I booked it online

From mega-travel agencies to boutique sites, the Internet has exploded consumers' hotel-booking options. But what do the different sites really offer? And where are the hidden treasures?

Published October 27, 1999 4:00PM (EDT)

Booking travel online can be as challenging as finding your way through a strange city without a map. You know where you want to end up but aren't quite sure how to get there or whom to ask. Scores of sites sell similar products. How do you decide which one is best?

As the Web turns consumers into virtual travel agents, it's becoming essential to learn how to negotiate the various travel sites and understand how they work. This is particularly true in booking hotels because of the vast number and variety of places to stay and companies that book them. Knowing what sites to use can save you time, money and a great deal of frustration. And in some cases, it may help you find a unique place to stay.

The scope of booking online

Paralleling other forms of e-commerce, the sale of hotel rooms online is expected to grow exponentially in the next few years. According to Forrester Research, gross sales of online hotel bookings registered $1.1 billion out of a total $70 billion booked worldwide in 1998. That figure is expected to more than double to $2.7 billion this year and increase to $10 billion in 2003.

In a study of online travel sites released by Forrester Research in early July, Travelocity, Expedia and Preview Travel were rated the top three online agencies, in that order. These agencies have their own sites but are also used by several portals: Yahoo and Netscape use Travelocity, Excite and AOL have ties to Preview, and Expedia is owned by Microsoft. In early October, two of these big three -- Travelocity and Preview Travel -- announced their intention to merge. It's too early to know exactly what the effects of this merger, assuming it is approved by shareholders and government regulators, will be, but the new company, to be known as Travelocity.com, is expected to be the third largest e-commerce site after Amazon.com and eBay. With a projected membership of more than 17 million registered travelers, it will overtake Expedia.com as the largest online travel agency site. Equally important, the merged entity has signed a five-year contract with America Online that makes Travelocity.com the exclusive reservations engine for all AOL travel-related services on AOL.com, CompuServe, Digital City and Netscape. According to sources at Preview, the deal is expected to close by Feb. 1, 2000. Until that time, Travelocity and Preview will continue to operate as separate competing companies.

The July study conducted by Forrester surveyed 10,000 online consumers to find out which sites they used when researching and booking travel. Scores were given to 34 sites based on the breadth of reach these sites achieved among those researching travel, the percentage of site visits converted to sales and the amount of money the travelers who visit a particular site spend on travel, both online and offline.

According to analysts, only 10 to 15 percent of what these online sites book is hotels. The volume is still substantial, however. Out of $200.1 million in total gross bookings by Preview Travel last year, for example, $18 million was hotel rooms alone.

How does it work?

While the method of procuring and dealing with customers is different, the way these online travel agencies actually make their bookings is the same as traditional travel agents. They use databases called Central Reservation Systems, known in the travel industry as CRSs. These CRSs all operate in the same manner and include most major hotels around the world. The rates given are what are known as the rack rate or published rate, which is the full price of a room and the same rate charged by the hotels themselves.

Virtually all online travel agencies use these CRSs. Travelocity, for example, is the consumer arm of Sabre, which is one of the main CRSs used by traditional travel agents. Travelocity lists more than 40,000 hotels worldwide. This means that from your computer, you can book exactly the same hotels as the travel agent down the street. In addition to these databases, online travel sites also often have links to discount brokers for better deals on certain hotels.

To broaden their appeal, the sites also offer guidebook-type articles on countries and cities, often supplied by guidebook publishers, so that travelers can research their choices before they make their bookings. For example, Travelocity includes basic information supplied by Lonely Planet and Fodors. Yahoo uses content supplied by Lonely Planet and Rough Guides. Expedia produces its own content, which includes an online news section with the latest travel bargains, news and trends and a section called Best Places, with articles about destinations around the world. There are also links to citysearch.com's Sidewalk, which includes city guides -- what to see, where to shop, best restaurants and entertainment schedules -- to about 70 U.S. cities, as well as Sydney and Melbourne. Preview Travel posts extensive write-ups on destinations and hotels supplied by Fodors and includes a feature whereby users can take a look at a particular Fodor's hotel review and book that hotel on the spot. These reviews are Fodor's top picks and range from major well-known downtown hotels to tiny inns with just a few rooms.

Uniglobe's innovative approach

Wary of losing customers to such online services, many traditional agencies are going online to expand their client base. Perhaps foremost among such agencies is Uniglobe, a franchised travel agency consortium with 1,100 locations worldwide. In 1996 Uniglobe created an online booking site which is now known as Uniglobe.com.

Although only a small percentage of the company's revenue came from online bookings -- $10 million out of a total of $2.8 billion in total sales -- last year, the amount of business on the Web is expected to increase 10-fold to $100 million this year. Last year 5 percent of the company's hotel bookings were made through the Internet.

