4.4. Booking.com Facts and business concept Representation of Priceline's Annual Report Conclusion of the analysis of

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1 1 Table of Contents 1. INTRODUCTION Background of the study Hypothesis Aim Objectives Structure of the dissertation Summary LITERATURE REVIEW Introduction Comparison of traditional and online sales The individual businessman segment The business group segment's sales channels Individual travellers' sales channels Sales channels of leisure group travellers Sales and sales tools in the hotel industry and their development Distribution channels Types of distribution channels Participants of the distribution channels Development of distribution and the appearance of e-reservations Early stages Internet Distribution System Online Travel Agents Latest tendencies Social Media Consumer Generated Media Meta Search Engines Travel, booking and research behaviour among Hungarian travellers Travel behaviour Booking behaviour Research behaviour Summary METHODOLOGY Introduction Secondary Research Primary Research Data Analysis Methods Summary EVALUATION OF RESULTS Introduction Interviews with intermediaries Mr. Mate Hegedus, Revenue Specialist of Expedia Lodging Partner Services Mr. Zoltan Katona, Marketing coordinator of Wellnessakcio.hu Comparison of the interviews with intermediaries Interview with a hotel representative Mr. Zoltan Katona, Marketing consultant of Aquatherm Hotel Zalakaros Conclusion of the interview with Aquatherm Hotel Zalakaros...48

2 Booking.com Facts and business concept Representation of Priceline's Annual Report Conclusion of the analysis of results Summary CONCLUSION Introduction Conclusion of analysed results Recommendation Reflection and evaluation of research methodology Suggestions for further research Summary...60 FINAL WORD ACCOUNT REPORT...61 APPENDICES Interview questions intermediaries Interview questions hotels...63 REFERENCES...64

3 3 1. INTRODUCTION 1.1. Background of the study The reason of the dissertation's topic is that the author is enthusiastic toward the Sales and Reservations department of the hotels. As tourism industry is one of the leading industries in the world we have to monitor the new means and tools in order to be more and more profitable and also competitive, evaluate the efficiency of these new tools and make a decision on the number and the type of methods we want to launch. There is a lot of impacts which can easily change this industry, such as economic, political, and cultural effects. Today's most popular way of promoting hotels and offering services and products is e-reservations. There are more and more websites offering online sales methods for hotels and in the last few years Hungarian hotels joined e-reservations, realising it is a quick and beneficial way to launch new packages, sell hotel rooms in low seasons and persuade new customer segments. The author used to work for a company which dealt with online marketing and online sales services. As a Sales Assistant the author had daily contact with Sales and Marketing representatives of Hungarian hotels located mainly in the countryside and she negotiated with hotels regarding to the elements and the price of the packages as well as the length the vouchers were going to be available as the site itself operated as a flash sale site. Later the author worked at the world famous Broadmoor hotel as a Reservation Sales Agent, which led into a deeper vocation and let her experience the process of creating packages and set the right price of them while shadowing the hotel's Revenue Manager and had a more pure view on selling packages to guests.

4 Hypothesis The author's hypothesis is a temporary statement or in other words the writer's personal thoughts about the potential results of the research. Throughout the dissertation several observations need to be completed, then evaluated and the results of these can support or reject the statement. The hypothesis is that hotels that joined e-reservation systems provided by intermediaries have financial benefits since the affiliation compared to the era of operating with only traditional sales tools. In the past few years various e-reservation systems appeared on the Hungarian market and the researcher believes that in order to remain competitive in this industry it is essential to cooperate with these intermediaries Aim The aim of the study is to prove that e-reservation systems provides a beneficial sales channel to hotels and is essential to remain competitive, hence whether the above mentioned hypothesis is true. Nevertheless the thesis statement is accepted or rejected, the observation itself may be still beneficial for those hotels who have not joined to these organisations yet. It may provide an economic comparison for them including the advantages and disadvantages of the potential affiliation.

5 Objectives The objectives of the study shows the steps how the researcher studied the topic and provides a brief overview about the dissertation and as a result it helps the reader to understand it better. Objective one: To compare online and traditional sales. Objective two: To analyse the development of e-reservation tools. Objective three: To evaluate of the awareness of e-reservation tools and hotels' willingness to use them. Objective four: To analyse the influencing factors of the decision-making process. How many and what type of reservation system do hotels join and why. /Preference list./ Objective five: Final analysis of introducing the benefits and advantages on the market of hotels joined to e-reservation systems. Through the dissertation the author would like to give an overview about the appearance of e-reservations as a new and growing trend in the tourism industry and prove that it is economically beneficial. While reading the dissertation the reader will see different point of views as interviews are made from both of the sides firms offering online sales services and hotels which affiliate with them.

