Hotels Revisit Their Internet Strategy

To lure customers to their own sites, the hotel chains began guaranteeing that travelers wouldn't be able to find better rates anywhere else on the Internet. InterContinental Hotels claims it was the first to do so. Hilton, Starwood Hotels and Resorts (HOT Quote) and Marriott International (MAR Quote) followed suit. Starwood offers loyalty points for online bookings made at its Web site, but not at other sites.

Hotels also began to develop grievances about the way some online agencies were doing business. InterContinental took its complaints public last April, when it announced a set of standards it required online partners to meet.

Leslie McGibbon, the company's communications director, said some agencies were telling travelers that rooms were sold out when the agencies' own supply was gone, but rooms were still available elsewhere. Lack of automation in the booking process was causing some problems as well.

"A lot of the online chaps were faxing bookings to a hotel, but the fax had fallen behind the fax machine, and the hotel wasn't expecting the guest," McGibbon said. "There was no room, and that can have an impact on guest loyalty and satisfaction, but the hotel had done nothing wrong."

Another grievance was that some agencies weren't detailing what the various fees and taxes were on a room above the wholesale price InterContinental was charging the online agencies.

A failure to meet InterContinental's standards caused the company to terminate its relationship with Expedia and Hotels.com last fall, though McGibbon won't say what specific standards were at issue.

But David Dennis, a spokesperson for Expedia and Hotels.com, said the key problems were over disclosure of rates and fees and how the two companies were telling travelers no rooms were available at its site.

He said Expedia and Hotels.com will give customers one figure that sums up taxes and fees but won't break out line items because it doesn't want to reveal what it's merchant margin is. "Other hotel partners don't want us to expose our net rate," Dennis said.