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Consumer Reports


Big hotels fighting online sale with their own joint Web site

http://www.jewishworldreview.com | (KRT) The nation's largest hotel companies are attempting to take back control of online room sales from independent distributors such as Hotels.com.

Their biggest weapon in that effort is Travelweb LLC, which recently began selling hotel rooms to consumers through its Web site, www.travelweb.com. Since its founding a year ago, the Dallas-based company has supplied rooms to other distributors but hasn't sold directly to consumers.

The new effort by Travelweb - a privately held company owned by Hilton Hotels Corp., Hyatt Corp., Marriott International, Intercontinental Hotels Group, Starwood Hotels & Resorts, Priceline.com and Dallas-based Pegasus Solutions Inc. - connects consumers to one of the participating hotel reservation systems. So a consumer who wants a Hilton room has access to Hilton's computers through the Travelweb site.

Independent online sites, such as the one operated by Dallas-based Hotels.com, require hotel staff members to re-enter the reservation into their systems after customers book online.

Travelweb customers also get their confirmation number directly from the hotel, rather than a third party. Scott Hyden, Travelweb's general manager, says that seemingly small distinction can mean more peace of mind for customers.

"You're booking directly into the system, so there's no room for error," said Hyden, who joined Travelweb two months ago after running American Airlines Inc.'s Web site, www.aa.com.

For the hotels, Travelweb offers more control over price and room inventory.

In recent years, third-party merchants, such as Hotels.com or Travelocity.com negotiated with the chains to get blocks of discounted rooms. The deals helped hotels to sell more rooms, but the online deals usually undercut the hotels' prices and encouraged consumers to stay away from the companies' official sites.

The nation's largest hotel chains didn't like that trend, so they joined forces a year ago to form Travelweb. Airlines took a similar tact when they founded Orbitz three years ago.

Travelweb's new online offering site has forced other travel sites to change the way they deal with hotel companies.

Expedia Inc., for example, recently announced a deal with Hilton that connects customers to the company's reservation system and gives the chain more control over how many discounted rooms are available at any given time.

"Expedia would not have agreed to that deal if we weren't here offering an alternative," Hyden said.

Travelweb's strength as an alternative marketplace will depend on its ability to draw customers to its Web site - a tough proposition considering the company's resources and competition, analysts said. Expedia.com, Travelocity.com and Hotels.com already command 75 percent of the market for online bookings.

"Getting traffic is going to be difficult. Not impossible, but difficult," said Jared Blank, an analyst with Jupiter Research in New York.

As a startup, Travelweb doesn't have as many resources to spend on marketing as its competitors. The industry's biggest players devote $50 million to $100 million on marketing each year, said Lorraine Sileo, vice president of information services for research firm PhoCusWright.

"Are the (hotel) chains willing to cough up the money to do enough marketing? That's the biggest question," Sileo said.

Travelweb officials wouldn't discuss details about the company's financial goals or resources, but they did say it would be spending less than $50 million on marketing this year.

"We have to grow and prove ourselves this year, and hopefully we'll have more to spend next year," Hyden said.

One disadvantage is that Travelweb only offers hotel rooms, and consumers are increasingly looking for a single site where they can book rooms, airfares and car rentals. Travelweb plans to add other features to its site, but not right away.

"It's a matter of when do we want to put our eyes on that ball," Hyden said.

Several consumer trends may work in Travelweb's favor, analysts said.

Most travelers shop several sites before buying, leaving a door open to Travelweb. And the market is expected to continue growing. Online bookings now account for about 10 percent of all room reservations but are expected to grow to 20 percent by 2005.

"As more people start booking online, there's plenty of business for us to grow significantly and be a big player," Hyden said.

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