European Hotels Counter Portals with Online Venture

Three of the largest European hotel chains announced plans Tuesday to launch a joint venture that will provide online bookings, reservation systems and a business-to-business (B2B) platform for wholesale purchasing.

Hilton International, Accor SA and Forte Hotel Group, owned by UK media firm Granada Group Plc, said they will make an initial joint investment of $20 million euros (18.2 million US$) to fund the venture, which will go online by year’s end.

Even though the platform will initially be limited to offering rooms in Europe, the group said it will eventually be open to other major hoteliers. In fact, all three members of the group — which accounts for one-third of Europe’s branded hotel inventory — are already talking to potential partners.

“While the percentage of our hotel bookings through the Internet is still very small, there is no question that this medium will grow over the next two to three years toward 15 percent of our total business,” said David Michels, chief executive of Hilton International.

Competition for Travel Portals

While some analysts feel that this latest move by Europe’s major hotels is an effort to more effectively control their room inventory, it is also seen as an attempt by the consortium to counter the inroads being made by major online travel portals into their bookings.

By creating an industry-wide offering, analysts contend that the group will be able lure potential customers with the same one-stop-shop approach being used so successfully by their online rivals.

“I believe this initiative is crucial to enable us to jointly embrace and exploit the opportunities these technologies present,” added Sven Boinet, chief executive of Accor Hotels and Resorts.

The B2B component of the venture will help the hotels take advantage of online procurement of supplies and services. Analysts point out that by joining forces online, the hotels will command much more negotiating power with suppliers.

Growing Trend

The new online alliance is the second move made by major European hotels to create an industry-wide B2B platform. Last month, Spanish hotel giant Sol Melia SA announced that it would team up with a variety of technological partners to invest 30 million euros (27.2 million US$) for the development of a similar platform in Spain, along the Mediterranean and in Latin America. The venture is also open to future partners.

This growing trend of hospitality industry giants joining forces online could accelerate the shakeout among smaller dot-com travel portals.

According to a recent report by investment bank Bear Stearns, 80 percent of online travel sites are destined to fail over the next five years.

The six-month study projects that only 200 of the 1,000 existing online travel sites will still be in business in 2005, led by such stalwarts as Expedia.com, Travelocity and Priceline.com.

“Most agencies will run out of the capital needed to provide access to hotel rooms, cruise ships and airplane seats,” said Bear Stearns analyst Jason Ader.