Methodology of Electronic Distribution Channel Management Think Tank

Executive Summary: Electronic Distribution Channel Management Think Tank

January 28, 2003

Department of Hotel Management, William F. Harrah College of Hotel Administration,

University of Nevada, Las Vegas

Overview:

The Purpose of the Think Tank was to brainstorm the issues surrounding distributing hotel rooms electronically. First, industry experts were asked to identify hotel e-distribution channels and the key challenges inherent in each. Second, solutions to challenges were asked as if unlimited resources were available. Lastly, real-world barriers to implementing these solutions were isolated and suggestions specific to overcoming these barriers were presented.

Procedure:

The daylong meeting was convened on January 28, 2003 in the Stan Fulton Building at the University of Nevada Las Vegas Campus. Experts for the Think Tank were invited from industry practitioners located throughout the United Stated and Canada. These experts consisted of hotel operators, vendors of electronic distribution channels, and hospitality technology consultants. There were fifty-four participants, twenty-five from hotel operations, twenty-five from various types of vendors or web services companies, and four consultants. While a broad range of property types were invited, in actuality there was very little “chain” hotels representation among the operators. Two who had intended to attend the Think Tank were unable to at the last minute. Also, many of the hotel operators were from the west coast, with a large representation from the Las Vegas market.

The Think Tank process divided the fifty-four participants into four breakout groups, each group consisted of a balance of operators, vendors, and consultants. A general session introduced participants to the Think Tank format and their assignment to one of four breakout groups. Groups then convened in separate breakout rooms to proceed with three sessions.

Session One consisted of each group identifying and prioritizing channels of distribution based on the difficulties that hotels have in managing them. Participants in each group then identified and prioritized challenges to each channel. Session One concluded by all groups meeting in a general session where channels and challenges were consolidated. Each participant then voted on the consolidated challenges (approximately 30) by placing one or more of 5 stickers given them in an associated space next to the challenge. Participants could place any number of their five stickers on any particular challenge that they felt represented a significant problem.

Session Two began by providing each group with the top ten challenges identified in Session One. Participants first identified “ideal” solutions to each challenge and then prioritized them. A general session was then held to form a general prioritized list of solutions following the same consolidation and voting procedure as done in Session One.

Session Three allowed for each group to identify the real world barriers to the top ten solutions identified in Session Two. The groups then discussed how to overcome them.

Results:

Session I: Electronic Channels and Issues

The tasks for the first session consisted of each group identifying and prioritizing channels of distribution based on the difficulties that hotels have in managing them. Participants in each group then identified and prioritized the particular challenges hotels have in managing each channel. One of the clear difficulties in the discussion of “channels” was the language used to describe them. Each group spent a considerable amount of time defining the terms they used to describe the channels. Terms such as “opaque” and “transparent” were used to describe how clear the view was from the consumer’s side as to who was selling the product. For instance, an ”opaque” site would be a site where the consumer does not know what property they are booking in whereas a “transparent” site would be a site that clearly delineates the properties offering rooms matching the consumers inquiry. Sites like priceline.com and others could be selling rooms from wholesalers or other third party vendors as well as directly for a property. Other groups identified multiple “merchant models” where the rooms were sold by a provider such as Sabre, Travelocity, Orbitz, and Expedia. When examining the list of channels, it appears that some groups choose to define them in more detail, while others used more global terms.

The results of the each group’s channel identification are presented below.

At the end of the first breakout session the groups came together to discuss the channels. This turned out to be no small task and the channel names were once again at issue as an attempt was made to consolidate the information from each group. While most groups generally identified the same distribution channels, which particular channels were included in their definitions varied and created quite a controversial topic for concurrence purposes. Additionally, in this first breakout session the groups were asked to identify the “issues” or “challenges” to management associated with each channel that had been identified. These challenges might have cut across several channels or be specific to one. When the groups came together for the second general session, each participant voted on the consolidated list of challenges by voting with five stickers that they were given at the start of the session. Table 1 displays the results of this “voting”, showing all of the items that were identified by the groups. While the initial list was long, and the challenges identified were varied, the results of the “vote” revealed the priority of the challenges in the minds of the Think Tank participants. The first column in the table shows the rank of the “issue” after the vote. The second column show the total number of votes that the item received, and the last column in the table is a breakdown of the vote by participant type (i.e. hotelier, vendor, or other). The total number of “votes” cast was 252 out of a possible 300. The top ten, those receiving 10 or more “votes” were then used as the beginning point for the second breakout group session.

