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In both sectors, it is undoubtedly consumer demand that is the driver. Decreasing supply

growth is certainly a key ingredient, but RevPAR gains are clearly being fuelled by higher

occupancy. We discussed in the April edition of The Pegasus View how increasing demand,

from a transaction volume and complexity standpoint, necessitates a new look at hotel

reservations technology. Perhaps the most important aspect of this is understanding what

technology does from the customer experience point of view.

The customer is king and it will be the organizations that can most effectively cater to

guests’ needs, from their decision to book until it’s time to check-out, who will capture

guest loyalty and, ultimately, market share. The three systems most crucial for optimizing

guest experience are: CRM (customer relationship management) system, PMS (property

management system) and CRS (central reservations system). Contrary to the practices of

many, it isn’t enough to just posses sophisticated technology. In order to achieve superior

guest satisfaction these systems must work together seamlessly in a truly integrated

environment, providing real-time interaction.

For instance, advanced systems are able to alert multiple departments of an incoming

guest’s various preferences. This allows the front desk to assign the perfect room and be

ready with frequent stay program amenities upon check-in. The concierge can order tickets

and set resort or spa appointments prior to, or right at, arrival. Housekeeping is able to

receive a report detailing a guest’s need for an allergen-free pillow and specific items

stocked in their mini-bar. Room service can be prompted with a queue of pre-orders to

ensure food is fresh and on time. Through cloud computing the AC can pre-set itself to the

guest’s desired temperature and the television tuned to their favorite station. Every one of

these actions is possible even before the guest has stepped off their plane.

Seamless system integration facilitates the delivery of this type of highly personalized and

positive customer experience. Not only individual operators, but the industry at large, must

work toward a technological environment that can seamlessly surpass guest expectations,

and do so effectively and cost-efficiently. Recently, Pegasus announced a relationship with

HP that positions the duo well for taking advantage of this “software as a service” model.

Shared platforms will result in innovative solutions that can help hoteliers better understand

and track their customers’ preferences, identify new sources of revenue and increase

operational efficiencies. Other companies are forming similar alliances both within and

outside the hospitality arena.

How can hoteliers take advantage of these capabilities to provide guests with the ultimate

service experience? Something to consider as you read The Pegasus View May edition’s

analysis of each distribution channel’s performance below.

GDS CHANNEL (CORPORATE TRAVEL FOCUS)

Sustained booking volume and steady ADR gains in the GDS channel confirm that business travel,

primarily in the larger corporate sector, is on the rebound. Certainly use of the internet,

teleconferencing, webcasts, etc. is widespread and being leveraged to reduce travel. The advantages

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of face-to-face interaction, however, live on. While still controlling costs, companies are eager to

grow their business and capture market share. Therefore spending restrictions are loosening,

particularly for areas positively impacting revenue streams.

GDS channel net revenue on a date-of-booking basis for the month of May rose to a remarkable

+39.6% increase over prior year. Not only is that easily the highest revenue increase over last year

for any month in 2010, it is even higher than April’s increase, which was fuelled by extra bookings

from Iceland’s volcanic activity. (For more detail, see the Special Edition as well as the May edition of

The Pegasus View.) May bookings only fell off April’s boosted peak slightly, maintaining a powerful

growth rate of +26.6%. Therefore it was the continued rise in ADR of +6.5% that pushed May’s

revenue to a new high for the month.

As further evidenced below, not only are increases being witnessed each month over prior year, but

the pace of such increases are sustaining or gaining momentum. Reservations, ADR and revenue

growth over prior year for May were all higher than the year-to-date averages through May. Even

LOS (length of stay) displayed a +3.6% increase in May versus a +1.0% increase year to date.

Variances against 2008 and 2007 are also improving.

NORTH AMERICAN GDS

GDS trends for North America are similar to those seen globally, just set at a slightly lower speed

setting. Net Revenue for May reached an impressive +35.5% over prior year, driven by ADR up by

+4.5%. Reservations, dipping a little from April, were still a solid +26.3% over May of last year. As

recovery continues to be lead by corporate travel, we are hopeful that industry operators will

continue to raise rates accordingly to match increasing demand.

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The table below likewise shows how the month of May outpaced 2010 year-to-date performance for

each key metric below. Although the gaps against 2008 and 2007 are lessening there is more ground

to make up with respect to ADRs before the industry is able to return to pre-recessionary levels.

GDS AROUND THE WORLD

GDS results outside of North America shine the brightest light on the return of corporate travel.

Revenue rose to +41.4% over prior year in May compared to +35.5% for North America. This further

exemplifies the impact of ADR. Even though May booking volumes were just under those of April,

higher ADR is behind the delivery of higher revenue growth.

The following table displays May’s improved performance against May year to date 2009, as well as

those 2010 time periods against 2008 and 2007, respectively. With bookings, ADR and LOS

increasing at a faster pace than year to date, we’re seeing double-digit revenue growth over each of

the previous three years – 2009, 2008 and 2007.

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ADS CHANNEL (LEISURE TRAVEL FOCUS)

The ADS channel continues to display slow, but steady, progress. Booking volumes in May held a

respectable +9.7% increase over prior year with ADR now just barely below last year. Thus May

revenue sure-footedly passes that of last year by +7.5%. As global economic recovery has been

likened to that of a slow uphill roller coaster, leisure travel and its reliance on factors such as

unemployment likely has a while to wait for its recovery to blossom. Indicative of the more value-

minded leisure traveler is that the May average look-to-book ratio rose +53.5% higher than last year.

The good news is that, although the leisure sector is not recovering at the same pace as the business

sector, increasing demand is evident and it shows signs of consistent improvement – even during the

months leading up to the peak summer travel season.

