- The Washington Times - Wednesday, May 3, 2000

Hotel rivals Marriott International Inc. and Hyatt Corp. are climbing in bed together, agreeing to create an on-line company to buy and sell hotel supplies.

The off-line competitors will become on-line allies and leverage their buying power to purchase everything from food to furniture for as many of North America's 32,000 hotels as they can turn into customers.

"Once you get past the initial reaction that we are in with our competitor, I think people understand that, intellectually, it makes sense to do this," said Dennis Baker, chief operating officer of the unnamed joint venture and a Marriott employee the past 13 years.

Mr. Baker said the joint venture likely will be based in Montgomery County, Md., and begin operations later this year, but he didn't divulge each company's ownership stake in the on-line business. The companies also declined to say how much they will spend to start their on-line venture.

The joint venture will be going after a huge market. The U.S. hospitality market buys an estimated $50 billion in goods and services annually to support their businesses.

Bethesda, Md.-based Marriott, with 2,000 hotels worldwide, and Chicago-based Hyatt, with 200 hotels worldwide, buy a combined $5 billion worth of goods and services each year.

The hotels are joining a trend in forming Internet-based alliances to make business-to-business purchases buying products that help companies run their business.

The plan by Marriott and Hyatt to start the on-line purchasing company gained momentum when General Motors Corp., Ford Motor Co. and DaimlerChrysler announced a joint venture Feb. 25 to streamline business with their suppliers and handle much of the $240 billion in raw materials, parts and office supplies the three automakers buy each year.

"All it did was make it easier to sell the idea," Mr. Baker said. "Procurement is something we do to support our business, and it's not our main focus. If I can find a way do it better, we can concentrate on our main focus."

The plan by the Big Three automakers has led competitors in other industries to start alliances to make business-to-business purchases, said Patrick Snell, partner for equity research at Nashville, Tenn.-based investment firm J.C. Bradford & Co.

"That was the catalyst," Mr. Snell said. "I can't think of one industry where the companies aren't thinking of doing this."

UAL Corp.'s United Airlines, AMR Corp.'s American Airlines and other carriers said last week they will invest $50 million to start an Internet business exchange for aircraft supplies.

A group of 15 North American power companies said March 29 they will join the trend and build an Internet-based business and pool efforts to buy goods and services.

Christopher Cogan, chief executive of GoCo-op Inc., the company that will build Marriott's and Hyatt's on-line purchasing network, said the Internet buying strategy could trim up to $107 off each transaction the hotels make by eliminating the time and effort involved with paper-based transactions.

Proponents also advocate group business-to-business purchasing because it cuts costs to buyers by fostering competition among suppliers vying for business from a bigger group of purchasers.

GM officials said the joint effort of the auto industry's Big Three could slash $90 from the $100 cost of filling a purchase order.

Analysts' forecasts for business-to-business Internet commerce vary widely, but all indicate an increase in on-line buying. Technology researcher firm Forrester Research, of Cambridge, Mass., estimated 1999 business-to-business Internet trade at $109 billion, and projects that figure to double every year for three years.

Marriott was up 12 cents to close at $33.12 yesterday on the New York Stock Exchange. Hyatt is privately held.

LOAD COMMENTS ()

 

Click to Read More

Click to Hide