6 Structure of the dissertation In this section the author provides a brief overview of the dissertation and the way it will be built up. The very first chapter of the study is the introduction which consists of the background of the study explaining the purposes and the motivation which led to chose the current topic and title. It also contains the hypothesis which will be accepted or rejected as well as the aim and the objectives. The second chapter is the so called literature review which consisted of several views selected from books, articles, written by economists, researchers and university professors. The writer determined the basic concepts of tourism, the participants focusing on clarifying the importance of their activities, the various distribution channels, introduce their development, compare traditional and online sales methods and finally represent the new tendency, the appearance of e-reservations. All in all it will give a brief overview about sales and reservation tools in tourism and hopefully help the reader to understand it better from economic point of view. The third chapter is the methodology which introduces and explains the different data collecting methods the author adopted while processing the research. It contains secondary data collection tools for the second chapter, namely the literature review and primary research methods for the fourth chapter, the evaluation of results of the primary research instrument, the interviews. The above mentioned fourth chapter focuses on the evaluation of results of the interviews made by a representative of a domestic hotel and experts of online intermediary sites too, thus it examines the primary data collection method and evaluates the collected sources.

7 7 The very last chapter called the conclusion will summarise the above mentioned objectives and draw conclusion of the researched literature and the results of the primary instrument, the interviews. It will also either accept or reject the hypothesis composed by the author Summary The purpose of this chapter was to introduce the topic and show the structure of the study that the author followed throughout the study. The researcher believes the dissertation's topic is very up to date and relevant evaluating one of the latest trends on the Hungarian tourism market which could help hoteliers to make their decision on potentials cooperations.

8 8 2. LITERATURE REVIEW 2.1. Introduction In this chapter the researcher gives a brief introduction to tourism itself, an overview of traditional sales tools in hotels, the process and the steps of their development and finally introduce the newest trend, the intermediaries providing e-reservation services. It helps the reader to understand the importance of being up to date and being aware of the latest trends in order to be and remain successful in the hotel business. It will also help to be able to differentiate the various types of sales methods. According to the World Tourism organisation we can define the industry as Tourism comprises the activities of persons travelling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business or other purposes. (WTO, 1993) Tourism is a dynamic industry in today's economy and its main goal is to follow and satisfy its customers needs and wants. Since this economy changes fast it is essential to monitor the newest trends and launch them if necessary Comparison of traditional and online sales In this sub-chapter the author introduces and discusses objective one and compares traditional and online sales. Each segments of the hotels' clientele has its own sales channels and they determine each other. There are four main segments, which are represented in the illustration below.

9 9 Illustration 1: Sales channels, Source: Author's editing based on Dr. Juhasz Laszlo PhD: Piaci-gazdálkodás tevékenységei The individual businessman segment The best-known categories for the individual businessman segment are the individual business travellers and the individual corporate business travellers. For these subgroups we differentiate two sales channels, namely electronic partners; business partners and corporations. Business partners and corporations can also be segments of business -, conference -, and city hotels as well. As it is included in the contract, the employees of the companies are accommodated in the contracted hotel, they are able to pay discounted rates, but paying commission is rare. The most significant corporations enjoy special proceedings and they are called 'key account', hence the representative of the sales department is called a Key Account Manager. The non-professional internet suppliers also provide distribution opportunities, they ensure the appearance and availability of the website on the world wide web and their services are affordable to every hotel, even for smaller ones too. In case of reservations of the individual non-corporate businessman segment on professional internet reservation companies, there is usually a contracted commission. This section is not typical in wellness, sport and leisure hotels outside of Budapest due to the characteristics of their

10 10 location as generally they are situated in natural environment in the countryside. OTAs (Online Travel Agency) 1 are usually used by individual tourists, especially tourist arriving for city breaks and with sightseeing purposes. All in all, the most typical hotels providing accommodation for the individual businessman segment are boutique -, business - and apartment hotels The business group segment's sales channels This segment covers all the conventions, the personnel of MICE 2 and air carriers. Since corporations and air carriers from the individual businessman segment usually organise conventions, partner parties, trainings, meetings, exhibitions or conferences, hence they are potential convention segments as well. Another possible sales channel is the so called professional Congress Organiser, as they deal with cultural or sport conventions, banquets and festivals. Since these events require personal supervision, electronic systems are not able to spread in this industry Individual travellers' sales channels Individual leisure travellers are usually couples and families and the mostly utilised sales channels are travel intermediary agencies, tour operators, internet suppliers, online internet reservation companies, speciality channels and additional reservation systems. Travel intermediary agencies are the most famous classical channels, especially in case of individual leisure travellers. On the Hungarian market, 70% of the room reservations are individual bookings and out of these reservations 30% is electronic, hence 21% of all reservations are made electronically. Half of the non individual reservations (15%) are booked through domestic travel agencies, the other half is booked through international ones. These agencies can be tour operators, travel related intermediaries, domestic, international or multinational. Moreover, they can be inbound, outbound or domestic operation agencies, however in the point of view of hotels outbound travel firms are not potential partners. For their services, the contracted commission is usually 8-15% and their 1 A travel agency offering a web-based booking engine, specializing in online shopping and reservations as well as featuring reviews from consumers. 2 MICE is an acronym or the Meetings, Incentives, Conventions and Exhibitions tourism segment.

