Hotel marketers are convinced that the future is on the internet and that travelers will gravitate inevitably and inexorably to this booking channel.

They may be right, but if they are they are in for a shock: on-line booking is not seen by travelers as the panacea that hoteliers would like them to think they are; hotel sites are not seen as marketing tools as much as they are information sources and convenience providers; and on-line travel sites such as Travelocity and Hotels.com are poised to suck margin out of hotels' bottom line like a Dyson vacuum cleaner.

Let's deal with the last point first. On-line travel sites are the big box stores of travel – category killers as it were. It is surprising that after so many years of recruiting package goods trained marketers, hotel brands have not seen the parallel and acted accordingly to manage the outcome in their favour.

The general response by hotels to on-line travel sites is something less than tolerance. There is a grudging acceptance that they are there and they need to be catered to – after all, they sell millions of room nights. But that's where it ends. There is a generalized hope that travelers will see the light and take advantage of "best available prices" on brand websites (with the especially fantastic idea that people will compare properties on the consolidated sites and then go to the hotel site to book). There is no obvious channel strategy that would allow hotel brands to benefit from the situation. To most hotel companies it is a matter of revenue management. Period.

From the travel sites perspective it is entirely different. If all they do is pass along third party products (airlines, hotels, cruises, etc.) at the best negotiated price, they are nothing more than a commodity in a highly transparent, easy to access, low cost of entry commodity marketplace. In order to be successful they need to deliver differentiated, unique and valuable experiences: Travelocity and the rest are looking for perceptual brand image differentiation (Gnomes come to mind); they are building trust through guarantees; and this writer is willing to bet they will introduce their own, consolidated loyalty programs based on their own sales.

In other words, these sites are doing to hotels (and airlines and the rest) what retailers did to manufacturers in the early nineties: provide their own brand values, sell third party branded goods at generally non-differentiated prices and build their own customer bonds. It would be strange if we did not see Hotels.com or one of the others brand their own hotels through a franchise system – not unlike retailers having store brands and in-house brands and a strategic approach to brand portfolios.

The bottom line is that travelers will increasingly go to Travelocity because they want the totality of the Travelocity experience, not because they want any specific hotel or travel brand. Hotel marketers, many of whom are products of package goods firms, would do well to study the impact of big box stores and category killers on national brands and how these national brands responded.

Part 1: Online booking is not seen by business travelers as the panacea hotel companies think they are

Our branding company conducted focus groups among frequent business travelers in order to understand how they integrate on-line booking into their travel needs. The results, which are qualitative in nature and meant only as a general guide or set of suggestions, are quite startling.

Booking hotel rooms is hard work

These travelers do not see on-line booking as easier, or more convenient, than direct booking on the phone or reservations made through travel agents. In fact, for a number of reasons it is more confusing, somewhat more difficult and in many cases more time consuming.

Business travelers say that booking the right hotel is the most important controllable variable in their travel schedule. It affects every aspect of the trip and is central to their evaluation of the outcome, not only of the hotel stay, but of the success of their enterprise. Travelers understand that they have no option but to stay in a hotel, and at some level feel like potential victims: They are concerned that unless they are good at the hotel-game, they miss out, get overcharged, and waste time

They suggest that making hotel reservations in general is a skill, and requires a logic process. This process, which we refer to as the "Path to Purchase", differs among people with different attitudes and is discussed later; but it seems to be consistent for each traveler "type." In order get what they want and need from the hotel in which they will be staying, business travelers have developed specific strategies. For the most part, on-line hotel brand sites (and travel sites) do not meet the needs of the strategy and, ultimately, become more trouble than they're worth.

Let's take a look at the complexity of the process from the travelers' point of view

Hard to figure out the location relative to where they need to be

While the closeness of the hotel to the place they need to be is not always the most important factor, it is always of some importance. When visiting a city for the first time, it is hard to determine the nature of the geographic relationship – distance is one thing, but time is another. Travel sites offer mapping options and will select hotels based on distance (for those who are looking at this as a critical variable), and this is appreciated. It is not, however, helpful to the hotel brand marketer!

