July 27, 2006

How The Internet Is Changing Indepdent Hotels (Small Businesses)

There's two main reasons why there are so many franchise hotels (Best Western, Holiday Inn, etc) instead of independent hotel owners.

1 - They want to be affiliated with a brand name

2 - The hotel owners want access to a central reservation system connected to travel agents (online and traditional) - global distribution systems (GDS)

Because of the Internet and growth in online hotel room booking (and ecommerce overall) many hotel owners are seeing a rise in hotel reservations via the Internet. While brand recognization is important a hotel owner can build their own traffic through online marketing/advertising and have reservations booked directly through their own web sites.

Business Week writes Over the past three years, Starkov has seen about 20 clients drop their chain affiliations after seeing significant increases in the number of reservations booked directly through their Web sites. He says that's largely because direct distribution is far more profitable than other reservation channels. Travel agents will typically take about a 10% cut in commission fees, and travel sites like Expedia take even moreóabout 25%. A telephone reservation can cost between $8 and $15, depending on how efficient the call center is. Yet an online reservation booked directly through the hotel's Web site costs only about $3.

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