Online Hotel Bookings to Increase by 2005, Report Says

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Hotel bookings made online will increase from 9 percent of total bookings to one in five within three years, according to a new report from travel research consultancy PhoCusWright Inc.


The switch will be propelled by the growing popularity of discount Web sites offering special merchant rates, "PhoCusWright's Hotel & Lodging Commerce 2002-2005: Distribution Strategies and Market Forecasts" report said.


"Hotels have become more commoditized than ever before because people go on discount sites and compare prices," said Lorraine Sileo, analyst at PhoCusWright, Sherman, CT. "So I think what we'll see over the next few years is hotels, global distribution systems and online travel agencies countering this commoditization by providing more multimedia, including pictures, 360-degree views and information."


Such heady adoption of online bookings is expected to cause fundamental changes in economic models and market leadership. This will mainly affect the distribution network -- online and offline travel agencies, hotel properties and chains, call centers and global distribution systems.


Two constituencies will continue to lose out as the Internet plays a larger role in hotel bookings, PhoCusWright said.


Global distribution systems like Galileo and SABRE, whose share of hotel sales is shrinking, will have to change their fee structures, grow their role as packagers and build new services for hotels.


Also, traditional travel agencies will be afflicted with the same dilemma as their share of hotel sales slips from 21 percent in 2001 to 18 percent in 2005.


"What we've identified is an opportunity to provide market information to hotels and to remain viable, that's one of the businesses you need to be in," Sileo said.


The 60-page report said hoteliers continue to work with leading online travel agencies as occupancy rates stand at their lowest in years. As a result, there will be a 49 percent increase in online hotel sales this year to reach $6.3 billion.


However, such growth comes at a cost. Hotels now are looking to move away from reliance on intermediaries by taking back distribution and reducing that dependency.


According to the report, Hotels.com, Expedia and Travelocity account for 73 percent of all online travel agency hotel sales.


Hotels and chains have created their own rival TravelWeb online service to pull away share from intermediaries like Expedia and Travelocity. They are also investing heavily in promoting their own sites, which account for the majority of online sales for major chains.


Still, consumers will continue to prefer the vast selection of properties offered by online agencies even as hotels build out their sites, PhoCusWright said in its report


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