Hard to know what the right price is:

When reserving a room on most hotel websites, potential customers are faced with a confusing array of different prices for the same accommodation. In some cases this is explained (although not very clearly) in terms of differences in flexibility, advanced paying, etc. It is nevertheless confusing. But more than that, this range of rates almost forces the customer to check out other hotels to get some idea of how this rate stacks up against other rates in the area: if the same room can cost $210 or $249, how does the customer know what is the true relative value? Given that in most cases the properties seem pretty similar when presented on web sites; there is a strong probability that there is a "last seen" advantage: that after checking two or three rates and seeing that they are all similar, on-line bookers will simply lose interest and reserve the last room they looked at.

In an uncanny way, the first site has promoted a sale for the last site. On-line marketers would be better off to proactively offer a comparison chart of all the brands in the location – at the very least this will ensure that they incur the benefit of the "last seen" advantage.

Hard to know what the quality is

Consumers know that hotel brands do not offer consistent levels of product quality in every market, except perhaps at the lower end of the market. Not all Westins are the same, and not all Westins charge the same rate. Each property delivers a unique value proposition, which is not made clear on brand web sites. Travel agents have historically provided this information ("I had a client who stayed there last week and she was thrilled with the property,") and on-line travel sites offer this value description through ratings systems and comment sites. But hotel and hotel brand sites have difficulty in effectively delivering this very important piece of information.

Hard to consider all the factors

Business travelers take much more into account when reserving a hotel than the generic information on the hotels' web site. They need to understand how this particular property is going to meet their own, specific needs better than another hotel. And we are not talking about amenities, or things like different pillows or scotch preference – they are trying to evaluate the impact staying at the specific property will have on their business dealings; they need to know how the hotel is prepared to help them with business emergencies; where the spa is in relation to the meeting rooms, the list is infinite.

They are looking for information in two separate (and not necessarily equal) areas: what is important in terms of the purpose of the trip and, secondly, what is important for them personally. We discuss this, and the hierarchy within the decision making process, later on.

Need to develop strategies to ensure you get what you need

Frequent business travelers talk of strategies to ensure they get what they want, and while these strategies are different for each person, they all require an underlying flexibility that can generally only be delivered by on-site reservations agents (either directly by calling the hotel or indirectly through a travel agent).

Strategies we heard discussed included checking prices on the web and then booking direct and negotiating, using the "lowest available" rate as the starting point; negotiating room upgrades directly with the hotel reservations agents, and trying to get every possible perk – for some people this is almost a game. They "know the tricks hotels try to play" on them, and have learned how to "play the system" to get what they consider reasonable value out of the hotel. It is a dangerous indictment of the industry in general that the best customers think this way!

Part 2: Determining how much they will pay

It would be nice to think that hotel customers would just pay whatever the hotel tells them to pay – accepts the value proposition determined by the hotel and translated into the rate card. Travelers, however, are adamant that this is not the case. Given the myriad alternatives and variables, they construct their own acceptable value proposition at the time of making the reservation, and act on this. They establish value based on their own assessment of the hotel's overall offering (including facilities and amenities) filtered through a set of personal value and price "inputs" that rationalize the decision:

Who is paying for the hotel?  Client? Company?  Personal?

The base line of the value equation is determined by who is paying the bill – this is a phenomenon that is seen in some other categories, but none so clearly as in the hotel segment.

Length of stay

A short, overnight stay requires fewer facilities and amenities in the hotel than does a longer stay. Travelers will forsake a swimming pool or tolerate a smaller room for one night; but if they are staying three nights these amenities develop a higher level of importance.

Location

The old maxim "location, location, location," still applies, but the details have changed for the modern traveler. It is not automatic that they want to stay as close to their business as possible; it is not automatic that they want to stay in a central downtown location – each traveler has his or her own definition of the perfect location, and even that varies based on the purpose of the trip, length of the trip and specifics of the locality. The impact on the value equation is obvious.

Other factors that come into play are such things as anticipated stress (if there is a chance the trip will be stressful, there is a proportionate increase in the value of luxury and comfort features); for women travelers there are a variety of hard and soft necessities that add to the value of the experience; time of year; importance of the trip. The list varies for every traveler on every trip!

