HOW RAFFLES HOTEL IS CONDUCTING E-COMMERCE

The Problem
Raffles Hotel, one of Singapore's colonial-era landmarks, is the flagship of Raffles Holding Ltd., which owns and manages luxury and business hotel worldwide. Raffles Hotel operates in a very competitive environment. To maintain its world-renowned reputation, the hotel spent lavishly on every facet of its operation. For example, it once stocked 12 different kinds of butter, at a high cost. The success of the company and each of its hotel depends on the company's ability to lure customers to its hotels and facilities and on its ability to contain costs.
The Solution
To maintain its image and contain costs, Raffles must address two types of issues--business-to-consumer and business-to-business. On the business-to-consumer side, Raffles maintains a diversified public portal (raffles.com) that introduces customers to the company and its services. The portal includes information on the hotels, a reservation system, links to travelers' resources, a customer relationship management (CRM) program, and an online store for Raffles products.
On the business-to-business side, Raffles has interorganizational system that enables efficient contacts with its suppliers. To do business with Raffles, each of 5,000 potential vendors must log on to Raffles' private marketplace. As for purchasing, Raffles conducts e-procurement using reverse auctions among qualified suppliers, in which sellers bid for the sales contract, and the lowest bidder wins. With the reverse auction, the number of suppliers is reduced and the quantity purchased from each increases, which leads to lower purchasing prices. For example, butter is now purchased from only two suppliers. Procurement negotiations now take place online. Buyer-seller relationships have been strengthened by the private, online marketplace.
The e-marketplace also has a sell-side, allowing other hotels to buy Raffles-branded products, such as tiny shampoo bottles and bathrobes, from electronic catalogs. Even competitors buy Raffles-branded products because they are relatively inexpensive. Also, the luxury products make the hotel that purchases from them look upscale.

The Results
The public portal helps in customer acquisition. Using promotions and direct sales, the hotel is able to maintain high occupancy rates in the difficult economic times. The private marketplace is strategically advantageous to Raffles in forcing suppliers to disclose their prices, thus increasing competition among suppliers. The company is saving about $1 million a year on procurement of eight high-volume supplies (toiler paper, detergents, etc.) alone. The success of the company is evidenced by its aggressive expansion in the Asian markets.

What We Can Learn...
For an old-economy hotel to transform itself into a click-and-mortar business, it had to create two separate electronic markets: a B2C private market for selling its services to consumers and a B2B market to buy from its suppliers and to sell products to other hotel. In addition, it had to use several e-commerce mechanisms : a corporate portal, electronic catalogs, and e-procurement using reverse auctions.