Internet Bookings A Boost To South Florida Hotels Amid Slump
Written by Elisa Llebry on May 23, 2002
By Elisa Llebry
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South Florida hoteliers have turned to online travel agencies to alleviate the post-9/11 tourism slump. In the process, they realized that with the right technology they could skip the middleman.
"We work with hotels to help them with unsold inventory," said Ammy Bohutinsky, a spokeswoman for Hotwire.com. "Right now hotels in the Miami area have a lot of rooms open. If travelers are flexible regarding flight arrival and departure time, they can save up to 70% on vacation packages."
Hotwire is a no-pick agency, meaning it allows consumers to select their destination and days of travel, but the name of the hotel is not revealed until the user pays for the package.
"We have never had this much presence on the Internet," said Pier Alberto Raccuglia, general manager of Holiday Inn, 6060 Indian Creek Drive, Miami Beach.
"This is a whole new ballgame," Mr. Raccuglia said. "Even wholesalers are asking for concessions now. We had to lower our prices 30% because with the recession people are looking for bargains on the Internet."
Some hoteliers said they realized in the face of current economic instability that travelers are waiting until the last minute to book trips, hoping to get a better deal.
"The reason why online advertising is so attractive is because once it goes in print, it is set in stone," said Kevin Worrell, vice president of Pelican Creek Hotel, a 45-room family-owned and -operated hotel in Miami Beach. "Online has a broader reach, and it is malleable. If you are experiencing low occupancy, you can just log on and change your rate."
Discount travel sites operate under two different business models. One works just like an off-line travel agency, charging 8% to 15% commission per room-night sold.
The merchant model re-sells unsold inventory below a hotel’s posted rates. This is possible because users design their own itineraries and make their own reservations online, which decreases the need for human labor. The result is up to 70% in discounts for consumers and a high profit margin for merchants.
"We do not spend a lot of money on conventional advertising," Mr. Raccuglia said. "We use Expedia.com because they are everywhere. They have a strong positioning. In fact, 35% of our business comes from Internet, 25% from our 800 number and 40% is the result of big hotels’ overflow."
Expedia, one of the top 75 most-visited sites on the web with 11,974,000 unique visitors in April 2002 alone, is the world’s leading online travel service and the seventh largest travel agency in the US.
For the first quarter, which ended March 31, it sold 1.6 million room-nights – up 224% from last year. After-tax adjusted earnings rose to $28.4 million for the quarter. Its revenue increased to $116 million, up 103% year-over-year.
A major challenge of Miami’s hospitality industry is getting guests all year around, especially during summer. The forecast for the upcoming summer months is everything but promising. This has forced the industry to concentrate on markets that could smooth out their demand.
"We are aiming at the quintessential European student through worldwide online reservation networks such as Utell.com," Mr. Worrell said. "To attract domestic tourism we promote family-oriented activities. That’s why we have kitchens in all of our rooms."
The post Sept. 11 downfall hit hotels harder than non-hospitality industries. It caused even the winter season, the most profitable months of the year, to be low in occupancy. Even high end-hotels such as Hyatt Regency in downtown Miami have joined the online frenzy, advertising rooms on Expedia.com for $85.
Yet, lodging representatives complain that dot-coms are not afraid to tip the scale in favor of hotels that pay them higher commissions or give them better allotment prices by exposing them to a larger audience.
"Sometimes you search for Holiday Inn on Expedia.com and it does not come up at all," said Mr. Raccuglia, who oversees an 85-room property. "They have the power to hold us back because they are all over the Internet.
"I closed down four floors to cut down on expenses because of low occupancy," he said. "They are trying to get us to pay them more commission. Perhaps other hotels are in a better position and can afford it, so they give them preference even if their product is not as good as ours is."
Mitch Robinson, marketing manager for Expedia Inc., said one reason the company reported record revenue and earnings for the first quarter is that it has the ability to work with hotels and make sure negotiations are a win-win situation for both consumers and properties.
"We have many different factors that determine where a specific hotel appears on a search result: price and quality are some of them," Mr. Robinson said. "We also allow consumers to search by what is most important to them. You pick the hotel, the airline and we combine it to see if we can save you money."
But the following sign posted on the Fort Lauderdale-based website makes some clients wonder if everyone gets treated equally: "Beginning at 10 p.m. on Friday, May 17, Expedia.com will be conducting a website upgrade. During this time, you will not be able to shop for flights, lodging, rental cars or vacation packages. You will, however, be able to shop for and book cruises."
Best Western, the world’s largest hotel chain, is one of Expedia’s thousands of clients nationwide. Bernard Edelstein, who owns one of the chain’s franchises at 9365 Collins Ave., agrees with Mr. Raccuglia.
"Expedia wants more money, but we haven’t had the time to negotiate a better deal with them," Mr. Edelstein said. The agency’s gross bookings this quarter were $1.1 billion, up more than $425 million from first quarter 2001.
"The procedure can be as simple as programming the search criteria to make some hotels pop up more often than others," said Raymundo Gonzalez, marketing coordinator of Fiera.com, an e-commerce portal. "It’s like newspaper advertising. If you pay more, you get more prominent exposure."
The solution to this technological uncertainty, many industry experts said, is cloning online travel networks, a strategy that some high-end hotels have already implemented.
"We are very keen on Ritz-Carlton.com and on taking advantage of that as a medium primarily on the Internet," said Paul Cookley, director of group sales. The Key Biscayne resort, he said, recently upgraded its website to improve navigation.
"It allows guests to make their own reservations and take advantage of our affordable packages," Mr. Cookley said.
For $279 a night, Ritz-Carlton guests can embark on an Island Getaway that includes full breakfast for two in Aria, the resort’s signature restaurant; valet parking, and 20% discount on all spa services at the 20,000-square-foot ocean view facility.
The 1,000-room Westin Diplomat Resort and Spa, which is part of the Starwood family – which lays claim to being the largest conglomerate of managed, owned and operated luxury hotels and resorts in the world – already has a worldwide booking site at starwood.com. It allows the hotel to concentrate on developing fun summer promotions. For example, for $149 Floridians can spend a night of luxury and relaxation at the waterfront resort. The regular price of a room at the newly inaugurated hotel is about $300.
"Other advertising alternatives are VisitFlorida.com and the chamber of commerce," said Michelle Le Vous, a spokesperson for the 39-story resort and spa on Hollywood beach.
"Today, the Internet is a key factor in the lodging business. A year from now, things will be different," Mr. Raccuglia said. "We are working in conjunction with Holiday Inn’s corporate office to develop our own extranet. Consumers will be able to get the best deals directly from our website."
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