The Internet as a Distribution Channel

Abstract

The internet has become an extension of hotel chains' global distribution systems (GDSs). It offers three particular strategic possibilities: (1) to drive revenues by extending the company's reach to broader, more global markets, (2) to reduce costs by bypassing traditional distribution channels (e.g., airline GDSs), avoiding commissions, and lowering transaction fees, and (3) to enhance customer service by providing more and better information with multimedia. The potential of the market for guests' booking their own rooms is considerable, and electronic bookings are generally less expensive to complete than those from other channels, notably toll-free telephone lines. The technology is new enough that many difficulties remain, however. Of the top-ten sites maintained by luxury hotel operators, for instance, none provided for real-time, online reservations. Midscale and economy operators have been able to make better progress in online reservations, in part because their rooms are more uniform than those of luxury operators. Purchasers of corporate travel are able to use electronic booking to monitor and gain better control of their travel expenses. Hotel chains that assist corporate travel departments in this effort, through direct connections, can benefit. Prospects for group sales remain in the future, because the design of GDS and internet software does not yet capture the many complications of room-block and meetingroom purchases. Meeting planners can, however, find meeting-related information on the internet. Among other shortcomings of the internet are the overwhelming volume of information available and concerns about the security of data transmission and storage. Perhaps the greatest challenge of electronic distribution is achieving some form of competitive advantage from GDSs and web sites—since so much of today's technology is easily copied. Finally, no precise formula exists for how a particular hotel operation should allocate its resources for electronic commerce. That determination stems from the hotel's overall marketing strategy.