Table 1. Thirty-two challenges identified with regard to electronic distribution channels.

Rank	Total Votes	Challenge	Vote Detail Hotel/Vendor/Consultants
	42	Consolidated / non proprietary real time connectivity	19/20/3
	33	Uncontrolled distribution channels	15/16/2
	32	Rate erosion / ADR	21/10/1
	21	Rate parity	9/11/1
	17	Brand erosion	10/6/1
	14	Cannibalization; rate, brand, inventory	10/3/1
	12	Channel conversion	8/2/2
	11	Forecasting	6/5/0
	10	Cost of distribution	4/6/0
	10	Customer service	9/1/0
	8	Growth / wholesale merchants	2/6/0
	7	Actionable real time data	6/1/0
	7	HOD (Hotel Description)	0/6/1
	7	Strategy – optimize revenue	3/4/0
	6	Delivery (2/way)	4/2/0
	4	Standards and Platforms	0/3/1
	4	Bias/Positioning	2/2/0
	2	Positioning	2/0/0
	2	IT infrastructure	0/1/1
	1	Manual labor	0/1/0
	1	Employee training	1/0/0
	1	Legacy systems – driving traffic	1/0/0
	0	Shopping capability	0/0/0
	0	Management/maintenance	0/0/0
	0	Cost of loyalty programs	0/0/0
	0	Rate guarantee	0/0/0
	0	Implementing strategy	0/0/0
	0	Data accuracy	0/0/0
	0	Accounting issues	0/0/0
	0	Cost of marketing	0/0/0
	0	Lack of online meeting room inventory	0/0/0
	0	Qualifying customers through third party	0/0/0

Session II: Perfect World Solutions

Session Two began by providing each group with the top ten challenges identified in Session One. The groups were then asked to identify solutions to these challenges. This first look at solutions was to be done without constraints, i.e., in a “perfect world”. Therefore questions of cost, or technical feasibility were to be ignored. Table 2 lists the combined prioritized solutions generated from the groups in Session Two. These solutions are presented by rank, with the total number of votes in column two, and the detail of the voting by participant type in the last column.

Table 2. “Perfect World” Solutions to channel challenges.

Rank	Total Votes	“Perfect World” Solutions	Vote Detail Hotel/Vendor/Consultants
1.	69	Central inventory and rate management	34/32/3
2.	35	Dynamic OTA compliance – standards	15/18/2
3.	35	Dynamic Yield– fencing (room/type).	14/21/0
4.	34	Control by supplier (hotel) including distribution & allocation	20/12/2
5.	27	E/commerce regulations – full disclosure (contractual)	17/8/2
6.	13	Total data collection & access to all data including source	7/5/1
7.	6	Single image inventory	0/5/1
8.	5	Centralized HOD	1/4/0
9.	5	Customer segmentation	1/4/0
10.	5	Education and business process integration	1/4/0
11.	2	Lower costs	1/1/0
12.	2	Loyalty	2/0/0
13.	1	Perfect market knowledge	0/1/0
14.	0	Control integrity	0/0/0
15.	0	Filter	0/0/0
16.	0	Allotment based on distribution	0/0/0
17.	0	Funding	0/0/0
18.	0	Delivering brand promise	0/0/0

Session III: Real World Barriers

The third session started with the top six “perfect world” solutions from the previous session. Each group was then asked to identify the “real/world barriers” to these ideal solutions and how to overcome them. Table 3 displays the barriers to each of the six “perfect world” solutions listed by the groups. Because barriers are relative to environment, no attempt was made to prioritize these results, and therefore the barriers listed in the table are in no particular order.

Table 3. Real World Barriers to Perfect World Solutions.

