Distribution 101 2004

1. Distribution 1012004 Resort Management Conference Greenbrier Resort Bill Peters Vice President Reservations & Market Development Outrigger & OHANA Hotels and Resorts

2. Traditional Switching Companies Global Distribution Systems (GDS) Originally Airline Central Reservation Systems (CRS) Sabre Apollo Worldspan Amadeus Switch companies Pegasus WizCom Resort CRS

3. Pegasus and WizComCirca Mid 1980’s • Switch companies bring to the table • Single image inventory • Instant confirmation • Auto availability & auto rate update • Electronic transactions, less paper • Reduction in processing agents

4. The 2nd Traditional Method of Distribution is the Wholesale Channel Consumer Wholesaler Fax Server Travel Agent Wholesaler Resort FAX

5. There is still a lot of paper! Resort FAX Paper, Paper and More Paper Resort Agent Resort PMS

6. Internet Cloud ArrivedCirca 1998 Creating new Turbulence!!!

7. Traditional Model Traditional consumer Travel agent commissionable rates Dot Com commissionable rates Internet consumer GDS Switch companies Pegasus WizCom Resort CRS

8. Merchant Model Circa 2001 • Paradigm changes • Many dotcoms became more like traditional travel wholesalers • Net rates 25% to 35% below rack • Multi-million dollar consumer advertising campaigns • Tremendous volume when it was needed post 9/11

9. INTERNET CONSUMER Traditional Wholesaler Expedia.com Travelocity.com Orbitz.com Hotels.com Merchant Model and the mega dotcoms

10. No Free Lunch! Merchant Model 25% to 35% below rack rates Resort ADR and RevPAR decline

11. And it is a paper nightmare! Resorts try to keep up with the Paper Faxes, Room Blocks, Net Rates and Staffing.

12. 2003 -2004 Resorts Respond • Millions of dollars are being invested to enhance resort Web sites regain control of the market • The transactions on these sites will grow but the mega dotcoms are here to stay

13. Speed bumps ahead! • Speed Bump # 1 • Mega dotcoms are way out spending the hotels in consumer advertising and Web placement • Speed Bump # 2 • Traditional wholesalers are also out spending the hotels in consumer advertising and Web placement

14. Speed Bump # 1 I need a Vacation! Joe Consumer

15. Speed Bump # 2 I still need a Vacation! Joe Consumer

16. Your hotel – finally! I’m going on Vacation! Joe Consumer has run the Internet gauntlet and finally makes it to the resort Web site.

17. How to improve ADR/RevPAR • Focus on the amount of business you are willing to allocate to the dotcoms • Carefully monitor all channels in regards to price and availability • Invest in your Web site

18. New Distribution Concepts • Rate parity in all consumer channels • Live chat • Electronic permission based marketing • Convergence of voice, data & video over IP • Links out – transparent sites in • Low price guarantee

19. Low Price Guarantee • Does it work? • The jury is still out. • According to PhoCusWright Inc, Marriott, Holiday Inn and Hilton have seen a significant increase in transactions on their web sites since the introduction of their low price guarantee.

20. Here are some of your competitors!

21. InterActiveCorp Ten Banana Rating • Owns an operates the following companies: • Hotels.com Interval International • Expedia.com Ticketmaster • Travelscape.com Newtrade Middleware • TV Travel Group - UK Entertainment Book • HSN – USA HSN – Europe • Match.com Citysearch.com • US Cable Travel Network Udate.com • Zero Degrees.com Anyway.com - France • (acquired 3/2004) • Tripadvisor.com Hotwire.com • (acquired 3/16/04) • Activity World – Hawaii • (acquired 3/2004)

22. Cendant Three Banana Rating • Travel Distribution Services • Galileo International Travelport • Travelwire Lodging. COM • Travel 2 and 4 Neat Group • Wizcom Shepherd Systems • Cheap Tickets Cendant Travel • THOR RCI • Hotel Club.com & Rates to go.com • Acquired (3/2004)

23. Expedia.com – Number One • Market leader • Air – 46% (2003) was 36% (2002) • Hotel – 37% (2003) was 28% (2002) • PhoCusWright consumer survey • Merchant Model • % off lowest published public rate • % is negotiable • Agreed upon mark-up (margin) • Inventory management • Change at will via Extranet site

24. Expedia.com • Watch for: • Forward distribution of the Merchant Model • Travel agencies. • Corporate travel • Over 1,100 actively booking companies • Loyalty club • Strategic emphasis on customer loyalty • Direct connect to CRS via Newtrade middleware • Expedia hotel rating • Improved dynamic packaging

25. Travelocity.com • Market share – 2nd in Air and 2nd in hotel • Air – 44% (2003) was 59% (2002) • Hotel – 34% (2003) was 34% (2002) • PhoCusWright consumer survey • Merchant Model • % off lowest published public rate • % is negotiable • Agreed upon mark-up (margin) • Inventory management • Change at will via Extranet

26. Travelocity.com • Watch for: • Loyalty club • Forward distribution of the Merchant Model • Corporate travelers via GetThere.com • *Sabre equipped travel agents* • Dynamic packaging for Site59

27. Hotels.com – Number three • Hotel reservations • Hotel – 24% (2003) was 17% (2002) • PhoCusWright consumer survey • Merchant Model • % off lowest published public rate • % is negotiable • Agreed upon mark-up (margin) • Inventory management • Change at will via Extranet site

28. Hotels.com • Watch for: • Creation of a loyalty club. • Dynamic Packaging • Corporate Travel • Forward distribution of the merchant model • Conferences and Meetings • Weddings and social events • Airline sites such as Mexicana Airlines • Latest news • Provides hotel accommodations for Delta Airlines customers • “Bill me later” service.

