purchasing method across the region, but he is unsure of the rate it will be adopted.
"I have heard the figure of five years [before e-commerce is accepted] but if you look a the demographics it's a young demographic," he adds.
Marriott's Fuller adds that Marriott is looking to expand the reach of its site into markets with languages other than English.
"We have started construction on making our system language sensitive. We are currently working on German, Chinese and Spanish in the first phase - to be launched in 2007 and 2008. Arabic will come in the second phase along with French and Japanese," he explains.
"[The internet] is critical to bringing in people as a booking device."
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