e-commerce - faculty websites like traditional commerce, involves the buying and selling of goods...

e-CommerceFREQUENTLY ASKED

QUESTIONS


QUESTIONS

Developed by

American Hotel & Lodging Association’s Technology Committee

Developed by

American Hotel & Lodging Association’s Technology Committee


QUESTIONS

This guide was written by Victor L. Vesnaver and developed by the TechnologyCommittee of the American Hotel & Lodging Association.

Technology CommitteeChairman Robert Bennett, SVP Property Systems and Services

Pegasus Solutions, Inc.

Vice Chairman Darrin Pinkham, CHTP Director of TechnologyLoews Hotels at Universal Orlando

AH&LA, Staff Liaison Richard J. Jackson, Vice President / CIOAmerican Hotel & Lodging Association

AH&LA Officer Liaison Kirby D. Payne, CHA, AH&LA ChairmanPresident, American Hospitality Management, LLC

Members Carol Beggs, Vice President Technology Sonesta International Hotels Corporation

Kathleen Pearl Brewer, Ph.D.William F. Harrah College of Hotel Administration.

Brian Garavuso, Chief Technology OfficerMeristar Hotels and Resorts

Mark Haley, CHTP PartnerThe Prism Partnership

Danny Hudson, Vice President Sales & MarketingNewmarket International, Inc.

Jon Inge, PresidentJon Inge & Associates

Sherry Marek, Vice President of MarketingDatavision Technologies

Joseph Martino, Vice PresidentIDeaS Inc.

Gary Mesich, Vice President IR Business ServicesMarriott International

Richard Siegel, President and PublisherHospitality Upgrade / Siegel Communications Inc.

David Sjolander, Vice President Hotel Information SystemsCarlson Hospitality Corporation

Victor L. Vesnaver, PrincipalV2 Consultants

©2002 American Hotel & Lodging Association2

Acknowledgements

AH&LA E-Business Committee - Provided portions of the contentDavid Sjolander, Carlson Hospitality Corporation - Editorial Review

DesignDrew Banks, Senior Graphic Designer, AH&LA

Disclaimer

This guide is intended only as a general guide concerning hospitality computer systemsmatters and does not purport to be, nor should it be used as, a complete description ofhospitality computer systems problems or solutions. Companies should not rely upon thisguide for other than general information and should consult their employees and attor-neys before implementing any suggestions or procedure or using ant forms contained inthis guide. AH&LA does not warrant the accuracy of the guide, the accuracy of com-pleteness of the procedure described in this guide, the effectiveness of such proceduresor the effect of any forms contained herein.

Copyright 2002 by the American Hotel & Lodging Association. All Rights Reserved.

HOTEL TECHNOLOGY 101

e-Commerce Frequently Asked Questios 3



TABLE OF CONTENTS

E-Commerce Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

E-Procurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Realistic Opportunities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Challenges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

So You Have A Question . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

E-Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Global Distribution Systems. . . . . . . . . . . . . . . . . . . . . . . . . . 19

Internet Distribution Systems . . . . . . . . . . . . . . . . . . . . . . . . 20So You Have A Question . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Web Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

So You Have A Question . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Glossary of Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33



E-COMMERCE OVERVIEWThe Internet is changing the way people think, work, and live. In today’sfast-paced world, we have been conditioned to expect easy access to information, instant gratification, and most significantly, the ability totransact business whenever and wherever we choose.

E-commerce, like traditional commerce, involves the buying and selling ofgoods and services. In e-commerce, however, transactions are supported by the use of the Internet or another electronic medium. A company’s e-commerce offering may be as simple as an electronic brochure describingthe company and its products and services or as sophisticated as an onlinecatalog featuring thousands of products. E-commerce offers instant accessto information and, if warranted, the ability to quickly compare products,make choices, purchase, and complete a transaction. More robust capabili-ties in the product sales arena allow post-transaction tracking of shippinginformation and product returns. The Internet and e-commerce are having adramatic affect on the supply chain in most industries, and hospitality isalready a prominent participant.

The initial implementation of e-commerce in hospitality dates back to when the first electronic hotel reservation was taken by a travel agent anddelivered to a hotel via telex or fax. Due to the vast amount of product andrate information that already exists in an electronic form, the implementa-tion of e-commerce in the hospitality industry has been primarily focusedon the front-end distribution of hotel rooms. As the discipline has maturedin other industries, e-commerce has come to include all aspects of businessand market processes enabled by the Internet and Web-based technologies.

Well beyond the sale of hotel rooms, e-commerce will have far-reachingimplications for the hospitality industry. As industry consolidation contin-ues, and operators and suppliers become more sophisticated in their busi-ness practices, an increasing number of routine tasks and transactions willtake place online. E-commerce does not end with the development of a slickWeb site or the ability to accept electronic reservations. It will also find itsway into interactions with suppliers, accountants, payment services, govern-


ment agencies, and even competitors. This online community will demandchanges in the way we do business from production to consumption and willeven affect those companies and hotels that might otherwise not be part ofthe electronic economy beyond accepting online reservations.