11 11 tools for keeping contact can include s or online inquiries. Tour operators have just as significant role as travel agencies, however since they are bigger companies they are stronger on the market, hence they can be potential key accounts for hotels. The quota of their utilisation is relatively small especially in prior and after high seasons. The role of non professional internet suppliers is dominant. With the help of their services such as ensuring distribution, designing and developing websites and displaying them on the right spots are essential for hotels to reach the before mentioned 70% individual reservations. The importance of online internet reservation companies are getting more and more determining year by year, however these services always require commissions Sales channels of leisure group travellers Travel related intermediaries are not as significant in this segment as in case of individual travellers simply due to the fact that it is rare that tour operators retail programs and packages for group travellers, however tour operators have the biggest market share in case of groups. Hungarian hotels usually cooperate with foreign or inbound travel agencies, since domestic group travel active only among students and pensioners. Based on previous years' experiences there is an increase in individual reservations through electronic tools, however the number of inquiries through the phone are not decreasing. Due to distribution on the world wide web inquiries are becoming stronger and stronger. Family and individual hotels' main and relevant sales tool is the so called word-of-mouth and return guests are the main sales generator for them. Generally one of the benefits of traditional sales tools is the personalised service sales representatives are able to communicate and provide to potential partners, by which the relationship is not commercialised but tailor-made, which mostly results in a trusted, intimate business cooperation. A disadvantage must to be mentioned is the cost of traditional sales, which is proven higher than in case of working with online sales methods as hoteliers need to hire staff for making cold calls, handling inquiries and customer support. Gathering feedback on the performances of the staff is limited compared to the usage of online sales tools.

12 12 In terms of human resources, online sales strategies and tools are more cost effective, as hoteliers need to employ less staff to handle the tasks of the sales department, hence they can save on wages as well as phone calls as well. Online sales tools also let managers measure the effectiveness of their performances as they are able to measure their web traffic, the content and pages internet users read or click on and many more, hence the feedback of the impression is guaranteed. Since online tools let hoteliers keep their business open 24 hours a day, it is a very convenient feature of online selling both for the supplier and the customer. The e-tourism concept includes all business functions (i. e., e-commerce, e-marketing, e- finance and e-accounting, ehrm, e-procurement, er&d, e-production) as well as e- strategy, e-planning and e-management for all sectors of the tourism industry, including tourism, travel transport, leisure, hospitality, principals, intermediaries and public sector organisations. (Buhalis, 2011) Based on tourism expert Buhalis's statement the author would like to emphasise that in today's tourism and hospitality industry functions of the different departments and staff members are in very close connection and most of the time, especially in case of smaller businesses they can cover each other's tasks and responsibilities. As a result of the examination of the findings, the author definitely believes that usage of the mixture of traditional and online sales tools are the key to operate a well-run hotel in today's economy due to the simple fact that clients and customers differ as well as their behaviour and customs Sales and sales tools in the hotel industry and their development The author of the dissertation would like to state that based on her own experience while doing the research and searching for literature in the topic, tourism and hotel

13 13 management industry today hardly differentiate sales, sales tools, distribution and reservations due to the presence of online tools that frequently enable hoteliers to reach each of the above mentioned activities' goals with one common step. The main aim of sales in all industry is to generate revenue. Sales departments have a great impact on increasing sales volume and are in close connection with the marketing department. The main goal of this sub-chapter is to make the reader familiar with the meaning and the concept of sales and the various sales tools. Sales is usually defined as exchanging goods and services for a specific amount of money or products with an equivalent value. When talking about sales in hospitality, everyone should take into consideration that tourism products are intangible and perishable, hence products in the hospitality greatly differ from products in other industries, however every organisation has to consider the company's goal and objectives it wants to achieve by sales tools as well as the available budget for it. In tourism, we can divide sales for at least two different parts: one is sales toward customers and sales toward clients. The methods of sales may vary according to the target audience, that is why sales representatives of the hotel industry should be well experienced and professional in this field. Personal sales call is the one of the most utilised sales tools firms try to contact potential clients with and Heavenly Planet Earth defined as The personal sales call is often the most effective means of customer contact, especially when directed at volume movers of the leisure, business and meetings market. A personal sales call is used to build rapport with clients or potential clients and sell them the property's products and services. (Heavenly Planet Earth, 2008) The most commonly used sales method among personal sales tools is the so called cold call or with other words prospect call. The purpose of the cold call is to attract potential

