Hotels Revisit Their Internet Strategy

When large hotel companies first checked into cyberspace they let others -- online travel agencies -- dictate the terms. But the hoteliers have been fighting hard to take back control, and they don't expect to relinquish it.

Large hotel chains have beefed up their own Web sites and added incentives to get travelers to book rooms via them. They have also became more selective about how many rooms they sell wholesale to the online agencies, the biggest of which are IAC/InterActive Corp.'s (IACI) Expedia, Sabre's (TSG) Travelocity and Cendant's (CD) Orbitz. And in one high-profile instance, a major chain, InterContinental Hotels Group (IHG) essentially slammed the door on IAC's online agencies when it stopped providing them with rooms to sell.

In the coming year, those trends are likely to continue.

"I expect the hotels will reduce the amount of merchant or prepaid inventory that they make available to the third-party intermediaries," said Henry Harteveldt, an analyst at Forrester Research, a Cambridge, Mass., technology consulting company.

It hasn't taken long for things to change. During the economic downturn that followed the Sept. 11, 2001 terror attacks, travel suffered. Eager to fill rooms, hoteliers were willing to offer up blocks of inventory to online travel agencies at significant discounts. The agencies would turn around and list the rooms at a markup. Although major hotels allowed travelers to book at their own Web sites, their technology in some cases wasn't as sophisticated as that of the online agencies.

But hotels began to rethink their dependence on the online agencies. They realized the agencies were controlling the relationship with their customers. "To serve the needs of our best customers, we need to have them booking directly through us, either through our call centers or through our Web sites," said Bala Subramanian, senior vice president of distribution and brand integration at Hilton Hotels (HLT). With a direct relationship, Hilton can learn about the preferences of its guests and use that knowledge to serve them better.