What is driving the e-commerce revolution? Computers and networkingoptions such as electronic data interchange (EDI) standards have existed forsome time, but the Internet is the first ubiquitous two-way data communi-cations platform that operates on a set of common standards. The wideavailability and inexpensive nature of the medium have led to the develop-ment of business applications and supporting transaction standards thatenable previously stand-alone systems to communicate easily with oneanother. This reduces the cost of integrating systems , allowing freeexchange of information while eliminating duplicate data entry and redun-dant manual processes.

Our customers will continue to embrace e-commerce as a preferred way ofdoing business, and it will be up to us to creatively address this trend andfind ways to differentiate our properties and services in the two-dimensionalworld of the Internet. Industry suppliers have historically operated on veryslim margins, and their business is only going to get more competitive aswe have access to more variety and product information on the Internet.Lest they choose to erode their already slim margins, suppliers will beforced to reserve their best pricing plans for those customers who can transact business in more efficient ways. As you consider ways of growingyour business at a time when competition is greater, product and servicedifferentiation is more difficult, operating margins are tighter, and the sup-ply chain has been squeezed, the opportunities and efficiencies that e-com-merce offers should be primary considerations for the future of your opera-tion.



E-PROCUREMENT

OverviewE-procurement refers to the purchasing of goods and services over theInternet. Using a computer and a standard Web browser, buyers can lookthrough product catalogs, review services, compare products, place orders,and pay for purchases. There are three common approaches to onlinepurchasing.

Sell-Side Model: This modelinvolves placing an order directlywith a supplier over the Internet.In this many-to-one environment(many buyers, one seller), thebuyer generally accesses the suppli-er’s own Web site to do researchand make purchases. The sell-sidemodel applies to companies who

use Web technologies to sell their goods and services to other companies.

Buy-Side Model: In this “onebuyer, many sellers” approach,buyers purchase Web-based services or use self-supported systems to buy from approvedvendors electronically. In thecase of third-party intermediaryinvolvement, the service is frequently tailored to a particular

buyer’s needs, providing access to customized catalogs of goods and servic-es offered by multiple suppliers. Once an order is placed, the intermediaryin turn Transmits the order to the supplier. The buyer and supplier thencomplete the financial transaction while the intermediary provides trackingand communication support. Several major hotel chains and related purchas-ing consortia use this model.


Companies can choose to operate their own electronic purchasing environ-ment, but would need to assume the significant responsibility of managingtheir own content and technology. The buy-side model offers key opportuni-ties to reduce costs, including procurement, production, and operations bystreamlining the purchasing process. It focuses on quick and thoroughsearches to compare desired product offerings, minimize paperwork, andproduce clear, consistent product and vendor information, thereby reducingordering errors.

E-Marketplace Model: The e-market-place model represents a virtualshopping mall where many buyersand many sellers transact business.Such communities connect customersdirectly with suppliers to serve abroad array of business segments.They typically draw on a larger universe of buyers, often formed intopurchasing groups (PGs) that consoli-date the volume from otherwiseunrelated businesses, interested in

purchasing similar products and services. Costs are reduced because purchas-ing transactions can be completed online leveraging the efficiency of theInternet as a distribution channel. and because of the efficiency of Thismodel allows buyers to collaborate with their peers to procure products forgeneral business or industry specific requirements.

The key benefit to buyers under each of the three approaches is the abilityto view online catalogs containing detailed product descriptions, receivetimely pricing information, place orders online 24 hours a day, seven days aweek, and reduce costs by eliminating ordering errors and unnecessarypaperwork. The second two approaches offer the added advantage of pool-ing many customers’ orders to create buying economies and achieve bettervolume discounts. An even bigger benefit in these models is the added costsavings of fully automating the purchasing process from order placementthrough payment. These options also offer the ability to track and analyzepurchases through all stages of the purchasing cycle, allowing sellers tobetter control costs and manage inventory.



Realistic OpportunitiesE-procurement solutions have broad appeal because they span all marketsectors and many industries. All businesses perform some sort of purchasingfunction, and the great challenge facing purchasing managers and organiza-tions is how to make the procurement process more efficient and realizeadditional hard dollar savings. In some industries a minimal savings in pro-curement costs can result in a disproportionately large increase in operatingprofit.

E-procurement can deliver significant cost reductions. Particularly suited togeographically distributed and multi-unit businesses, cost savings accruethrough a variety of ways, including automation of manual processes,improved contract compliance, and empowerment of purchasing employees.In general, e-procurement customers report a relatively quick return oninvestment and high satisfaction levels. A recent Deloitte Consulting surveyof more than 200 business executives found that of the heavy users of e-procurement systems, 85 percent reported being “highly satisfied” with theresults.

ChallengesThe biggest challenges of a successful e-procurement implementation arechange management and supplier adoption. Change management deals withthe people side of e-procurement and changing buying behavior. A newsolution will not be successful if people within the organization workaround it. Linked with change management is supplier adoption. Focusingon which suppliers to bring online to generate the quickest return oninvestment, supplier adoption ensures success by generating liquiditythrough online purchasing. If the people side and the supplier side areaddressed together, the challenges of e-procurement become the promise ofe-procurement.


So You Have A Question?1. What is the typical cost savings in the first year

for hotels embracing e-procurement practices? How much of the savings come from better pricing versus process efficiencies?