14 14 clients, providing information about the benefits of the cooperation and briefly introduce the framework of the affiliation. Once a potential client is interested in a more detailed negotiation, an appointment can be made with the caller. The author would like to note that in today's hospitality cold calling is usually processed between the supplier and a potential business client, nowadays attempting social customers with this tool is relatively rare. Appointment calls are one step ahead after making cold calls. An appointment call is made between the sales representative of the caller company and the decision-maker of the called firm or organisation. Generally an appointment call is just like a face-to-face interaction, and all the details and necessary information are discussed at this time. Trade shows are another effective means of sales and promotion. Appearing on trade shows can gather information on competitors' activities, can maintain the relationship with existing clients and attract potential commercial customers, however measuring the costreturn effectiveness of the participation is questionable. Site inspections and familiarisation trips are used less frequently, however it is the one which probably have the biggest impact before decision-making. Site inspections usually include a guided tour around the property led by the sales manager of the company consisting of lunch to discuss the details about the possible contract or cooperation, or presentation about the same topic, while familiarisation trips include accommodation as well to let the potential client experience the products and services the hotel offers. In our days most salesmen use the tools of the world wide web and make presentations to potential partners online or through a conference video call. The advantages utilising these methods is that they can reach several potential clients at the same time, that is why it is definitely time and cost effective, however it may be impersonal and the hotel may lose business according to this atmosphere, hence the usage of the previously mentioned traditional sales tools are absolutely necessary.

15 15 Sales toward individual customers are quite different. Hotels usually try to generate sales by special offers and promotions and in today's industry they use as a tool for mass promotion. This is typical for guests previously staying at the hotel as reservations agents send confirmation s to them upon finishing the reservation. Another option to gather potential guests' addresses is the subscription surface on the hotel's website, where customers are able to provide their contact information to receive newsletters or special offers. Several firms use printed sales promotions as a tool to generate sales. Advertisement and promotions in magazines and newspapers published in the area of their target market may increase sales as well. Using the media to inform customers is a great tool, however only a small portion of today's hoteliers can afford it. Providing information on special offers and deals through local radio stations or TV channels can affect the volume of inquiries and sales. In the 21 st century the number one tool for hoteliers to generate sales is their own company website as well as utilising third parties such as online travel agencies and travel retailers. First of all a hotel's website should be informative in a logical order, should be interactive to help potential customers experience the atmosphere of the property and the services too, ought to be professional in terms of style and colours. Ho (1997) analysed particularly websites from the aspect of content. He used a framework to evaluate websites from a value added customer s perspective. He was the first to identify three purposes in a commercial website: provision of information, promotion of product and services and processing of business transaction. (cited in Zafiropoulos, 2010) The author absolutely agrees on Ho's statement as these purposes keep the mission simple and focused. Provision of information is particularly significant as it may include basic information about the company let it be a hotel or travel agency, such as address, phone number, address, opening hours. It usually consists of any policies that may apply, such as cancellation, or payment conditions, taxes and additional fees. Promotion of

16 16 products and services are probably the most important factor when launching a company website, however providing information and promotion of products may cover each other. Thinking about a hotel's website as looking at one of its suites, it promotes the product the property has and also gives details about the size, the atmosphere, the colours and the design of the suite. Processing of business transaction let hoteliers to utilise their own website generate revenue by installing an online reservation surface which customers can easily use to process their booking and payment. All in all the researcher believes a welldeveloped, professional website can influence the decision-making process of the customers as it creates an image and a feeling in potential guests even before they visit the property. In terms of travel agency websites it defines the expertise of the agency in customers' minds and influence their buying willingness. A commercial website should be definitely easy to use, informative and communicate the company's mission statement 3 and USP (Unique Selling Proposition) 4. Another tool to attract customers and generate sales is the usage of online travel agencies, which will be detailed more precisely later in this chapter Distribution channels Travel products, packages are not always sold by the producer of the items, but by intermediaries who act a significant role in the distribution system and are links between the suppliers and the consumers. They help to reach customers due to the geographic and time differences and mediate between the supply and demand side of the economy. Since travel products are intangible, travellers buy only an expectation at the time of the purchase and products can not be presented to the customers hence travel related businesses sell only information. There are numerous ways to define what exactly a distribution channel is. According to Mill and Morrison the tourism channel of distribution is an operating structure, system or 3 A summary of the aims and values of a company, organization, or individual. 4 A statement that showcases how you stand out from your competitors. A critical component to a successful marketing strategy.

