InterContinental Hotels Group takes bold action to address problems with Online Travel Distributors

InterContinental Hotels Group (IHG) is adopting a new standard for its portfolio of  brands representing more than 3,500 hotels for selling or re-selling hotel room inventory via all online travel companies, effective May 21, 2004. The IAHI, one of the most established independent franchisee associations in the industry, unanimously endorsed this standard on April 16, 2004.

"The standard directly addresses a number of problems that IHG's guests and hotel owners are experiencing with some online travel companies. We have been discussing these problems for some time and believe several distributors are working hard to alleviate the situation. However, it is important that we ensure the business practices of all our online distribution partners are in line with our core values," stated Kevin Croley, Sales and Marketing, InterContinental Hotels Group, Asia Pacific.

With its new standard, IHG said it is committed to only working with distributors and their affiliates that do not engage in confusing and potentially unclear marketing practices, that clearly present taxes and fees to consumers, that respect IHG's trademarks, and that ensure reservations are guaranteed through an automated and common confirmation process. The new standard also ensures that hotel owners are able to provide the best available rate, realise efficiency gains from the Internet which they can reinvest in their properties, and better manage inventory.

Confusing and potentially unclear marketing practices

The rapid adoption of the Internet for travel booking has led to the rise of some potentially confusing and unclear practices. 

· Customers who go to an online distributor's Web site to find a hotel may see a hotel listed as 'Sold Out' when that hotel actually has rooms to sell.

· Customers may be lured to a site with the promise of huge discounts on recognised hotel brands, which may not exist in any meaningful quantity.

· Customers searching for a specific hotel brand can be diverted to another Web site without their knowledge or consent.

IHG will only work with distributors and their affiliates that commit to not engaging in any of these types of practices.

Unclear presentation of taxes and fees

When booking a hotel room on some distributors' Web sites, a guest may see a charge for 'taxes and fees' added to the room rate. In many cases, it is not made clear to the guest what proportion of this charge is for taxes, and what is for service fees imposed by the distributor. This means that a large part of the 'taxes and fees' line may often, in fact, be fees retained by the distributor, although many guests may be unaware of this. It also leads to problems for hotel owners and distributors in determining the appropriate taxation basis on the amount remitted by the distributor to the hotel.

IHG will only work with distributors that commit to clearly showing all guest charges and to helping hotels directly address the question of the appropriate taxation basis.

Antiquated and unreliable booking processes

Given the hi-tech nature of the Internet, it is surprising that some of the third party sites still use manual and inefficient booking processes. Consumers can make reservations on a distributor's Web site, but those reservations are often ultimately transmitted to the hotel via a fax or other process that then must be manually reentered into the hotel's reservation system. This leads to the potential for lost reservations, reduces consumers' confidence that their booking is secure, and increases operational costs for hotel owners.

IHG will only work with distributors that either already have automated the booking, payment, and settlement processes or are committed to automating the processes in a short period of time.

Hard for hotel owners to offer the best rate available

Current online distribution models make it difficult for hotels to offer the best rate available. In some cases, hotels don't have the ability to set their room prices on third party sites, making it unnecessarily difficult for a hotel to ensure that it stays in compliance with IHG's Lowest Internet Rate Guarantee.

IHG will only work with distributors and their affiliates who commit to work with hotels to comply with IHG's best rate available promise.

Hotel owners unable to respond to supply and demand

Under the existing model, hotel owners are unable to make real-time choices on controlling rooms available for sale, taking into account demand levels, customer buying patterns and channel costs. Hotel owners often subsidise inefficient distributors by being forced to keep open high cost channels when demand is high.

IHG will only work with distributors and their affiliates who commit to allowing hotel owners to respond to market supply and demand.

Internet efficiencies unrealised by hotels

The high cost of some current distribution channels prohibits efficiencies gained from the Internet from being passed to hotels and consumers. In fact, some distributors are currently operating with 20-30 percent commission margins, a level that far exceeds even 'traditional' offline travel agents.

IHG will only work with distributors who want to share Internet efficiency gains with hotel owners and guests.

"We are committed to working with a wide variety of sales distribution channels," said Croley. "However, we are taking the stand that we will simply not have our brands sold through distributors who refuse to solve these problems. Customers and hotel owners have a high degree of trust in our brands … our reputation and heritage is built on that trust."

Leroy Lail, chairman of the IAHI, stated, "We as hotel owners are fully in support of this new standard. It is a win-win for owners and guests alike."

Over 70 percent of InterContinental Hotels Group online reservations are currently booked directly via its own Web sites, well above the industry average of 50 percent. Bookings through third-party online distributors currently represent less than two percent of room revenues for IHG's brands worldwide.