While savings can vary greatly from buyer to buyer,cost savings typically quoted by e-procurement serviceproviders range anywhere from 4 percent to 20 percent oftotal purchasing costs, depending on the degree of

automation and the volume of pooled purchases. A 2001 study published bythe Aberdeen Group found that online purchasing can reduce administrativecosts by up to 90 percent, inventory costs by up to 25 to 50 percent, andpurchasing costs by up to 15 to 25 percent or more by reducing the level ofoff-contract purchasing and improving processing efficiencies. As with manynew programs, careful monitoring and widespread acceptance/utilization arekey to success.

2. What’s in it for suppliers who adopt e-procurement provider solutions?

While many suppliers argue that e-procurement provides just another wayfor buyers to further squeeze already low profit margins, suppliers canexpect an increase in sales and cost savings through greater compliance andprocess efficiencies. The biggest benefit to suppliers comes from fullautomation and integration with large-volume, online intermediaries andlarge multi-unit hotel companies. Suppliers can also anticipate significantcost savings from increased volume of purchases through intermediary con-solidation, more efficient automated business processes, and improved cashflow from online settlement of payments. National suppliers that negotiatediscounts with multi-location operators and large hotel chains can alsoexpect an improved level of program compliance. The buyer’s ability to trackpurchases by stock keeping unit (SKU) and/or supplier greatly improves participation levels in corporate programs.



3. How important is integrating internal back-end procurement and accounting systems with front-end e-procurement software to the success of an e-Procurement strategy?

For smaller individual properties or a small group of hotels, the cost ofintegration with back office accounting systems may not be fully justified.For very large hotels (such as convention and casino hotels) and large hotelcompanies, integration of front-end e-procurement software to back-endaccounting and procurement systems is essential to capturing the full benefit of e-procurement practices. Improved enterprise reporting programcompliance, cost control, inventory management, and the substantial costsavings from streamlined “procure to pay” business processes are generallynot achievable without tightly integrated systems.

4. What technology upgrades will I need to make before I can implement an e-procurement program at my hotel?

E-procurement solutions should not require vastly different systems or capabilities than what might already exist in your operation. If you alreadysurf the Net, collect e-mail, and administer your property’s inventory usingan electronic distribution system, you may already be adequately equipped.

When it comes to computers and the Internet, however, more horsepower isgenerally better. Given the nature of e-procurement and the operationalchanges it is likely to impose, you may want to upgrade your systems andprovide computer and Internet access to affected members of your staff. Agreat deal of potential benefit comes from automating manual processessuch as creating requisitions, approving purchase orders, and trackingbudgets. To achieve the full benefit of e-procurement, everyone involved inthe purchasing process will need ready access to a computer and theInternet. Like it or not, this is becoming more the rule than the exceptionwith almost everything we do.


Here is a benchmark for the minimum level of technology that will berequired today to successfully implement an e-procurement program:

Intel Pentium III Class machine (or equivalent) with a 400 Mhzprocessor and 128 MB of Random Access Memory (RAM) with a 20Gigabyte hard drive.

The latest version of Microsoft Internet Explorer or NetscapeNavigator.

High-speed access to the Internet (although you can access theWeb via a 56KB dial-up connection, response time will likely beunacceptable; if at all possible, secure a high speed Internet connection from an Internet service provider [ISP] that provides DSL[digital subscriber line], cable modem service, or other high-speedservice option).

5. If I own a small group of hotels, what are the most compelling reasons for me to sign up with an e-procurement solution provider?What spending volume makes a customer a viable candidate for an e-procurement solution?

E-procurement solutions have broad appeal because the options span allmarket sectors. Benefits often include lower prices, reduced transactioncosts, faster and more accurate transaction processing, elimination ofoff-contract buying, increased contract compliance, reduced inventory,improved order tracking, improved management information, improved staff efficiencies, and reduced security risks.

The challenge facing purchasing managers and organizations is determininghow to make the procurement process more efficient and understandingwhere to realize additional hard dollar savings. The ability to realize resultsis based more on selecting the right service to address your needs ratherthan the size of your property or the number of your hotels. If you wouldlike access to better prices from suppliers or want to streamline your admin-istrative processes, there is likely to be an e-procurement solution that isright for you.



6. Once a customer is signed up, what compels them to commit all qualifying spending to a single e-procurement solution provider?

The most compelling argument for a customer to commit all of its spendingto a single e-procurement solution provider is the opportunity to maximizevolume discounts to obtain better prices. Another benefit is tailored customer service and the level of system integration with the primary service provider. In addition, the cost of integrating back-end accountingsystems with a front-end e-procurement system can be high; therefore, itmay be cost-prohibitive to integrate with more than one service provider.Of course, the benefits of committing all spending to a single vendor mustbe weighed against the potential for obtaining even better pricing fromonline “shopping around.” Finally, subscription and transaction fees shouldbe taken into account when weighing the options.

7. What are the main reasons for the slowdown in e-procurement adoption in the hospitality industry?

Probably the most pressing issue thwarting rapid adoption of the e-procure-ment model in the hospitality industry is the general skepticism aboutInternet business that has prevailed following the burst of the “InternetBubble” in 2000 and 2001. In spring 2000, no fewer than 10 e-procurementsolution providers focused on the hospitality industry. Today, you would behard pressed to identify more than three. Decision makers in the hospitalityindustry are rightfully concerned about the reliability and financial stabilityof the few providers left.

