Hotel chains fight to reclaim revenue from travel sites

By Karen Robinson-Jacobs

The Dallas Morning News

Published: Monday, Jan. 23 2012 11:06 p.m. MST

DALLAS — The love-hate relationship between hotel operators and increasingly popular online travel sites took a turn this month with the launch of a Dallas-based search engine called Roomkey.com.

Founded by six major hotel chains, including Hilton Worldwide, Hyatt Hotels and Wyndham Hotel Group, the site channels consumers to the chains' own websites to book rooms, bypassing third parties such as Priceline.com and Travelocity.com.

The launch is seen by some industry insiders as an attempt to recapture revenue lost to the online travel giants.

"This is going to compete directly with the Expedias and Hotels.com," said Tom O'Rourke, president and chief executive of O'Rourke Hospitality Marketing. "Let's say I'm Bill Marriott (of Marriott International Inc.). I can take that money back, put it into my property, service my guests better, and it's a much better business model for me."

Of the estimated $33.8 billion in hotel rooms booked online in 2011, about 55 percent, or $18.6 billion, came directly through hotels' own websites, according to Carroll Rheem, director of research at PhoCusWright Inc., a research firm. About 45 percent, or $15.2 billion, was booked through online travel agents — up from only $2 billion as recently as 2001, Rheem said.

As the popularity of online sites has grown, so has the cut paid to the online travel agencies. That's been a growing source of angst for hoteliers, who see razor-thin margins on some rooms sold through online sites.

Today, commissions enjoyed by the online travel agencies can be as much as 30 percent of the rate the consumer pays for the room, said John Davis, an online travel pioneer and chief executive of Roomkey.com.

Davis, whose company has 22 employees, would not reveal the commission rate Roomkey.com charges. But he said it will be "far less than the going rate that's out there."

The cost of using online travel agencies "has become such that it is almost unsustainable," he said. "With high commissions, it's hard for the hotelier to make money."

If Roomkey.com becomes popular, chains will probably make fewer rooms available to online sites such as Hotels.com.

Taylor Cole, a spokeswoman for Dallas-based Hotels.com, said the popular website lists "145,000 hotels in more than 60 countries" and continues "to come up with ways to grow our base."

She declined to talk about commissions charged by Hotels.com or to say if the company is looking at lowering those fees to hang on to market share.

"Consumers want choice, and this is another option for consumers," she said.

Rheem, the researcher, noted that this is not the first time the hotels have tried to bypass the online travel agents.

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