Also encouraging is that both ADR and average LOS, the two measures shown below as still trailing

prior year, are improving at a slightly quicker pace. May ADR came in at -0.9% under prior year as

opposed to -2.9% year to date, and average LOS is -1.3% shorter than last year as opposed to -1.7%

year to date.

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NORTH AMERICAN ADS

North American ADS is still where we see the slowest recovery. Generally plagued by greater ADR

discounting, rates are taking longer to come back to prior year levels. ADR is, however, creeping up,

with May at -2.9% under last year. May booking volumes compensated with a moderate but sturdy

+8.0% increase over last year, enabling a revenue increase of +3.5%.

Bookings show strong double-digit growth year to date against 2009, 2008 and 2007 volumes,

driving a revenue rebound despite weakened ADRs. We are also seeing that North America booking

lead times, although still under last year by -4.4%, are leveling off.

ADS AROUND THE WORLD In contrast, ADS booking volumes outside North America continue to rise at a faster pace each

month, reaching +22.6% over last year in May. ADR, although quite flat, manages to keep its head

just above prior year’s level by +0.8% in May. With little help but also little hindrance from ADR,

revenue tracks almost exactly with booking volumes, increasing by +22.3% over prior year in May.

Although booking volumes are performing strongly against prior year, they are still further away

from 2008 and 2007 levels. ADR is slightly up over 2009, and similarly closing the gap against pre-

2009 levels. We are also seeing ADS average booking lead times no longer shortening. In fact they

were one-tenth longer than prior year in May at 26.2 days. This is a small yet encouraging sign,

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because longer booking lead times reflect a return of consumer confidence; they are willing to plan

for travel expenditures futher in advance.

GDS & ADS CHANNEL PERFORMANCE BY REGION Although many factors influence performance, especially at regional levels, certain overall trends hold true. Booking volumes are up consistently for both GDS and ADS, with stronger growth most often in the more corporate-influenced GDS channel. ADRs, still slow to return, are showing positive growth over last year for all regions in the GDS channel. ADS ADR is beginning to turn around in most regions thought still lagging behind prior year, particularly in North America.

FORWARD-LOOKING INDUSTRY TRENDS GDS forward-looking data supports a continuation of the upbeat trends we’ve seen in recent months

and bodes well for a promising outlook for corporate travel. Booking volumes show double-digit

growth for all months through September. Perhaps more significant is that ADR shows consistently

strong growth over prior year for future bookings as well. Those factors, plus increasing average LOS,

lead to the revenue increases in excess of +30% seen below and point to the long-awaited full return

of business travel.

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ADS forward-looking data rings hopeful as well. We see double-digit booking volumes for almost

each month through September. ADRs are close to prior year levels, even showing positive growth

for September stays. On average, however, LOS looks to remain less than prior year for the time

being. These factors combined produce consistent, but more moderate, revenue growth through

September. What all of this describes is that leisure demand is alive and well. Consumers will be

traveling this summer but generally vacations will be kept in check by the need to spend prudently,

as evidenced by shorter stays and expanded searches for the best value.

KEY TAKEAWAYS Global GDS net revenue performance forges ahead stronger than ever, further confirming corporate

recovery is in full swing. May had the highest revenue percentage increase over prior year so far of

any month in 2010. Even absent the boost from travelers stranded by Iceland’s volcanic eruptions in

April, booking volumes remained high and, importantly, ADR continued its rise.

ADS, indicative of leisure travel, is also improving. Not as quickly as the corporate sector, however,

and more timidly in North America than in the rest of the world. The pace at which North America’s

bookings exceed prior year have slowed, and ADR, although moving up, still trails behind last year.

Future bookings look strong for both the GDS and the ADS channels, with double-digit increases over

prior year through September. This holds great promise for the coming months.

In summary, a positive overall outlook remains. As we are now on the brink of the highly anticipated

summer travel season, trends analyzed in The Pegasus View and reported by other industry sources

point to an improved season over last year. What is yet to be seen is by how much. There exist

various concerns related to household finances, the economy, unemployment, exchange rates,

airfares, etc., that will no doubt be defining factors. Nevertheless, the number of travelers planning

to take more trips during 2010 outnumbers those that plan to take fewer, and today’s consumer is

determined to be as resourceful as necessary to still take much needed vacations.

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We look forward to sharing more about industry trends, developments and projections in the next

edition of The Pegasus View.

Mike Kistner

President and CEO, Pegasus Solutions

Ric Leutwyler, COO, Pegasus Solutions President, Utell Hotels & Resorts

Note: All data is on a date of booking basis unless otherwise stated. ADR and revenue percentage changes are calculated from values using a single constant exchange rate to eliminate the effects of currency exchange rate movements.

ABOUT PEGASUS

Pegasus Solutions is the world’s leading provider of technology and services to hotels and travel distributors, supplying

state-of-the-art central reservation systems and electronic distribution services, advanced agency commission processing

and payment services, and hotel marketing representation services. Founded in 1989, Pegasus created and launched the

hotel switch, and today its customers include nearly 100,000 properties around the globe as well as a majority of the

world’s travel agencies. Additionally, Pegasus’ powerful representation arm incorporates Utell® Hotels & Resorts and Utell

Connect, services that have been chosen by more than 9,000 member hotels in more than 130 countries, making Pegasus

the hotel industry’s largest third-party marketing, sales and reservations specialist. Pegasus also powers the niche

consumer Web site www.hotelbook.com™, dedicated to promoting independent and boutique hotels throughout the

world. Headquartered in Dallas, Pegasus has 18 offices in 11 countries, including regional hubs in London, Singapore and

Scottsdale, Arizona. For more information, please visit www.pegs.com or www.utell.com.