Other issues constraining growth include the reluctance of some of thelarger suppliers to cooperate with e-procurement intermediaries, the slowrollout of e-procurement solutions by some of the major hotel companies,and the lack of high-speed Internet access at many hotels. Lastly, thehospitality industry is notoriously slow to adopt change.

8. What are the top two or three challenges companies face in movingto an online purchasing environment? How can hoteliers effectivelyovercome them?


The biggest challenges of a successful e-procurement implementation arechange management and supplier adoption. Change management deals withthe people side of e-procurement and changing buying behavior. The newsolution will not be successful if people within the organization avoid usingthe system. Linked with change management is supplier adoption. Focusingon which suppliers to bring online for the quickest return on investment,supplier adoption ensures success by reinforcing the benefits and capabili-ties of online purchasing. If the change management issues and supplieradoption challenges are addressed together, the implementation of e-pro-curement practices becomes much easier.

An easily avoidable challenge is inadequate technology and access to theInternet. Given the right tools in the form of updated PC technology andhigh speed Internet access, e-procurement should, in most cases, signifi-cantly improve the otherwise mundane and time consuming task of creatingrequisitions, and generating, approving, and tracking purchase orders.

9. How should a company decide between creating its own e-procurement environment and engaging an outside e-procurement servicesprovider? What are the business tradeoffs between public and private exchanges?

Several key factors should be considered when deciding between purchasingan e-procurement service from a third party and managing the technologyinternally. First, if you are at all interested in improved purchasing powerthrough the aggregation of purchasing volume and/or participation in apurchasing group, purchasing a service that offers that benefit is necessary.If, however, you are more interested in the administrative benefits ofimproved efficiencies and better controls, managing your own e-procurementenvironment can be considered, remembering that extensive costs are asso-ciated with such a decision.

In addition to the cost of computer hardware and software, significantcosts can be associated with the ongoing administration and support of thetechnical environment and the maintenance of the catalog and pricinginformation received from the many suppliers that will be in the database.In an outsourced solution, the cost of this “content management” is often



shared among all users of the service. Given the number of suppliers andSKUs that are typically used in the industry, the effort required to maintainthis information is not trivial.

If you prefer to operate independently from any other hotels, or if no oneoffers access to the group of suppliers you use, you might also considerusing an outsourced service. In such a case, a service provider can create aprivate or customized marketplace available only to you and your properties.Although you would still be responsible for negotiating deals with your suppliers and getting them to agree to use the system, the technologywould be managed by the service provider.

In short, think long and hard before deciding to support a technology infra-structure in house. There are very few hotel companies big enough to justifythe headache or expense.

10. Which commodities are easiest to handle through online purchasing? Which are the most difficult?

In general, nonperishable hotel operating supplies such as linens, in-roomguest supplies, housekeeping supplies, and maintenance supplies are theeasiest to handle online. Customized furniture and case goods, constructionand renovation projects, and perishable food and beverages are the mostdifficult.

11. Is it really any easier for end users to buy online rather than place orders over the phone?

Depending on the system being used and the item being purchased, it mayor may not be easier to buy online. Many systems today can store commonor recurring orders, making repetitive transactions easier and less time con-suming. One-off purchases are probably easier to make over the phone, butin doing so you lose the management benefits of an e-procurement system.These benefits include significant reductions in paperwork, better processesfor routing and approving invoices online, better inventory management,better documentation of orders with improved order accuracy, and betterprices through participation in purchasing groups and substantiated pur-chase volumes with suppliers.


12. How concerned should I be about the sustainability and financial stability of the handful of e-procurement providers currently serving the industry?

Whenever you choose a vendor to provide an ongoing service to your operation, it is wise to be concerned about the company’s financial stabilityand likely longevity. After doing an appropriate amount of due diligence toeliminate the options that are clearly not viable, all you can do is weigh therisks with the anticipated benefits and make a sound business decision.

Fortunately, you have been purchasing goods and services for a long timewithout the benefit of e-procurement. If something should happen to yourchosen service provider, you can revert to your traditional ways of doingthings. Maintaining updated manual procedures will keep this option viable.

13. What kind of e-procurement services can be expected from myfranchisor?

In most cases, the major franchise and representation companies do a greatjob of negotiating volume purchase agreements with the common suppliersto the industry. Many of these companies are in the process of or havealready taken steps to make these negotiated deals available electronically.Contact your franchisor or representation company to see how you can takeadvantage of any available e-procurement programs.



E-DISTRIBUTION

OverviewThe travel industry is uniquely poised to take advantage of the continuinggrowth and acceptance of consumer-based e-commerce. Unlike manyindustries, hospitality has been leveraging electronic forms of distributionfor many years, regularly digitizing product information and makinginventory available online.

Long before the current popularity of the Internet and consumer access toonline services, the hospitality industry was an active participant in e-distribution. From the first booking made by a travel agent via an airlinereservation terminal, the hospitality and broader travel industries have beene-commerce pioneers. As the term suggests, e-distribution is the means bywhich hotels make their products and services available via electronic chan-nels, including travel agents, wholesalers, consolidators, and consumers.Such channels are widely viewed as more convenient for those constituentsthat have online access and are often a less expensive source of bookingsthan traditional telephone channels. E-distribution includes the followingtwo major categories.

