“The New Normal for Distribution Channel

Management”

Our expert panel

• Carrie Campbell, Director of Lodging, D.K. Shifflet & Associates

• Richard Chambers, President, TravelCLICKinteractive

• Bill Peters, Vice President of Reservations, Outrigger Hotels & Resorts

• Jim Young, Senior Vice President, Global Distribution, InterContinental Hotels & Resorts

Today’s agenda

• Quick overview of the new landscape• Recent findings of consumers trends in

online arena• Expert panel to comment on those

trends• Summary of recommendations for

channel management• Q&A from you

BackgroundBackground

• Continuing Internet growth and influence

• Economy recovering

• Intermediaries consolidating/evolving

• Chains taking action

. . . challenges remain!

Internet Hotel – U.S. Internet Hotel – U.S.

Growth&

Share Mix

Growth&

Share MixHotel Revenue

’03 ‘0413% 20%

The Internet – U.S. The Internet – U.S.

Growth&

Consolidation

Growth&

Consolidation

Consumer Use of the Internet Consumer Use of the Internet

Source: PhoCusWright,2003 Online Traveler Survey

Half of online travelers look online but book offline.

Half of online travelers look online but book offline.

The EconomyThe Economy

An improving economy is a necessary condition for hospitality financial improvement:

• Improves occupancy• Provides negotiation leverage• Sets the stage for raising ADR

An improving economy is a necessary condition for hospitality financial improvement:

• Improves occupancy• Provides negotiation leverage• Sets the stage for raising ADR

Hospitality Forecast Hospitality Forecast

63.462.9

63.3

59.759.1 59.3

60.8

55

60

65

1998 1999 2000 2001 2002 2003 2004P

Total US Occupancy Percent

Source: Smith Travel Research

Declining Travel Agent Role Declining Travel Agent Role

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

1993 1995 1997 1999 2001 2003E

AgencyRevenue

($b)

GDS Changing Roles GDS Changing Roles

Conglomerate Component vs. Distribution Core

Mega Players in the Game

Expedia

HRN (Hotels.com)

Travelscape

Hotwire

TripAdvisor

Ticketmaster

Vacation spot.com

Interval International

Lending Tree

Match.com

WizCom

Trust

Galileo

Cheap Tickets.com

Trip.com

RCI

Hotels

Avis/Budget

Rezoultions/Anasazi

Thisco

Utell

ASP-PMS

TravelWEb.com

InterActiveCorp

Biggest Player you may have never heard of

Liberty Media Corporation• 20% of InterActiveCorp• 4% AOL Time Warner• 3% Cendant Corporation• 55% On Command• 100% Starz• 42% QVC• 50% Discovery Communications (Travel Channel included

here)• 29% Sky Sports 1,2,3• 56% DMX Music• 30% the Wireless Group• 89% True Position, Inc

The Major SitesName Price Mkt Cap

Choice 45.85$ 1.54BStarwood 41.46$ 8.47BWyndham 1.00$ 160MMarriott 44.25$ 10.12B

Hotel CompaniesName Price Mkt Cap

IAC 34.01$ 23.65BTravelocity 25.12$ 3.52BPriceline 27.00$ 1.04B

3rd Party Web Sites

3 Hotel Companies3 Hotel Companies 20.13 B 20.13 BTop 3 “3rd Parties”Top 3 “3rd Parties” 28.21 B 28.21 B

Prices as of noon April 2, 2004Prices as of noon April 2, 2004

Chain Response Chain Response

• Chain distribution focus:Chain distribution focus:• Web siteWeb site• Direct connectDirect connect• Best rate guaranteeBest rate guarantee• Portal strategyPortal strategy

• Intermediary negotiationsIntermediary negotiations

• Property level support:Property level support:• Strategy – Pricing & DistributionStrategy – Pricing & Distribution• SystemsSystems

• Chain distribution focus:Chain distribution focus:• Web siteWeb site• Direct connectDirect connect• Best rate guaranteeBest rate guarantee• Portal strategyPortal strategy

• Intermediary negotiationsIntermediary negotiations

• Property level support:Property level support:• Strategy – Pricing & DistributionStrategy – Pricing & Distribution• SystemsSystems

Key IssuesKey Issues

• Guest eye share

• Guest allegiance & market share

• Price and inventory control

Intense competition for . . .

