Rooms at the Top

Just a day after Expedia’s incoming CEO told an investor conference about the online travel site’s continuing push into the hotel market, the Bellevue, Wash-based company inked a deal with the Six Continents Hotels network.

Not to be outdone, the airline-backed travel site Orbitz launched a program aimed at signing up more hotels to participate in its lodging operation.

“Hotel booking is now one of the fastest growing online travel categories,” said Jeff Katz, Orbitz president and CEO.

The increasing efforts that the online travel sites are making in the hotel space are in part a result of declining revenues from airline reservations as that industry continues to suffer from an overall decline in air travel after 9-11.

Other factors are a depressed economy, and now the threat of war with Iraq, which could send airline reservations down another 10 percent, according to some studies.

“The percentage of online travel that is coming from air will definitely shift,” said Lorraine Sileo, an analyst at travel industry research firm PhoCusWright.

“In 2002, airlines represented 48 percent of the online travel industry (leisure and small business), but that percentage is expected to decline to 41 percent in 2005,” she told

However, PhoCusWright also projects that hotels will remain at 22 percent market share (of the online travel industry) for the 2002-2005 period.

“While hotel sales will continue to grow (only 9 percent of hotel sales are booked online, so there is plenty of room for growth), prepackaged vacations, cruises and international sales will grow at even higher rates,” Sileo said.

Despite a slump in the hotel market itself as more folks have stayed home, travel companies such as are beginning to find some significant revenue in the hotels market. Priceline recently said its first-quarter-to-date hotel revenues are up about 35 percent over the same period in 2002.

And, operated by the Sabre Holdings Group , last month signed its own deal with Six Continents, a British company that owns more than 3,300 hotel and resort properties worldwide.

The Expedia deal with Six Continents (operator of brands such as InterContinental Hotels & Resorts, Crowne Plaza Hotels and Resorts, Holiday Inn and Holiday Inn Express) calls for the hotel operator to join the Expedia Special Rate program.

Six Continents determines the wholesale rates for room inventory, and the room prices and inventory can be changed at any time. As part of the agreement, Expedia is working toward seamlessly connecting to Six Continents Hotels central reservation system, the HolidexPlus network. Travelocity’s deal calls for the same thing.

And with Expedia’s dynamic packaging technology, Six Continents hotels now can be booked with flights and/or car rentals at a single price. Expedia is majority-owned by Barry Diller’s USA Interactive , which also operates, a stand-alone hotel reservation company.

Orbitz, meanwhile, is making its own push into the discount hotel market, and is taking aim at independently owned and operated hotels. It reportedly has already brought about 100 hotels under its wing, including some luxury hotels in Las Vegas (Harrah’s)
and San Francisco.

Through its just-launched merchant hotel program, Orbitz said it expects to add thousands more properties to by the end of the year. Orbitz already sells discounted rooms in about 4,000 hotels through a relationship with TravelWeb, a consortium of five major hotel chains including Marriott International, Hilton Hotels and Hyatt Corp.

Through a direct relationship with Orbitz, hotels will be able to dynamically update rates, room availability and Web site content via an extranet and receive reservation confirmations via e-mail.

Although there’s more emphasis among online travel sites on the lodging industry, there remains lots of room for growth.

Expedia’s incoming CEO Erik Blachford told the investor conference Wednesday that currently only 5 to 10 percent of hotel rooms in the United States are sold online, and worldwide the figure drops to about 5 percent.

Said Blachford: “This is a sustainable, long-term business.”

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