Global Distribution Systems Global Distribution Systems (GDS) are principally used by members of thetravel industry to book airline, hotel, car, and cruise reservations worldwide.Given the capabilities and wealth of information maintained in these systems, they also form the foundation of many of the consumer-focusedInternet booking services discussed in the next section. Unfortunately, mostof these systems were principally designed to sell airline reservations and,as such, are not easily adapted to offer the many different products andservices available from the hospitality industry. That said, various industrygroups have been working hard to help drive the direction of these systemsto better serve the industry.


According to the Hotel Electronic Distribution Network Association (HEDNA),booking volume through the GDSs continues to grow. In 2000, over 48 million hotel reservations were booked via these systems, representing an11.4 percent increase over the prior year. As consumer acceptance and useof electronic booking mechanisms continue to grow, the volume throughthis channel will become an even more important source of business for theindustry.

Your ability to affect the volumeof business that comes throughthis channel is largely based onthe amount of attention you payto associated marketing efforts.Most of the major chains andrepresentation companies canhelp member properties under-stand how best to position theirproducts and services in thesesystems. Take advantage of thisvaluable service. In addition,make it a point to visit sometravel agents. Ask what they see when they look at your property in theirsystem. Note any discrepancies and work closely with whoever is maintain-ing your information to correct it and keep it up to date. Taking this step can mean the difference between making a sale and losing it to a competitor.

Internet Distribution SystemsAs use of the Internet increases, various consumer-oriented booking systemshave become available. From the large, popular sites that are related to orrely on GDSs, to Internet-specific and “boutique” solutions, Internet distri-bution systems (IDSs) have become one of the fastest growing segments ofInternet-based e-commerce. Unlike GDSs, these systems are typically usedby consumers to book airline, hotel, car, and cruise ship reservations forthemselves. The good news — and the bad news — for the industry is that



1Source: 2001: An On-Line Travel Odyssey, Michael Pastore, January 16, 2002, CyberAtlas

IDSs eliminate a layer in the distribution chain. The wealth of informationavailable to consumers has never been greater, and consumers expect andshop hard to find lower prices online. As a consequence, the environmenthas become very competitive. A well-thought-out e-commerce strategyincluding a property specific Web presence.

The e-commerce researchfirm of comScoreNetworks found that during the peak of 2001activity, online travelaccounted for more than40 percent of totalonline retail sales. That

peak eroded later in the year after the events of September 11, 2001, andonline travel activity finished at the same level at which it started the year.

Concerns about travel safety and a down economy have combined to cooloff a sector that had no shortage of demand. According to the PhoCusWrightTravel Consumer Trends Survey, 21 million Americans “usually” buy theirtravel online, up 75 percent from 2000. Nearly 27 million Americans havebought travel online at least once, up from 21 million in 2000. Online travelbuyers represent 13 percent of the population.1

Depending on the specificsource, IDS reservationsmay be the least expensivesource of electronic book-ings. Bookings from suchchannels typically avoidany third-party agencyinvolvement and increas-ingly bypass the traditionalGDSs, although the volumeof IDS reservations ulti-mately booked via the GDSs remains high.


Another valuable IDS that has evolved is the electronic clearance center fordistressed inventory. “Name your own price” sites and last-minute Internet-based bargain notifications have provided an effective way for hotels to dispose of distressed or otherwise underutilized inventory. The managementof such channels is and will continue to be a critical factor in a property’se-distribution strategy.The sheer number of focused users of these systemssuggests that diligent management of your inventory will reap greatrewards. Hotel managers should leverage this and all electronic channels tobroaden their market reach for motivated customers. Gone are the dayswhen hotel managers should keep rooms open for unexpected, late-arrivingcustomers. Particularly during high occupancy periods, hotels should lever-age broad-eaching e-distribution mechanisms to the fullest extent possible.Given the market reach of the electronic distribution channels, you shouldrarely if ever close out a high-occupancy night with any rooms empty.

For additional information on this topic, including published studies, train-ing courses and a very active membership directory, visit the HotelElectronic Distribution Network Association (HEDNA) at www.hedna.org.

So You Have A Question?1. I am interested in Web-based reservations for

my hotel(s). How do they work? Where can I gethelp? How much of a jump in bookings can I expect?

Internet-based reservations should be an increasinglyimportant component of your marketing strategy. Inaddition to being a highly cost-effective source of book-ings, they allow you to maximize your exposure to the

consumer retail market. Consumers enjoy the convenience and anonymity ofonline shopping and reservations.

Consider listing your property with an Internet-based booking service suchas GotRooms (www.gotrooms.com), the only site of this type endorsed byAH&LA. You can list with as many services as you choose, and the cost perreservation is generally less than that of other electronic booking sources.



There is a management overhead associated with listing your property onthese sites, and information and inventory availability need to be managedin order to maximize the value of such services and generate more business.

Most importantly, before you begin, contact any representation companies,hotel chains, or franchises with which you are affiliated. Many already haveprenegotiated relationships with Internet reservation services that you canuse, and many offer tips on how to maximize your bookings and reach. Youwill avoid duplicating their efforts and potentially causing operational prob-lems or confusion in the marketplace.