17 17 linkages of various combinations of travel organisation, through which a producer of travel products describes, sells and confirms travel arrangement to the buyer. (Mill and Morrison, 1985). Another definition states that a distribution channel is any organised and serviced system, created or utilised to provide convenient points of sale and/or access to consumers, away from the location of production and consumption, and paid for out of marketing budgets. (Middleton, 1994) The author believes that Mill and Morrison's thoughts are more precise to describe a distribution system as it clearly stated the two end of the channel, namely the supplier and the customer. Probably the most understandable definition origins from Ms. Eva Garan, lecturer of Budapest Business School, who said: The products reaches the consumer through distribution. With other words the consumer and the destination can meet only if there is a well-established distribution system. The distribution in tourism differs of the distribution of other industries, just because of the special characteristics of the products distributed. In tourism the travel sales distribution is the process of producing, marketing, selling and delivering travel related services from travel suppliers to consumers. (Garan, 2009) Types of distribution channels We sort distribution channels into two groups. In the first we differentiate direct and indirect distribution, while in the second group we distinguish traditional or online distribution. Despite this fact the groups can overlap each other meaning a direct or indirect classification can still be traditional or online. Direct sorting means a one player distribution where the producer and the customer are in direct contact. It can save time for both players and the supplier has personal control over sales, however it can cause high sales costs and there is a risk of losing customers.

18 18 Indirect classification consists of two or more players, usually intermediaries who can be tour operators and travel agencies. It can save expenses as only a few staff is needed for the supplier and they can get professional assistance by the intermediaries, but they have no or few control over sales and a certain amount of commission must be paid Participants of the distribution channels The most common intermediaries are tour operators and travel agencies or electronic partners. Tour operators purchase various elements of accommodation, transportation and additional services, combine them into packages, stores these and later sells them directly or indirectly to customers on an inclusive price. They usually buy in bulk, which is a huge risk as tourism products are perishable and sales can be influenced by political affairs, financial recessions and natural disasters, however in the same time it contributes to gain buying power, since they buy well in advance and pays well in advance too, hence they are able to negotiate for discounts from the suppliers. Travel agencies sells suppliers' or tour operators' products directly to the public at the agreed price for which they get a certain commission. They never change the elements of the package. The main difference between tour operators and travel agencies is that while tour operators purchase the services in advance before any sale, travel agencies do not buy anything until the customer pays for the desired product. In the tourism, the position of the distribution sector is much stronger: trade intermediaries (travel agents and tour operators of course, but also charter brokers, reservation systems and other travel distribution specialists) have a far greater power to influence and to direct demand than their counterparts in other industries do. Since they do, in fact, control demand, they also have increased bargaining power in their relations with suppliers of tourist services and are in a position to influence their pricing, their product policies and their promotional activities. (WTO, 1975).

19 19 Tour operators can be differentiated by the market they serve and the services they offer. They can be inbound, outbound, domestic or specialty tour operators, airline wholesalers/consolidators or can differ even by the destination, the transportation or the type of customer they specialised in. The World Tourism Organisation describes tour operators as a business that combines two or more travel services (e.g., transport, accommodation, meals, entertainment, sightseeing) and sells them through travel agencies or directly to final consumers as a single product (called a package tour) for a global price. The components of a package tour might be pre-established, or can result from an "a la carte" procedure, where the visitor decides the combination of services he/she wishes to acquire. (OECD, 2011) Travel agents play a significant role in the distribution since they are the ones who provide a convenient location for customers to meet the product, acting as sale representatives. As the researcher mentioned before, travel agents do not change the elements of the travel product and do not pay in advance, only upon the payment of the consumer, hence agents do not have product investment risk. The official definition by WTO states that a travel agency is an intermediary that provides a variety of services associated with travelling such as transport (including car rentals), accommodation and package tours on a fee or contract basis. (OECD, 2011) 2.5. Development of distribution and the appearance of e-reservations In this sub-chapter the author introduces objective two and analyse the development of e- reservation tools Early stages The first Airline Reservation System (ARM) 5 launched dates back to the 1950's when American Airlines installed its automated reservation system. Following the booming demand for airline tickets it was hardly possible to control sales and reservations manually, 5 An automated system for taking airline reservations.