Creates opportunities for resorts!

“The New Normal for Distribution Channel

Management”Carrie Campbell

Lodging Group DirectorD.K. Shifflet & Associates, Ltd.

The New Normal: (Overview)

I. We all know distribution has changed

II. Room Night/Revenue ShareIII. Who Using the Internet?IV. How Do We Rate?

We All Know Distribution Has Changed:

1993 2003 1993 2003

Other Website

Chain Website

Trav. Agt.

800#

Direct

Corp Trav.

No Res.

Other

Hotels Resorts

(Total Room Nights) D.K. Shifflet & Assoc. Ltd.

Share of Nights ≠ Share of Revenue

Direct 800# Corp Trav. ChainWebsite

Other No Res. Trav. Agt. OtherWebsite

Room Night Share Revenue Share

Hotels

D.K. Shifflet & Assoc. Ltd.

Share of Nights ≠ Share of Revenue

Direct 800# Corp Trav. ChainWebsite

Other No Res. Trav. Agt. OtherWebsite

Room Night Share Revenue Share

Resorts

D.K. Shifflet & Assoc. Ltd.

Bargain Hunting #1 Use of Internet

Hotels.com Orbitz Expedia Travelocity Priceline Hotwire Marriott Holiday Inn

Information Booking

D.K. Shifflet & Assoc. Ltd.

Who Are These People? Resort

WebsiteOther

WebsiteAll Other Res.

Channels

Male 56% 46% 53%

Female 44% 54% 48%

Married 68% 67% 71%

Mean Age 43.5 years 41.7 years 48.0 years

Mean HHI $90,700 $78,200 $80,200

Att./Grad. College 70% 77% 69%

Emp. Full Time 76% 80% 70%

Prof./Mgr 47% 44% 38%

D.K. Shifflet & Assoc. Ltd.

And Why Should I Care About Them?

Resort Website

Other Website

All Other Res. Channels

Avg. # of Trips 4.3 3.3 3.9

Ave LOS 3.1 3.0 2.8

ADR $125 $113 $120

Avg. Total Bill $379 $344 $314

D.K. Shifflet & Assoc. Ltd.

Guests Are Getting What They Pay For…

%9-10 Satisfaction %9-10 Service %9-10 Value

Total Resort Website Other Website

D.K. Shifflet & Assoc. Ltd.

Summary

• Most Internet room nights at expense of higher ADR channels

• Guests Through Your Website– Travel More– Stay Longer– Spend More

• Not all guest experiences are equal– In the long run, that will hurt you

D.K. Shifflet & Assoc. Ltd.

Our expert panel

• Carrie Campbell, Director of Lodging, D.K. Shifflet & Associates

• Richard Chambers, President, TravelCLICKinteractive

• Bill Peters, Vice President of Reservations, Outrigger Hotels & Resorts

• Jim Young, Senior Vice President, Global Distribution, InterContinental Hotels & Resorts

Wrap up:Best Practices for Local

Internet Marketing

Topics

• Functional Website Design

• Search Marketing

• Reservations Processing

Place the booking engine on the home page

• Conversion rates increase dramatically with less ‘click-throughs’.

Email Capture on Home Page

• Like the booking engine, acquiring e-mail addresses for future re-marketing is easier with less clicks

Instill Confidence on the Site

• Best Value or Best rate clear in the copy– Keep the online consumer at your

site rather than clicking to another site

Search Marketing

• Bringing customers to your site– Need to have both organic and pay

per click to optimize marketing plans

Search Marketing

• Market your resort by business unit– Horizontal Marketing Approach

Horizontal Strategy

www.hotel.com www.rest.com www.meetings.com www.golf.com www.spa.com

Accommodations Restaurants Meetings Golf Spa

Reservations Processing

• Conversion rates are higher with less clicks

Traditional Booking Engine

Summary

• Build Best Practices on the site– Less clicks means more business

• Best Marketing Practices– Search Engines– Market by business unit