Perfect World Solution Real World Barriers
1. Central inventory and rate management system
	If it is non-proprietary	Legacy systems
	Business process/inconsistency	Fragmented systems
	Not enough demand	Connectivity
	Implementation, and conversion	Technology
	No shared vision	Cost / ROI
	Strategic mgt/vision dynamics	Funding
2. Dynamic OTA compliance – standards
	Cost to meet OTA specifications	Legacy systems
	Competitiveness (gorilla) between players (vendor solutions)	Definition and clarity of OTA
	Intermediary threatened by implementation	Compliance
	Not enough demand	Technology
	Implementation	Conversion
	Mind set	Vendors
	Consumers	Resistance to change
	Standards	Number of available resources
	OTA not fully developed	No shared vision
3. Control by supplier (hotel) including distribution and allocation and percent of mark-up
	Existing contracts (terms…years)	Reluctance by IDS merchants
	Industry fragmentation	Competition for customers
	Under-investment of hotel industry	An internal struggle
	Cost	Core competency
	Distributors resistance	1st mover disadvantage
	Lack of Self-Management	Technology not there
	Existing contracts (terms…years)	Reluctance by IDS merchants
	Under-investment of hotel industry	Industry Fragmentation

4. Dynamic Yield – fencing (room type)
	Virtually no fences – just ask for low rate	Contract terms changed
	Funding of systems and connectivity between Yield-management, PUS, Digit systems	Lack of systems at all at some properties to connect to
	Legacy systems	Detail of spending at central reservation,
	Difficult to implement through distribution channels	No access to required data
	Lack of Technology	Unwillingness of vendors to use technology
5. E-commerce regulations – full disclosure (contractual)
	Existing contracts already in place	Buy side channel reluctance and power
	Enforcement	Taxes
	Global irregulars	Opt in/opt out
	Method of recover	Government involvement.
6.Total data collection & access to all data including source
	Power of those with data	Customer reluctance to offer data
	False data	Have intelligent systems to get information
	Funding	Compliance
	Not enough demand	Technology
	Implementation	Conversion
	Data management	What information
	Source	Why did you not buy me
	Feedback	Cooperation
	Power of those with data	Customer reluctance to offer data

The solutions or actions that were suggested to overcome the barriers were presented globally and not tied to a specific “perfect world” solution and it’s identified real world barrier. Instead the list of solutions was presented as some possible action that might be the first steps in addressing the needs of the industry with regard to electronic distribution. Table 4 lists the actions or suggestions that came from the four groups, which were again not prioritized.

Table 4. Suggested Actions

*“Dashboard” to legacy system and connectivity

Standards (driven by customers)

Increase budget for long term goals

Educate entire industry for IT benefits of standards + technology implementation

Leadership and implementation in OTA

Educate rational pricing

Understanding of customer and data/contract

Deliver value offers to customers to get data

Reduce internal segmentations

Educate operators and distributors to the value of compliance

Value ROI proposition into them

Pooled resources for development compliance

Shared Vision

Self/Management (product-driven)

Real time inventory

*The first solution listed, referred to as a “Dashboard” may require some explanation. This solution represents a concept to provide by channel: color-coded, execute business rules, demand indicator with an analytical engine for: availability, rates, yield, conversion, revenue management, comp set, history prior and current trends, and incremental revenue. This was thought of as a single point of control for the hotel.

There was a great deal of positive interaction at the reception following the last session and the consensus seemed to be that the Think Tank was very successful. People discussed the possibility of another Think Tank, either on the east coast or in a location that would encourage additional participation from other types of hotels. There was also some discussion of a consortium to drive changes on this important issue. We hope that all of the participants found value in the sessions, and we will keep you apprised of any future plans.

If you have comments or wish additional information please contact Dr. Pearl Brewer, Bill Geoghegan and Robin Roberts at UNLVThinkTank@aol.com.

Facilitators: Sessions Facilitators:
Dr. Pearl Brewer

Bill Geoghegan Robin Roberts,

Director, Interactive Gaming Task Force (IGTF) & Regional Sales Manager, GAMET Technology
Andy Feinstein, Ph.D.

Bill Bai, Ph.D
Greg Dunn, Ph.D. Candidate

Assistant Facilitators:
Sandy Chen, Ph.D. Candidate
Bomi Kang, Ph.D. Student
Ivan Wen, Ph.D. Student
Eddie Mao, MS

Thank you to our sponsors:

The Mirage, SynXis, Hotel Information Systems, IDeaS Management, PSHospitality, IGTF

January 28, 2003

Session I: Electronic Channels and Issues

Perfect World Solution Real World Barriers

1. Central inventory and rate management system