20 20 as it used to be before. The Semi-Automatic Business Research Environment (SABRE) became the largest data processing system in the world by Other airlines followed American Airlines' idea and launched their own systems which we call Central Reservations Systems (CRS). In the late 1970's United Airlines allowed travel agents to use their own system and to book flight tickets with exclusivity. At the same time British Airways installed Travicom, which was used by hundreds of travel agents in the UK, and later on merged to the newly developed Galileo system. In the 1990's Amadeus, Worldspan and Galileo International appeared on the market. These CRSs later became GDSs (Global Distribution Systems) 6, which is defined by the business dictionary as a worldwide computerised reservation network used as a single point of access for reserving airline, seats, hotel rooms, rental cars, and other travel related items by travel agents, online reservation sites, and large corporations. Due to the fact that GDS could be only used by agencies which had an agreement with the International Air Transport Association (IATA) it still did not reform the reservation system of hotels Internet Distribution System With the spread of the Internet, GDSs turned into IDSs (Internet Distribution System), which...offers technology that allows customers to build complete trips that combine flights, hotels and other lodging, transportation and destination activities. Travellers have the ability to research, plan and book their travel needs from a broad selection of partners. (Hospitality Performance Group, 2012) Some of the advantages of cooperating with and IDS as a hotel are: the property is visible to everyone at anytime and anywhere 24/7, which is a continuous marketing as well as provides the opportunity to generate bookings no matter the opening hours of the reservations department. 6 An automated reservation system used by travel agents to synchronize reservations for air travel, car rental, and lodging. First Hungarian representative was Ms. Eva Garan, lecturer of Budapest Business School.

21 21 Budapest Business School's lecturer, Denes Csehy defined IDS as the group of online reservation systems and travel portals that utilise the Internet to connect travel-related businesses such as hotels with those individuals and companies seeking to buy from them. (Csehy, 2012) The author thinks that both of the definitions touch important aspects of the function of IDSs, however both miss some too. The researcher believes that probably the most appropriate definition would sound like the combination of the two. For example: IDS is the group of online reservation systems that allows customers to build trips including flights, hotels and additional travel-related services for purchase and let them research, plan and book these from a wide variety of partners while providing assistance to travel companies to maximise their sales and revenue. However as Internet developed, large hotel chains realised and took advantage of the bigger independence of this development and created relationship with their customers directly on their company website, which also helped to avoid high fees paid to GDS. In the same time online agencies took a significant role in the distribution system like Expedia or Travelocity offering a great variety of travel products such as accommodation, car rental, travel insurance and airplane ticket reservation Online Travel Agents Today's most spreading trend in the tourism industry is the appearance of e-reservation tools, such as Online Travel Agents (OTAs). OTAs are a form of distribution, where an independent third party connects numerous suppliers and customers through a website. Their existence is growing in numbers and results as a very easy tool to use for consumers, as they provide information and purchase choices on their sites making the information gathering and reservation process more time efficient substituting the traditional methods

22 22 of sales (visiting or calling travel agents or other type or retailers). Numerous studies show the decline in the number of traditional reservations through the phone or GDS travel agents, while reservations made through the internet and the mobile web is getting more popular among customers. Fair share of OTAs is increasing year by year, while direct online channel bookings are decreasing. Appearance of flash sales sites are playing another important role in today's hotel business, however they are not as frequently used by hoteliers than OTAs, due to the high rate of discount hotels have to provide to customers on these web surfaces and the negative impact on the average daily rate. The main issue hoteliers have to face when using online intermediaries' services is the competition against themselves. As third party reservation services are getting more and more aggressive on pricing, hoteliers have to compete their prices displayed on their own distribution channels against their prices on these online reservations systems. Third parties' main aim is to generate the most sales possible, hence they request suppliers to reduce their prices on their sites and offer deeply discounted rates to customers. Should sales managers agree on that or should they reject it? What if they can not sell the rooms on the rates they promote through their own distribution channels? What if they sell rooms through OTAs on a discounted rate but they could sell them at their higher rates too? There are the most basic questions hoteliers often come up with, especially in peak season. Sales representatives should consider the effects on ADR, RevPar, occupancy, rate parity and cost-effectiveness before contracting any of these intermediaries. Randy Smith, co-founder of STR (Smith Travel Research) says: One path is to cut rates below those of competitors in an attempt to stimulate demand, on the classic economic assumption that demand is elastic and price reductions increase demand. Even if demand doesn t actually increase overall in response to rate reductions, a hotel can at least steal market share from competitors by cutting rates below those of competitors. The other course is to resist discounting and maintain price integrity. In this approach, the manager is counting on the hotel s value proposition which promotes targeted prices to targeted