Uniglobe's approach may be one way to help keep traditional travel agencies in business as a new generation of Web-savvy travelers turns to the Web. The company's agencies are hooked into its Web site, and agents receive 30 percent of the commission of all business coming from clients whom they've referred to the Web. When consumers make their first booking, they can supply the name of a travel agency and every time they purchase travel online thereafter, that agency will receive its portion of the commission.

Uniglobe.com clients who don't already have a travel agent can use an agency locater system to find one nearby. The system seems to be working. Forty percent of all Uniglobe.com bookings are done by referencing a franchise agency. The rest are what the company refers to as direct Web retail customers.

Discounters and brokers

While most online travel agencies sell rooms at published rates, one of the best ways to get hotel bargains online is through hotel discounters or brokers. Although some of these companies are Web upstarts, others have been around for a decade or more. The old-timers are well known to savvy travelers in search of a deal who, in the past, would book strictly through an 800 number but now have the option of researching and making reservations online.

One of the old-timers, Hotel Reservation Network, began business in 1991 and went online in 1995. Although the company still maintains its traditional 800 number, according to president Bob Diener, 80 percent of its reservations are now made online. The site receives 100,000 visitors daily and books an average of 1 and a half to 2 million rooms each year. It is linked to countless other sites, including some of the major online travel agencies.

HRN is what is known in the travel business as a consolidator. It buys blocks of hotel rooms and then sells them at a discount off the rack rate. The discounts in HRN's case are between 20 percent and 70 percent, depending on the city and season. The average is 40 percent, according to Diener. He also says his company has rooms available for sold-out periods such as the New York Marathon, a claim not made by many others. Clients pay directly to HRN with a credit card number when making a booking and receive vouchers to give to the hotel when they check out. The company charges a $50 cancellation fee per hotel stay.

HRN is expanding rapidly. It now lists 1,200 hotels and is expected to have 2,000 online by the end of the year. The company is also increasing its destinations and currently includes 38 cities throughout the U.S. and in countries such as France and Germany. In the next few months it plans to add hotels in Israel and Asia.

WorldRes is another hotel booking site that has managed to permeate the Web by establishing partnerships with a multitude of sites, which receive a commission for all WorldRes bookings that originate on those sites. The company, which was created in 1995 as a Web enterprise, grew from 70 hotels in California in 1996 to 8,000 worldwide this year. The company does not release numbers of bookings or revenues.

Unlike HRN, WorldRes is not strictly a hotel discounter. In fact, most of the hotel rates are published rates, but it also includes bargains, which it calls hot deals. Most of these deals are for smaller boutique hotels, and the discounts can be as much as 40 percent or more. Keep in mind, however, that deeply discounted hotel rooms may on occasion be what hotels call type specific, such as twin-bedded or smoking-floor rooms. In other words, the type of rooms that they normally have trouble selling.

When making reservations, WorldRes requires no money up front. Travelers who use the service give a credit card number to guarantee the reservation but pay the hotels directly when they check out after their stay. Cancellation policies are determined by the hotels themselves.

Although WorldRes has extensive hotel listings, it does not rely on a CRS for bookings; rather it has established direct relationships with all the hotels in its system. In fact, WorldRes seems to be the only online hotel booking site that the hotels themselves can access directly at any time to update their listings, making it popular with the hotels, which may be part of the reason its listings are growing so rapidly.

WorldRes recently expanded its reach with the purchase of Bed&Breakfast.com, which for now remains an information-intensive site with descriptions of 27,000 B&Bs around the world. WorldRes will offer each of these B&Bs an opportunity to become part of its system, so travelers can interactively reserve B&B accommodations in the same way they currently book hotel rooms.

Specialized sites

While companies like Travelocity and WorldRes, which book thousands of hotel rooms each year, are on one end of the spectrum, on the other end are small, very specialized sites, often selling hotels in just one country. A site called In Italy is one of these.

It began in 1993 as a newsletter published by a Los Angeles women named Kristin Jarratt who had lived in Italy for 20 years and at the time was working in the film industry and running a computer consulting company. Jarratt put the newsletter online and decided it was so much fun she would try to make some money and started putting Italian farm stays on her site.

These farm stays are part of Agriturismo, the system of agricultural tourism which began in Tuscany in the 1970s and flourishes throughout the country today. Travelers can stay on farms, eat home-cooked meals and observe, and sometimes participate in, grape, olive and other harvests.

Accommodations vary from very simple and basic farms to luxurious estates with swimming pools. Jarratt travels hundreds of miles down dirt roads through Italy's farm lands each year looking for new farms to work with and checking in with the 45 currently in her system.

Although she built her business on farm stays, they now make up only about half of her bookings. The other half consists of historic hotels throughout Italy. Her site has more than 2,000 pages of articles about Italy and the descriptions of her farm stays and historic hotels give travelers a very good idea about not only the accommodations but the family who runs them, the agricultural products they produce and the sights and attractions in the surrounding area.

