Chains gang up to launch, but skepticism is high

SIX of the world’s leading hotel chains have ganged up to launch – a move seen as an arrow at powerful OTAs – but skepticism is high whether the venture will work.

The founding partners – Choice Hotels International, Hilton Worldwide, Hyatt Hotels Corp, InterContinental Hotels Group, Marriott International and Wyndham Hotel Group – have now been joined by Best Western International as commercial partner., which functions as an online hotel search engine – with bookings going directly back to hotels, is expected to have 80,000 rooms in the inventory by mid-2012. It will initially focus on serving US travellers, followed shortly after by expansion to other English-speaking regions, according to a statement.

This is not the first time chains have attempted to regain control of their inventory, and to lower distribution costs – and they are expected to fail yet again.

Both Expedia and Agoda (naturally) do not believe Room Key will work, but even hotel chiefs interviewed think it won’t.

Agoda’s CFO, Bryan Lewis, said: “People underestimate how difficult it is to get traffic to your website. It’s relatively easy to create a website that sells hotels, or takes a GDS fee; the difficult part is to drive customers and make customers aware of it, and that’s what OTAs are good at.

“I think hotel chains combined with competing objectives are unlikely to be successful.”

Mark van Ogtrop, managing director of Golden Tulip South-east Asia, said: “What makes the Agodas and Expedias powerful is they offer a complete range of hotels, while Room Key will only provide the big brands. What we need is more competition in the OTA (sector); there’s just the handful that dominate the market.”

Ricco M DeBlank, CEO – Hotel Division of Sun Hung Kai Properties, which owns the Ritz-Carlton and Four Seasons in Hong Kong, said: “I don’t think it’ll work because Room Key is not a technology company, and hotel companies are too bureaucratic to make changes fast enough and compete with OTAs. I don’t think the remuneration and leadership at Room Key are able to attract the most innovative people in the industry the way technology companies do.”

“From an owner’s perspective, I do want them to succeed,” he added. “And, OTA commissions need to be regulated. We should not have hotels that are in dire need of filling rooms be willing to pay up to 35 per cent commissions to the OTA.”

– A look at Room Key and what’s really behind it, TTG Asia, February 24 issue

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