29. Orbitz.com • Market – 3rd for air and 4th for hotel • Air – 41% (2003) was 25% (2002) • Hotel – 18% (2003) was 10% (2002) • PhoCusWright consumer survey • Merchant Model • % off lowest published public rate • % is negotiable • Agreed upon mark-up (margin) • Inventory management • Change at will via Extranet site

30. Orbitz.com • Watch out for: • Forward distribution of the Merchant Model • The business traveler • Traditional travel agents as an alternative to GDS connections • Group • Weddings • Social Events • Loyalty club • Latest news • Cashing in with Las Vegas Casinos by offering packages for all Caesars Entertainment casino resorts

31. Priceline.com • Market share - 4th in Air and 5th in hotel • Air – 14% (2003) was 16% (2002) • Hotel –13% (2003) was 7% (2002) • PhoCusWright consumer survey • Opaque pricing • Room rate offering at discretion of hotel • No agreed upon mark-up but is minimum • Over 15,000 distribution partners • EBay, Amazon.com, Lowestfare.com, • GoGo (static packages) • Inventory management • Change at will via Extranet site

32. Hotwire.com • Market share - 6th in Air and 7th in hotel • Air – 6% (2003) was 14% (2002) • Hotel – 2% (2003) was 10% (2002) • PhoCusWright consumer survey • Opaque model • Room rate offering at discretion of hotel • No agreed upon mark-up but is minimum • Inventory management • Rates and inventory delivered through Pegasus switch.

33. Priceline.com • Watch for: • Dynamic packaging • Private label booking pages to traditional travel agencies. • Merchant Model offerings

34. Travelweb.com • (HDS) Hotel Distribution System • Owned by • Hilton, Hyatt, Marriott International, Pegasus, Starwood, Six Continents, and also Priceline.com • Merchant model • B2B only • Supplies merchant model rates to sites such as lowestfare.com, Orbitz.com, Neat Group and many more small Internet travel sites.

35. Sidestep.com • New paradigm model • Privately held Internet technology company. • Commissionable Rate Program • Consumer focused • Re-directs consumer to resort site or it intermediary site. • Core Technology • Can access all of the travel inventory available on the Internet, which conventional search engines, crawlers and shopping bots cannot. • 5 million membership since 2000

36. US Best Hotels.com • Direct to consumer hotel advertising firm • Resorts pay annual fee per property • One year of unlimited advertising through site • Consumer can link directly to resort site and book a reservation • Resorts do not have to allocate rooms • Lessening dependence of mega dotcoms.

37. WorldRes.com • Net rate program (merchant model) • Distributes net rates on retail Web sites worldwide • Set room night limits • Rates based on seasonal or daily demands • Adjust rates in real time • No long term contracts and pricing

38. The battle continues for market share or is it dominance ?

39. The battle continues for market share or is it dominance ? • Airline against airline • Destination against destination • Mega dotcom against mega dotcom • Traditional wholesaler against mega dotcom • Travel agent against mega dotcom and traditional wholesaler Internet sites

40. The battle rages • Traditional media advertising against Internet advertising • Traditional hotel distribution channels against the new Internet distribution channels • Traditional challenge of resort against resort for occupancy, ADR and RevPAR.

41. Who Will Win? • You will, after you listen to the next three speakers • It is your product that the consumer wishes to purchase • You control your sales and inventory strategies • You make your resort and destination stand out among all others

42. 3 Key Issues in Hotel Electronic Distribution John Burns Hospitality Technology Consulting

43. Web Now Drives Travel Decisions • “Most” travelers research their options on the Web prior to booking • either on or off-line • Search engines play a key role • optimization is a top priority • Do you know where you display? With various phrasings? In each engine?

44. Web Now Drives Travel Decisions • “Informative, appealing presentation of the resort is decisive • decisions are based on Web content; you won’t get a second chance • Resort travelers seek experiences, fond memories • can you help them? • do you say so? • sell benefits, not features!

45. Mega Agencies are Reshaping our Environment • InterActiveCorp (Expedia, Hotels.com), Travelocity, Orbitz, Cendant (Lodging.con, Cheaptickets, etc.) • Merchant Model produces approx. 5% of bookings • influence of MM rates extends far further; impacting ALL rates

46. Mega Agencies are Reshaping our Environment • Initially targeted individual leisure traveler • Now active in: • corporate • Expedia Corporate Travel, Orbitz for Business, Travelocity Business • tour • Expedia Classic Custom Vacations • dynamic packaging • WWTE, Neat .. + .. TicketMaster, etc.

47. Mega Agencies are Reshaping our Environment • The Future? • meetings and convention, groups... • All based on MM rate structure • Our initial attitude: “They are the enemy” • Our first reaction was denial • some softening in approach • movement (slowly) toward partnership

48. Mega Agencies are Reshaping our Environment • Think about a “wholesale-based” rate structure • Remember, you have what the Megas need most: Content • A Footnote: • role of representation companies in jeopardy

49. The Challenge to Manage • Electronic distribution is re-testing every resort’s skills and processes in: • pricing • inventory allocation • distribution management • The average hotel attempts to maintain inventory in 7 electronic outlets • Res managers say they can effectively manage 5

50. The Challenge to Manage • Begins with a thorough (highly detailed) forecasting process • may utilize revenue management technology • Includes consideration of daily potential of each channel -- including cost overhead and guest profitability • who are your most valuable guests?