2. How can I widen my array of distribution through electronic channels?

Even independent hotels or small hotel chains can widen their array of dis-tribution through electronic channels. E-distribution is a low-cost source ofbusiness and, if used properly, it can increase occupancy rates, generateadditional revenue, open new markets, and attract more affluent guests.

Assuming that your existing chain or representation affiliation already sup-ports your GDS needs, you can take advantage of the many IDSs that areavailable. Many of these services are small regional or segment-focusedoperations that serve as very targeted channels of distribution. Ask yourlocal hotel association for a list of services in your area. You can also takeadvantage of a larger national service, but be sure that you are not alreadyrepresented on the site through an existing affiliation.

3. Why should a hotel represent itself on a GDS or IDS?

E-distribution channels allow hotels to attract business from all around theworld. The systems provide millions of consumers and over 500,000 profes-sional travel agents up-to-the-minute access to product information andhotel inventory. Electronic bookings are generally completed and immediateconfirmations issued without any manual intervention. In short, e-distribu-tion channels allow hotels to easily and cost-effectively market themselvesto an enormous worldwide audience.



WEB SITES

OverviewWeb sites are the best thing to happen to collateral and marketing materialsince Guttenberg’s invention of the printing press. Aside from word ofmouth, there has never been a more cost-effective way to distribute infor-mation and provide services. The challenge lies in creating and managingWeb sites that take advantage of sophisticated electronic capabilities andfully meet users’ expectations.

Compared to traditional advertising or printed collateral, Web sites areavailable to viewers anytime they want to see them, and content is relative-ly inexpensive to change. In addition, Web visitors are often open to beingconvinced that your product suits their purpose and that they should makea positive buying decision. However, because consumers demand absolutelycurrent, correct information and expect Web sites to utilize cutting-edgetechnologies, sites require constant review, change, improvement, and cre-ativity.

This effort will require focused attention and a new line item in your annualbudget. Remember, the only interaction many customers will have with yourproperty is what they see on your Web site. This virtual relationship shouldbe nurtured just as carefully as if the customer were at your front desk ask-ing questions. Be cautious as you select a firm or consultant to developyour site. Many inexperienced, under-skilled companies bill themselves asWeb developers. Their products can be disappointing.

A logical extension of your marketing Web site is an internal “intranet”designed to facilitate communication among staff. An Intranet can provideyour team members with timely access to important employee information.

In addition, you may want to consider creating a specialized portion of youroutward-facing Web site that is available only to your best customers orsuppliers. This “extranet” can enable you to transact business, share infor-mation with trading partners, and improve the efficiency and perception ofyour operation. While the required technology and applications can be more


complex and expensive than those needed for the more generalized market-ing area of your site, the true value of e-commerce technology lies in theimprovement of standard business processes. Extranets are the next big stepin the development of Web sites and e-commerce.

The following suggestions can start you thinking about how best to incor-porate Web sites in your operation:

❙ New and interesting information should be readily available on your Web site so that customers know what is going on at your property.

❙ Seasonal changes in your business should be highlighted so that youtake advantage of buying patterns and the interests of your cus-tomers. In year-round resorts, the winter backdrop and features ofthe site may be very different from those used during summermonths.

❙ As new technologies become available and cost effective, you shouldlook for ways to integrate them into your site. Online reservations,maps, and activity scheduling have all evolved since the first persontyped “www” in a Web browser. To keep pace and differentiate yourhotel from those of your competitors, you will need to be bold andcreative.

❙ Look for new ways to leverage technology to your benefit. Customerswould like nothing better than to be more efficient in doing businesswith you. Your Web site can be a portal for your customers to com-municate, retrieve information, and provide input on things they likeand dislike. If your property caters to large meetings or tour groups,there may be a way to share billing and payment information online.

❙ Incorporate technology into your own operation wherever possible.Take advantage of the ubiquity of the Internet to communicate withyour employees. Schedules, newsletters, suggestions, evaluations,praise, benefit administration, daily updates, and computer-basedtraining programs can be included on an intranet site.

As you begin taking advantage of your new Web presence, be attentive tothe timeliness of the information, the services supported, and ways you candifferentiate your “electronic brochure” or storefront from those of yourcompetitors. You will need to dedicate enough human and financialresources to ensure that the desired results are achieved. The amount ofeffort you put into the development and ongoing maintenance of the sitewill have a direct impact on its success.

So You Have A Question?1. I want to develop a Web site for my hotel. What

do I need to know and do to get started?

Many books deal with this topic, but the following briefintroduction should help you get started.

First do some research to determine what you like inWeb sites and what features you want to include in yourown. Look at the Web sites of your competitors and of

hotels in other markets, but don’t limit yourself — you never know where agood idea will come from. Which sites do you like? Which ones are informa-tive, offer clever features, are easy to navigate, and are pleasing to the eye?Ask friends and colleagues for input. Bookmark or note the addresses (URLs)of the sites you like. Begin thinking about what you want to include in yoursite, regardless of budgetary or technical limitations, using your favoritesite as a benchmark.