In Italy is one of the best examples of a specialized travel site on the Web, but there are scores of others that deal in single destinations around the world. Some of these sites have been created by U.S. travel agencies and companies, while others are based in the countries they cover.

In Europe, 123 France, operated by the French online travel agency Sedipar, lists scores of hotels in Paris and offers discounts of up to 40 percent. British Hotel Reservation Center specializes in London hotel deals, with discounts of between 5 percent and 50 percent. This site also has a unique feature -- it includes the rack rate and the BHRC rate, so you know exactly how much you will save.

One of the best sites for the Asia Pacific region is Asia Travel, which includes 500 hotels with a wide range of rates in 70 destinations across Asia from the Maldives and Macau to Thailand and Taiwan. Accommodationline offers discounts of up to 60 percent on hotel rooms in Australia, New Zealand, Singapore and Bali.

Although Internet Southern Africa Accommodation does not offer discounts on the hundreds of hotels, B&Bs, hostels, guest houses and resorts it represents, an incredible range of accommodations means that travelers can easily find a room that meets any budget -- B&Bs priced at less than $20 per night to international chain hotels at more than $300. You'll need a knowledge of South African geography or a map to navigate this site, however, since the map included shows only provinces, not cities and towns.

There are several Latin American sites to help those going south plan their trips. One of them, World Reservations Center, is the online arm of a Mexico City travel agency representing more than 140 hotels in the country's most popular resort areas. The company offers up to 40 percent off published rates, as well as special two- to seven-night packages.

A South Miami travel agency operates another Latin American site, BROnline Travel, which specializes in travel to Brazil, with 10 percent to 20 percent off rack rates at about 100 hotels. The agency also sells eco-tourism packages and air tickets and has a visa service.

Hotel chains

While online travel agencies, hotel discounters and specialized hotel sites provide a way for consumers to contrast and compare hotel rooms in various cities and get some of the best deals or most unusual accommodations, it is the hotel companies themselves that are expected to win out in the battle for online bookings.

"In 2003, the majority of hotel bookings online are expected to be by the hotel companies themselves," said Seema Williams, senior analyst of Forrester Research. "Currently only 22 percent of total hotel sales go through GDS (Global Distribution Systems). The rest is direct sales."

Like the airlines, hotels are expected to give travelers incentives, in the form of discounts and extra frequent stay points, to get them to book on line. "We're expecting a price differential. It will be cheaper if booked directly with the hotels, but we haven't seen that yet," Williams added.

Many hotel companies have been slow to get into the online booking act, giving those who have entered early a clear advantage. Marriott seems to be leading the way, analysts say.

Marriott created its site in mid-1996 and sold $1.5 million dollars worth of room nights that year. In 1997, that figure jumped to $15 million; in 1998, it was $50 million and it's estimated to total $100 million this year.

Although the company is advertising its site and includes its URL in all print advertising and in-room collateral, it is not giving discounts or any other benefits to those booking online. "We are not biasing this channel or taking away from other channels (of booking). We want to be where the customer wants to shop," said Mara Hannula, director, interactive sales and marketing for Marriott.

This approach is different from many other travel companies but is one Marriott is strongly committed to. Marriott conducted a series of focus groups and discovered that giving special deals online causes confusion among consumers about the best way to book hotel rooms. "It gives customers the feeling that they can't trust the other channels, and we don't want that to happen," she added.

The moral

What does all this mean in practical terms? Just to scratch the tip of the hotel-booking iceberg, on a recent Monday afternoon, we comparison shopped among the various online booking entities, choosing well-known hotels in San Francisco and Paris as examples.

For a Friday night in October, the price given for a room at the Sir Francis Drake, a well-located hotel in downtown San Francisco, was $159 by Preview Travel, $169.95 by Hotel Reservation Network and $195 by Expedia. The hotel itself quoted us a price of $185.

In Paris, we decided to compare the cost of a certain Sunday night in October at the Holiday Inn Garden Court Montparnasse. The price was 759 francs ($122.42 at the current rate of US$1=FF6.2) through Expedia, Preview Travel and Holiday Inn's toll-free reservation line. WorldRes listed a room at 850 francs (or $137.09). The night we checked was unavailable on Travelocity.

The moral? Basically, no one site and no one resource is clearly better than any other. As always, the first step is determining exactly what you want in terms of budget and style. Then you should compare the prices offered by a variety of sources, online and offline: the online booking sites, the hotel's own site, discount sites, the hotel's reservation line, discounters and other brokers, and smaller, boutique sites that may offer special properties.

Online sites don't offer an easy, one-step solution to the hotel-booking problem. They just enrich your opportunities to find exactly what you're looking for.

By Judy Jacobs

Judy Jacobs has been reporting on the travel industry for 20 years. Her work has appeared in Business Travel News, Consumer Reports Travel Letter and Travel Age, among other publications.

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