| Hotel Valhalla
By: David J. Wardell
© 1998 By: David J.
Wardell. Reproduction or redistribution in any form without
written permission is strictly prohibited. |
||
| TWX reports (3/13/98) on a seminar given at
ITB on the savings available to hotels if only they would embrace
web-based bookings. The report concisely describes what I call
"Internet Hysteria." One cannot quarrel with the right of two
individuals with a specific interest in promoting e-commerce at the
expense of what appears to be the travel industry (it was probably a
very interesting presentation), but let's call things what they are: two
companies competing aggressively for business that displaces the rest of
the distribution system.
The fact that presentations of this type attract attention out of proportion to the sales pitches that they are (albeit polished and possibly even good sales pitches), is what Internet Hysteria is all about. People get the idea that whenever the Thor's Hammer of The Internet is brought out they automatically should lend their full attention and, should they choose to participate in the business schemes described, they will be entitled to sit in some electronic Valhalla feasting on e-dollars with the gods. The reference to Norse mythology is not as far-fetched as it sounds: people telling some of these e-commerce stories seem based in the same type of imagination and with about as much of a tie to reality. As reported, the presentation in question raises numerous issues that ought to be better supported:
The speakers told hoteliers that, "by shifting their business from intermediaries to web booking systems they will deal directly with consumers, pay lower transaction fees and thus enhance profitability." What is really happening is a new intermediary attempting to take the place of a CRS and agents at the same time. Why should we believe that this new intermediary will be any more acceptable? Why should the new process be more affordable unless the new intermediaries commit to charging less forever?
The systems described are said to take 6 to 7 million hits a month, with the comment that most hotel reservation systems couldn't handle that traffic. The comparison is irrelevant. Hits are not a measure of reservations or much of anything else that happens in a reservation system. Nothing was said about how many BOOKINGS are produced, or how many of the hits get transformed into meaningful business.
"Hotel chains receive 30% of their bookings through agents and 1% via the CRSs;" (Where did those numbers come from?) "The web is the fastest-growing reservations channel." Certainly it is--when you start with nothing any growth is geometric. The point of the percentages cited (together with later comments) is to make the point that the distribution system isn't interested in the hotel market anyway. A few moments thought by anyone who has been around the industry for even a brief time will dispense with that myth.
Figures are cited of a $654 million revenue travel e-commerce market for 1997, expected to grow by 625% in two short years by 2000. Really? These are new numbers to me. The latest and greatest TIA study uses different projections (more aggressive); the more mainstream research companies produce usually more conservative figures. Isn't it strange that we can't get together on even what the size of the market is--apart from that it's really, really big? In the end the problem is that NOBODY KNOWS how big the e-commerce travel market is, nor how fast it will grow. They just guess--with greater or lesser precision.
"Fourteen million people used The Internet to make plans or reservations last year." Really? Where did that estimate come from? What is the definition of "plans?" Perhaps that accounts for some of those "hits" we heard about earlier? If 14 million really are booking then perhaps a few of the e-commerce companies may start making money. Based upon a $654 million market, then their average purchase was between $50 and $60? More mainstream research suggests that the real number of people spending enough time on The Internet to book anything (and thereby make money for someone) is small indeed. The vast numbers routinely cited are comprised of casual users--mostly e-mail. I would think someone would have a hard time defending a 14 million number.
"Asked by Travel Weekly whether consumers want personal recommendations from agents," ... "My travel agent hasn't been to every city around the world that I need to visit. I booked a room here with an agent who had never been to Berlin." This is the old chestnut that people who have been trying to devalue distribution for decades will always drag out. It doesn't mean anything. In the end, a web-based information system is simply an electronic brochure. Perhaps better done that a printed one, perhaps with audio or video, but a brochure or reference tool just the same. Whether an agent or a customer uses that TOOL (it could be open to both) doesn't alter the fact that no one has "been there." In fact, if the agent has access to a tool with critical hotel references then they are probably better equipped to respond intelligently to questions from a customer.
In the end, let's not lose sight of the fact that people can (and should) promote their products as best they can, but the fact that The Internet may be part of their product doesn't necessarily mean that they know what they are talking about or that their message is right for everyone. E-commerce has substantial potential--enough so that Internet Hysteria is not only unnecessary but distracts everyone from getting down to business. |