Once you have developed an idea of what you want to include in your site,identify companies or individuals that can help you evaluate your ideas anddecide what is realistic and appropriate for your business. Start with thedevelopers of your favorite sites. Know that Web sites vary greatly in cost,complexity, and design, and beware of companies or consultants that over-promise and under-deliver. Make sure you review other projects that theyhave worked on and speak with their clients. Almost anyone can put togeth-er a Web site of some sort, but few can develop sites that are compelling,useful, and perform well under heavy utilization. Remember, viewing yourWeb site may be the only interaction your customers have with your proper-ty when deciding whether to book a reservation. Take as much care andpride in developing your Web site as you would in greeting your customersat the front door and remember, as with most things, you get what you payfor.

In addition to developing your own Web site, many chains, representationfirms, and franchise organizations provide member properties with individualWeb sites. This is typically done using a standard template to ensure thatall properties are equally represented and may be a required program. Thisapproach would be a quick and effective way to begin taking advantage ofInternet marketing.




2. I have a new Web site for my hotel and I want to add additional content. What content is typically most important to customers?

Web sites are marketing tools designed to entice potential customers andprompt a positive buying decision. Once that decision has been made, yourWeb site can become an effective vehicle for reservations, other businesstransactions, ongoing communications, travel planning, cross-marketing,client services, and other revenue-generating or service-enhancing features.Your budget will determine the features you can add, but here are some tothink about:

Booking reservations Booking activities Weather information Local attrac-tions Gift shop sales Restaurant reservations Maps and driving directionsProduct and service info. Pictures and videos Personalized GM greetingPersonalized travel page Extranet for group billing Interesting links Referrallinks — cars, etc. Personalized offers Event reservations Live action cameraCustomized group pages

3. What information should I request from guests to my Web site?

The amount and type of information you need from visitors to your Web sitedepends on what you intend to do with it and your ability to act on it. Ingeneral, the public is hesitant to provide a great deal of personal informa-tion unless there is a compelling reason to do so. Customer recognition,Internet discounts, free gifts, or customized Web site services are all incen-tives that might entice people to provide personal information. The moredetail that you want, the more enticing the incentive will have to be.

In most cases, an independent hotel without a frequent guest program butwith significant repeat visitation should request information that will enableit to better understand its guests’ wants and needs and provide a forum foryour guests to communicate with it. Guests of chain-affiliated hotels mayhave already provided this kind of information as part of joining a frequenttraveler program and understandably could find it annoying to have to do soagain. Timing is everything. People will be more likely to enter a few morepieces of information as part of the reservation process rather than enteringit just to get on a mailing list or fill out your guest recognition database.

Do not request guest preferences if your property has not developed thebusiness processes to respond. If you can respond, gathering this informa-tion allows you to better serve your customers by consistently responding totheir stated preferences and/or customizing offers based on previouslyentered information or buying patterns. Depending on the sophistication ofyour Web site, you may want to gather such information incrementally eachtime a customer visits your site.

4. What is digital branding and why is it important in my e-business initiatives?

Digital branding is the translation of your unique brand values and personal-ity into a “user experience” you create on a Web site, kiosk, or wirelessapplication. A digital brand can consist of a collection of colors, images,fonts, and sounds that your customers identify with your property. As moreconsumers and suppliers interact with your company through e-business, itis critical to convey your digital brand through each of these channels tobuild customer awareness and loyalty.

E-business offers hospitality companies the opportunity to take control ofthe customer relationship in a deeper one-to-one manner. An increasingnumber of people expect to communicate directly with their chosen serviceproviders (including hotels) in this manner. A strongly branded Web sitethat provides useful information and functionality will over time produce asignificant return on investment and contribute to your success.

5. I am interested in Web-based reservations for my hotel(s). How do they work? Where can I get help? How much of a jump in bookingscan I expect?

Offering Web-based reservations is crucial to your Web site’s success. Manyhotels’ Web sites now offer this ability, and many consumers prefer the con-venience and anonymity of online bookings. If you force them to make aphone call or access another site to reserve a room, you may lose theirbusiness.

Many of the Internet-based reservation services can provide privately brand-ed booking screens that can be incorporated into your property’s Web site.




Add this capability to the list of criteria you will use to evaluate potentialservice providers. You may also be able to secure a similar service throughany existing chain or representation affiliations.

A less functional and less desirable approach would be to insert a hyperlinkto your property’s page on the service provider’s site so that bookings canbe made directly on that site. There are several drawbacks to this option.Once you hand off your customers to another Web site, there is no way totell if they booked a reservation with you or if they shopped around andchose a competitor. You may also lose the opportunity to get closer to yourcustomer by gathering more information, selling them other services, orhaving them communicate directly with you via your Web site.

Finally, in addition to reservation capabilities that you may design into yourown Web site, remember that if you are affiliated with a major chain, repre-sentation firm, or franchise company, they will ensure that your hotel isbookable via the Web.

CONCLUSIONDeveloping a comprehensive e-commerce strategy requires extensive thoughtand planning, and this primer only begins to address the many considera-tions involved. While our focus has been on hospitality, the tools and manyof the challenges involved in this rapidly evolving technology are industryindependent. Familiarize yourself with your competitors’ Web sites and keepup to date with trends in the online industry. Don’t limit your review tohospitality sites; remember that great ideas often come from unrelatedindustries. Your evolving subject matter expertise and creativity may pro-duce the next significant Web-based product or service enhancement for thehospitality industry.

