Hotel CEOs Upbeat On Room Key Despite Its Late Arrival

Hotel company chief executives said they view the recently launched booking site as a chance to regain control of their inventories, although a few around the industry questioned whether the effort might be too far behind the curve to be successful.

Speaking here last month at the Americas Lodging Investment Summit, CEOs of four of the six founding partners of Room Key said the site is a much needed opportunity to rein in distribution costs and direct more bookings through hotel brand websites. Room Key is an independent company resulting from a partnership among Choice Hotels International, Hilton Worldwide, Hyatt Hotels Corp., InterContinental Hotels Group, Marriott International and Wyndham Hotel Group. It works as a metasearch site through which travelers can see rates across participating hotels for desired dates. then sends travelers to the selected hotel's own website for direct booking.

"The industry was long overdue in creating a solution that was a consumer-friendly site as well as an owner/franchisee-friendly site," said Choice president and CEO Stephen Joyce. "Customers who want to compare various brands will be able to do that, but then they end up booking at the right place, which gives them the guaranteed best rates and their loyalty points."

According to Wyndham Hotel Group president and CEO Eric Danziger, the issues go beyond cost, although the fees many hotels pay to third-party online travel agencies certainly were a driving factor. Distribution fragmentation also causes hotels to lose guest loyalty, particularly as OTAs seek to cultivate loyalty to their own brands through such efforts as new rewards programs.

"The industry ceded away its relationships with millions and millions of customers after Sept. 11 by allowing third parties to have the best access and rates available to them," Danziger said. "Every brand should have a direct conversation with the consumer, and we want to take back those relationships and provide a better cost structure for the owner."

Choice's Joyce said Room Key is comparable in concept to hard stances taken recently by airlines against third-party distributors because "they decided what they were paying out was not appropriate as a sales channel."

Not everyone in the lodging industry is convinced. KSL Capital Partners managing director Michael Shannon, whose company manages seven major U.S. resorts, called Room Key a "very late attempt" that won't work. Aside from the difficulty of competing with the numerous existing and emerging booking channels on the market, the hotel companies' involvement should prove to be a disadvantage with travelers, not an advantage, he said.

"It's very difficult to control pricing and distribution with an industry consortium," Shannon said. "Customers are smart and realize when something is owned by the ownership, it probably is biased against them. The consumer is going to demand independent, fair value as judged by others, and not by us, unfortunately."

Shannon also shrugged off the airline comparison, saying hotels face a much more difficult path in controlling distribution. "[Airlines] are a government-sponsored oligopoly, with a certain number of gates at each airport and an unholy cabal between unions and government to keep these things alive," he said. "It's much more competitive in the hotel business, and customers are used to trusted, independent sites."

Room Key member CEOs scoffed at the idea of bias, challenged naysayers to visit the site and insisted it was designed with the traveler in mind.

"It is an independent company with a strong management team unto itself," Hyatt president and CEO Mark Hoplamazian said. "It's not a bunch of founders sitting around micromanaging and manipulating what's going on. It provides simplicity and transparency."

IHG CEO Richard Solomons said the point of Room Key is not to completely supplant OTAs but to ensure that they remain an "incremental business." OTAs currently generate about 5 percent of IHG's business in most markets, he said.

Hotel distribution analyst and Estis Group managing partner Cindy Estis Green said the degree of Room Key's impact in the coming years depends on how it fits into the evolving distribution picture. As travel booking becomes more common through social networking sites, voice-activated mobile assistants and such large-scale platforms as Apple's or Microsoft's, those channels will be searching for providers of content. Room Key therefore could act as a "back end to deliver them to where customers are searching for travel," she said.

In the short term, Joyce said he expected more brands and independent hotels to participate in Room Key. Unlike past ventures__including the hotel-founded merchant distributor Travelweb, which co-owner Priceline eventually took over__the hotels do not plan to give up their stake in this one, he said. "We'll have something interesting on our hands that we should have had five years ago," Joyce said. "You've got what normally would have been a United Nations-type of picture, with people going lots of different directions, to be brands that have done a great job of all getting into the boat and going the right direction."

Shannon offered a contrasting maritime analogy. "If you look at the advent of Facebook and Google and where technology is going, we're in a very slow rowboat," he said. "We may be rowing together, but the speedboats are the better technology platforms with better and more trusted interfaces, which makes it very difficult for the U.S. and world hotel business to get control of their customers."