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We are talking with HUBS1CEO and President Teddy Zhang. During the Olympics, problems with high prices and transparency cause some anger among hotel visitors, what’s being done to change it for the expo 2010? The answer coming up next…
During the 2008 Beijing Olympics, the organizing committee signed contracts with 120 star-rated hotels and labeled them as official Olympic hotels at the end of 2007. This included 38 five star hotels, 45 four star ones and 22 three star and below. After that, the standard room price at an Olympic hotel skyrocketed almost four to five times its normal price. Although most of the five star Olympic hotels had high occupancy rates, the majority of the 3 and 4 star hotels were less than 50% full.
Q: During the Beijing Olympics, it’s obviously a much shorter event. But during the first couple of days, the star-rated hotels did pretty well, some of the non-star-rated hotels didn’t do so well, it seems that they’re really struggling and then of course given the current financial situation, things are not quite well either. Does that make very concerning to try and put together an Expo in terms of the hotel industry?
R: There are certainly concerns within the hotel industry, particularly for the hotel operators they worry about a lot of hotels being built and not be able to sell them. But I still think, again back to the government initiative about these seventy million visitors, among them 40 to 50 million visitors need hotel accommodation. So I still think this is a good opportunity for hotel operators to manage their inventory well. The challenge is how you manage them and how you through a different channel/platform to display your rates and inventory to the worldwide, not to the limited channels. If that is the case which happened before, that limited your transparency and exposure, that created information and symmetry which caused the rates are arbitrarily high or low. So that could be avoided through a good channel arrangement this time.
Q: Yes. We should see what had happened in Beijing. While there seem to have some occupancy issues in some hotels in Beijing, people also complained a little bit about some prices for the hotels going sky high, obviously this is a supply-demand issue, but what happened?
R: Look at the Beijing Olympics, I think that attributes to two reasons for the situation you just described. One is the Organizing Committee blocked about 70% of the inventory reserved for those visitors and officials and media and so on, so there are 30% inventory in the market to be quoted to the regular visitors, and imagine when the supply and demand come in. But the problem is the Committee did not have a commend center, a system to monitor these inventory and their management in a real-time fashion. So that creates the situation when you are approaching the Olympics, and those inventories are not being sold, and we don’t know how many of them left from a citywide situation. So that created a problem for the price and for visitors. And as you know, most international visitors especially in the North American market they plan ahead, if they look ahead a year early and my family want to travel to China to look at the Olympics, but prices are so high that deters and gives no incentive to travel. And then when approaching the Olympics, a lot of rooms came out and it’s too late sometimes. The second reason for that is I think because the unexpected event or these security issues or these process issues also deter some international visitors coming here. Lastly, I think because the Olympics are sports event where people can watch through the media broadcast, you don’t have to be physically there. Those are reasons also attributing to the problems you just described.
Having varied and plentiful accommodations for everyone heading to the expo is vital. 27 months before the event kicks off, a hotel reservation center was set up by the Shanghai World Expo Coordination Bureau, to help official participants and visitors book accommodation.
Q: How can a consumer or a business be confident that the transparency that wasn’t in Beijing is going to be there for Shanghai?
R: Learning from the experience from the 2008 Olympics, the 2010 world Expo organizing committee decided to set up the official reservation-booking center, just to balance the supply demand, and then the price. Because the key for this Expo is you have to ensure 70 million visitors come here because majority of the government investment is getting back through the ticketing sale. So ticketing-sale means you have to actually be there, and also Expo is a physical experience, you cannot just see through the broadcast. So the Organizing Committee sets up the reservation center, all the hotels if you want to participate in the Expo business, you can join the platform and on that platform you can display all the rates and information and changes, all in a real-time fashion. And then this platform also connects to thousands of distribution channels, so people, anywhere in the world or within China, they can go through those travel websites, local travel agencies, and book the hotel rooms, and see all the inventories being available to them. And this also helps the government provide the guidance, for example, the peak time, the price…just like the weather forecast, it’s the price forecast. So you can allocate the traffic not all concentrated in a particular time or a national holiday. So through this technology, that really helps to match the supply and demand in a real-time fashion. Consumer will go through this experience, and even starting right now, if you book the Expo time hotel, you can see you have many more choices, and a variety of hotels and prices are different, price categories you can also compare with. Many travel agencies now are powered by HUBS1, which means they all get all the Shanghai and surrounding area hotel information. Right now we have 2,000 domestic travel agencies, 700,000 international travel agencies, so that ensures visitors worldwide and domestic, they can all get the real-time information on the hotel accommodation.
Q: How does this then ensure people are not going to be worry about those rooms getting blocked off? And they are going to be transparent, other than the fact they can compare notes by looking at what their hotels are offering price wise? Is there more assurance there that they are getting a good deal?
R: Yes. This platform, one of the rules set by the government is, as long as you want to join this platform, you are not forced to do so, but you’re encouraged to do so, you have to display your inventory in the real time and price. So you can now display inventory when people really purchase or book it, and you say“I am sold out”, those are now prohibited from happening. All the hotels joining this platform have to follow the rules and display all your products and information as it is.