23 23 customers under the idea that revenue will hold up, even if occupancy doesn t. (cited in Withiam, 2011) Based on the datas of U.S. hotels provided by STR, Cornell professor Cathy Enz found that hotels which lowered their prices and placed their rates below their competitors' had relatively higher occupancy results while hotel which maintained their ADR had a lower occupancy and since lower ADR means lower RevPar, Enz concludes that hotels generate higher revenue by pricing above their competitor set and maintaining rate integrity. (Withiam, 2011) Latest tendencies Another trend spreading today is the usage of smart phones. How can it affect the hospitality business? Hotel chains which have properties all around the world may have the budget to create their own mobile applications with booking platform, but most of the smaller or individually owned properties do not. As today's society is familiar and comfortable using the Internet and smart phones as well as their applications, more and more of hotels' bookings are processed online. Typically reservations which are made through mobile applications are same-day reservations or booked just a few days in advance. A recent study by comscore found that over 50 percent of smartphone users (those with a iphone, Android, Windows or Blackberry device) had accessed travel-related sites from their phones. Additionally, one in five smartphone users had actually used their device to make a hotel booking or airline reservation. (Thomson, 2012) Suppliers which characteristically have same-day reservations (e.g. airport hotels or roadside hotels) can raise their sales volume by using these applications. If they are not able to afford to build it on their own, the solution might be the cooperation with third

24 24 parties who generally operate applications like these. Priceline issued the results of their statistics after monitoring the booking activity through its mobile application for two weeks in They found out that 58% of mobile deviceenabled customers were 20 miles or closer to their hotels when they booked the room and 35% actually were within 1 mile of the property says Dennis Schaal on tnooz.com. (Schaal, 2010) Even though the disadvantages mentioned above, all the hotels agree with the statement that the fastest way the achieve great marketing results for newly opened hotels is the utilisation of these online services. Even hotels which are on the market for several years cooperate with these third parties as they are able to attract customers who are not necessarily in their target market Social Media As the internet became part of our everyday life, utilising Web has been emphasised by corporations all around the world. (There is one thing the researcher would like to state: Social Media is rather a customer engagement channel than a distribution channel in hospitality.) SocialBakers.com focuses on social marketing statistics. According to their list which shows all the pages registered to Facebook ever, the very first accommodation provider brand is Hotel Urbano (Brazil) which stays on the 735 th place behind celebrities like Rihanna or Madonna or the movies Home Alone or Twilight. Their number of fans is , and the only travel organisations ranked ahead of Hotel Urbano are Disneyland ( fans) and Walt Disney World ( fans). The author found the number 10 list quite interesting in the field of travel/leisure. The first 3 were mentioned above, and the remaining 7 shows pages registered and operated by air carriers (Southwest Airlines, KLM), online travel intermediaries (Expedia) and cruise lines (Carnival Cruise Lines). No other hotel is on the list until the 33 th place, which belongs to Best Western with its The second generation of the World Wide Web, especially the movement away from static webpages to dynamic and shareable content and social networking.

25 25 fans. (Social Bakers, 2012) More and more travel related firms use social media as a tool to promote their products and services and generate more visitors time by time and they usually announce game for prizes too (free car rental, one night stay free of charge, etc). Most of the social media sites they use are Facebook, Twitter, YouTube, Google+ and LinkedIn. Probably the reason behind using these methods by companies is that they are free to use, they are a great asset to communicate with a huge audience at one time, easy to handle and act as part of their company website, hence provide information, promote products and services, but not able to process bookings and payment Consumer Generated Media Consumer Generated Media (CGM) 8 has a great impact on the decision-making process too. Review sites such as TripAdvisor provides a surface for travellers to post their experiences and general overview about the hotels they stayed at and are able to rate their stay giving the opportunity to others to check the posted reviews before purchasing any service on other sites. TripAdvisor cooperate with other sites like Booking.com where customers can actually process their booking. Based on the author's personal experience these sites can change the buying willingness according to the positive or negative opinions. Travellers tend to believe other travellers more than a never seen travel agent's opinion which sometimes may sound more like a sales script rather than a genuine support Meta Search Engines Meta search engine 9 sites also has an influence on tourism and tourism sales. Probably the best examples are Kayak or Travelocity. They operate as web surfaces which compares deals and prices of different intermediary sites such as Expedia, Orbitz, Priceline or Booking.com with their own and vice versa. Reservations can be processed through these 8 Posts made by consumers within online venues on products they have purchased. 9 A meta-search engine is a search tool that sends user requests to several other search engines and/or databases and aggregates the results into a single list or displays them according to their source.