Part 3: The role of the brand

At a cognitive level – that is, at the level where people are consciously aware of how they are making a decision -- the brand of the hotel does not seem to play a significant part in the selection except as it applies to two factors

Loyalty and reward programmes

Travelers on the whole are reluctant to admit they are motivated by points. However, they are prepared to admit they feel they deserve something back, and loyalty points are an effective way for hotel brands to fulfill this "need."  The danger is that while the need is fulfilled, brand loyalty is not actually being cemented – purchase frequency is being managed, but point collectors are loyal only to the points program, and can be easily moved from one program to another – in fact, most frequent travelers are members of multiple programs, so that in effect the loyalty program only serves to bring the brand to parity.

Ease and convenience of booking on line

Travelers will first go to the online site of the brand that is top of mind. This is a good and a bad thing, as they will not necessarily buy from that brand, but will use the information they get from the first website as the benchmark for further investigation. They seem most likely to book at the last site visited, which most often is determined by how long they have spent in the process. Sites that encourage competitive comparisons by providing links (but in separate windows so the user is retuned to the originating site) may well be building a logistical coral which almost forces the user to land on their page at the end of the comparison search.

This weakness in overt brand preference suggests vulnerability in hotel on line relationship management and sales strategies:

If the large on-line travel companies develop confidence building guarantees (which Expedia.com has recently incorporated) and follow this up by a point or frequency based loyalty program, hotel branded websites may well become, in the minds of many travelers, from a practical point of view, completely irrelevant: no real difference in the product, no difference in the price, no added value. While any given hotel company can offer a limited number of options segmented into a limited number of brands in any location, Travelocity can offer a broader range, a comprehensive quality guarantee and added value reward points that pile up no matter which hotel you choose. This is a hard competitive package to beat.

Part 4: Some insights into who they are

A rough segmentation

We found it was possible to identify three comprehensive segments that differentiated travelers based on how they made their purchase decisions. The segments are based on the commonality of underlying psychological needs that were fulfilled in the hotel room purchase process. We called the segments: points whores, self absorbed independents and upscale warriors. The table below shows the worldview, typology and manifest behaviour of each of the three segments:

(see separate file, figure 1)

These segments each focus on different functional "promises" when choosing their hotel, but they all have two "filters" in common. The first is that the underlying structure of the value equation (who is paying: the traveler, the company or the client); and the second is a quality filter that is most often influenced by personal experience, word of mouth input by friends or colleagues (or, as is becoming increasingly available, third person evaluation sites). The chart below sows the path-to-purchase decision tree demonstrated by each of the segments

(Separate file figure 2)

Conclusions

The hotel business has changed entirely: ownership structures, franchise systems, operators, the works; and hotel investors and operators are the first to admit this. However, they do not see that the hotel marketplace has changed absolutely, as well. There is general agreement that there has been some disruption due to the internet, some reassignment of roles ("wholesalers" are now on-line) but they have not understood or reacted to the enormity of the change in the buyer side of the equation.

This shift has resulted in a potentially much more powerful and controlling marketplace: one where all the players are smart, innovative and focused on profit maximization. Hotel brands are looking to design to differentiate their properties, deal structure to ensure profitability, human capital management to build a reservoir of talent and technology to bring it all together.

Absent in all this is an enlightened understanding of the customer and the customer's increasingly dominant role in the relationship.  Business travelers are determined to control their own destiny in their hotel purchase as they are in almost every other aspect of their lives. They are searching for relationships in which they can establish their needs and participate in determining the way in which these needs will be met.

For the most part, hotel brands miss the point. They view customer needs as one-dimensional and universal. They aggregate behaviours and call them "wants" (what customers do is not necessarily what they want, especially when they are given no options). Other than cosmetic ways, hotel brands do not seem to be responding in innovative, paradigm shifting ways. Ways which will result in deep, meaningful relationships with customers who want to do business with them and are willing to pay a premium for the experience.

Laurence Bernstein has been fine tuning the art of converting features, attributes and benefits into dynamic, experiential brands for over 20 years.

www.baycharles.com