Most Web watchers agree that it is only a matter of time before all busi-nesses must adopt an e-commerce presence to remain viable. This may proveto be an exaggeration, but why not take advantage of the many opportuni-ties Web-based technologies afford now, rather than finding out later thatthis doomsday prediction was true?





GLOSSARY OF TERMSASP

An application service provider (ASP) is a company that offers individuals orenterprises access over the Internet to applications and related services thatwould otherwise have to be located in their own personal or enterprisecomputers. Sometimes referred to as “apps-on-tap,” ASP services are expect-ed to become an important alternative, not only for smaller companies withlow budgets for information technology, but also for larger companies as aform of outsourcing and for many services for individuals as well.

Bookmark

(v) To mark a document or a specific place in a document for later retrieval.Nearly all Web browsers support a bookmarking feature that lets you savethe address (URL) of a Web page so that you can easily visit the page at alater time. (n) A marker or address that identifies a document or a specificplace in a document.

Compliance

Utilizing volume purchasing contracts that have been negotiated by a com-pany’s corporate purchasing group or by a hotel chain, franchise organiza-tion, association, purchasing consortia, or representation firm.

Content

Information maintained in a Web site. Depending on the nature of the Website, this information may be either product or marketing oriented. Specificexamples include descriptive text or photographic images, product catalogs,inventory and availability information, and general marketing or sales information.

DSL

Digital Subscriber Line. A specialized telecommunications service that provides high-speed Internet access to residences and businesses throughthe existing telephone network. DSL technologies use sophisticated modula-tion schemes to pack data onto copper wires. They are sometimes referredto as last-mile technologies because they are used only for connectionsfrom a telephone switching station to a home or office, not betweenswitching stations. DSL is similar to ISDN in that both operate over existingcopper telephone lines and both require short runs to a central telephoneoffice (usually less than 20,000 feet).


E-Business

The AH&LA E-Business Committee defined e-business in their mission statement as follows: The collective business strategies and businessprocesses influenced or enabled by the Internet and electronic technologies.

EDI

Electronic Data Interchange. The transfer of data between different compa-nies using networks such as the Internet. As more and more companies areconnected to the Internet, EDI is an increasingly important mechanism forcompanies to buy, sell, and trade information. ANSI has approved a set ofEDI standards known as the X12 standards.

E-Distribution

Selling products or services over the Internet or some other electronicmedium. Hospitality e-distribution includes the GDS and Internet-basedsales channels.

E-Procurement

Purchasing goods and services over the Internet.

Extranet

An external Web site that gives your company’s customers and partnersaccess to certain documents and other data. An extranet administratorinvites the customers and partners you want and sets site permissions forwhat documents, discussions, and other areas they can view.

GDS

Global Distribution System. The electronic networks used by travel agentsand some Internet-based distribution channels to make airline, hotel, carrental, and cruise ship reservations.

HEDNA

Hotel Electronic Distribution Network Association. The prominent tradeassociation supporting the industry’s use of electronic distribution channels.www.hedna.org



HSIA

High Speed Internet Access. Any one of a variety of services that providefast access to the Internet. The most common and cost-effective types ofHSIA include DSL and cable modem services. DSL is described elsewhere inthis glossary. Cable modem services are generally provided by a local cableTV provider and utilize cable facilities to provide fast Internet access. Otherforms of HSIA include satellite, private data line, and frame relay services.

Hyperlink

An element in an electronic document that links to another place in thesame document or to an entirely different document. Typically, a user clickon a hyperlink to follow a link. Hyperlinks are the most essential ingredientof all hypertext systems, including the Web, and can appear as either text orgraphics. Some hyperlinks perform special functions such as sending e-mail,submitting a form, accessing an ftp site, execute a database query, oraccess a Usenet newsgroup.

Internet

The interconnected system of networks that share standards and protocolsconnecting computers around the world.

IDS

Internet Distribution System. Internet-based services providing consumersthe ability to book airline, hotel, car rental, and cruise ship reservations.

ISP

Internet Service Provider. A company that offers services ranging from dial-up access to the Internet and e-mail services to complete Web hosting services, including site design, development, maintenance,content management, and security.

Intranet

An internal Web site for a company’s employees or workgroups. This private,secure site is usually accessible via the Web and can be used to share docu-ments, calendars, and event information. An Intranet site is an ideal onlinecommunication tool for businesses, departments groups, and organizationsand can be used to centralize important company information, post docu-ments, create group schedules, and announce events.


Off-Contract Purchasing

Purchasing goods and/or services from vendors or suppliers without thebenefit of a prenegotiated agreement.

SKU

Stock Keeping Unit. A standard numbering system used to identify productsof all types.

Supplier Adoption

The process of introducing and convincing suppliers to participate in e-procurement programs.

URL

Uniform Resource Locator. A standard for specifying the location of anobject on the Internet; an Internet address, such as www.ahla.com. URLsare used in HTML documents to specify the target of a hyperlink, which isoften another HTML document (possibly stored on another computer).

1201 New York Avenue, NW, #600 • Washington, DC 20005-3931 • www.ahla.com

AHLA/IT002042

e-commerce - faculty websites like traditional commerce, involves the buying and selling of goods...

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