26 26 websites, however studies shows that customers check hotels' own website as well before booking, not only comparing the results of these travel related search engines. That is why the author emphasises the importance of a professional, informative and easily navigated website Travel, booking and research behaviour among Hungarian travellers The researcher would like to introduce a recent survey made by Google and published in May 2012 examining the travel, booking and research behaviour of the Hungarian online bookers. The survey itself was conducted in December 2011 and studied travellers' experiences in the last 12 months. The author believed that this survey was in very close connection with the researched topic of the dissertation and considered it essential to include in this chapter in order to help the reader to interpret better the answers of the interviewees in chapter four. The researcher also believes that this study proves the before mentioned fact within this chapter, namely that online research and booking is getting more and more popular as well as the importance of e-reservation systems and search engine sites Travel behaviour According to the survey, 35% of the interviewed travellers spent a longer holiday trip once in the last 12 months (more than 5 days), while 24% of them spent on short trips once and another 24% two times in the examined period. 40% of all the respondents were on at least one short trip and at least one longer holiday. Among those who went onto short trips 86% chose Hungary as a destination and 66% traveled to Hungary from those who spent more than 5 days at other places than their residences. The main motivation for traveling was relaxation, VFR 10 and fun and 10 VFR stands for visiting friends and relatives.

27 27 entertainment, with the ratio of 40%, 37%, 32% respectively in case of shirt trip travellers, while in case of holiday trips relaxation is still the number one purpose (42%), however visiting destinations involved in the so called umbrella term sun & beach represented 37%, but fun and entertainment only 29%. 13% of short trippers used hotels as accommodation and 15% of the surveyed did the same when going onto a longer holiday Booking behaviour Table 1: Booking channels, accommodation. Edited by the author. Source: Google, Vertical deep dive travel, Hungary (2012) As the table shows 46% of the respondents booked accommodation online for 5 days or less. Out of this number, 24% made reservations via the internet directly with the hotel, while 30% called the hotel instead, hence in this case the usage of offline methods are still ahead of online, but when customers relied on travel agencies, they rather used online tools, however the total difference between offline and online is only 1.% Online reservations had been made for 5 days or more represents 37%. 18% of these bookers stated that they booked their accommodation directly with the hotel via internet,

28 28 while 30% of them phoned the hotel instead. Again, when dealing with travel agencies, customers are more willing to use online methods rather than offline, but the difference is low, only 2%. Based on the examined figures we can clearly see that in case of short trips the ratio of online and offline bookings are exactly the same, while when travellers book their holidays they rather use offline tools. Table 2: Booking channels, travel package. Edited by the author. Source: Google, Vertical deep dive travel, Hungary (2012) Table 2 represent the ratio of online and offline tools applied in case of booking a travel package. In case of short trippers booking with a travel agency, 22% used the internet, 17% called an agency and 10% visited the agency. For the same length of the trip 4% booked via internet with a tour operator, and 21% visited it, while 6% called it. When examining Table 2, we can see that in case of holiday trips, the elasticity of the ratios are more or less the same. When they contacted a travel agency with the purposes to process reservations for holidays, most of the respondents attempted a personal visit (26%), 18% of them booked with the help of the agencies online, and only 8% processed it via phone. Besides these, most of the customers booking a holiday trip visited a tour

29 operator with a ratio of 33%, 11% called the operator and only 3% booked online. 29 Based on the numbers we can state that in case of a travel package regardless the length of the trip travellers tend to make reservations with offline tools and in this case they rather use tour operators than travel agencies, however those who book online process their reservations with agencies more frequently. The author's opinion about this fact is that travellers are simply know more online travel agencies than tour operators. Online bookers mostly use their PC and laptops at their home or workplaces to make reservations for any kind of travel product (bus -, train -, air travel, accommodation or travel package), however mobile/smartphone bookings are used more frequently for bus and train tickets. Analysis of the likelihood of online repurchase based on bookers' experiences in the last 12 months shows that 92% would likely rebook via the commercial accommodation facility website, 85% via hotel portals and 75% via online travel agencies or portals Research behaviour Following researches on destinations, 76% of the travellers found offers via online media sources such as search engines and online travel agencies, 65% was informed by the so called word-of-mouth tool including consultation with a friend or a travel agent and 42% used offline media sources for gathering information. At the time of making the final decisions 71% of the interviewed stated that online media sources helped them, 64% was supported by word-of-mouth methods and 34% by offline media sources. Both for finding offers and making the final decision on bookings, travellers used mostly online sources and least of all offline media sources except one, namely the the travel package. It is clearly demonstrated that those who purchased travel packages between December 2010 and 2011 relied on the consultancy of a friend or a travel expert, e.g. a