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Online hotel discounts drive down corp. rates.

Article Excerpt
Hotel room discounts available on the Internet have raised buyer concern about rate integrity while providing unexpected negotiating leverage.

Buyers continue to chafe at seeing hard-fought negotiated rates undercut by Internet discounts, but they are beginning to realize that the new distribution channel provides significant transparency on rates that reveals more room to negotiate than most previously thought.

In the negotiations that culminated in rates for 2003, one travel manager used merchant rates to his advantage, using the rates as a defensive tactic. "When we were doing our market research, one question we asked properties was how many rooms they set aside each day for the merchant sites," said Yasuo Sonoda, travel manager at Macromedia in San Francisco. "By checking the merchant sites for these rates, we were able to set a floor for our negotiations because we knew how low the property really was prepared to go."

Interest in the Internet as a distribution channel for booking hotel rooms grew significantly last year, with vendors upgrading their sites to tap what they saw as unmet demand among business travelers for discounted inventory.

With the economy depressed and travel volumes down, online travel agencies Orbitz and Expedia entered the business travel market and put new focus on hotel bookings as a major source of revenue. Orbitz, for example, last month introduced a new hotel matrix on its already-established consumer site and announced plans to feature the new functionality on its four-month-old Orbitz for Business site, through which customers are able to book at their company's negotiated rates. While Expedia Corporate Travel...

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