Robert Diener, President of Hotel Reservation Networks

This is a partial transcript from Your World with Neil Cavuto, March 25, 2002. Click here for complete access to all of Neil Cavuto's CEO interviews. 

NEIL CAVUTO, HOST: There is a stock chart that's up 233 percent from it's 52-week low. That company, Hotel Reservations Network (ROOM). That's right, it's a travel industry stock that's heading straight through the roof. The secret? My next guest should have that answer. He's Bob Diener. He's the president, co-founder of Hotel Reservations Network. Bob, good to have you.

ROBERT DIENER, PRESIDENT, HOTEL RESERVATION NETWORKS: It's great to be with you today.

CAVUTO: All right. So let's explain how you work. You buy up rooms and essentially sell them back out again at cut-rate prices for consumers, right?

DIENER: Exactly. What we do is we go out to hotels in major cities. I mean, cities such as New York, Chicago and San Francisco, and we contract for large blocks of rooms. Based on the big volume that we do at the hotels, we get rates that are much lower than what consumers can find on their own. And we offer great values to consumers.

CAVUTO: All right. Give me examples of that?

DIENER: OK. Well, let's say you want to travel to San Francisco. Well, we can give offer you hotels like the Mark Hopkins Intercontinental, one of the best, four-and-a-half to five-star. It is about $500 a night. On our Web site, hotels.com, it's as low as $139 a night. And this works in New York City. In Chicago, for example, there's a whole list of hotels, first-class, four-star, that are available on the site from $79 to about $129 a night.

CAVUTO: But how do I find you?

DIENER: All you do is you go to the Internet, you click on — we actually launched a new site today. It's www.hotels.com. Our previous site was hotel...

CAVUTO: OK. So I find your site. Let's say I'm going to be traveling the second week in May to Las Vegas.

DIENER: It's very simple. All you do is you log onto hotels.com. You put in your travel dates, how many are going and with one click, you will get results and you will see a long list of hotels that can save you as much as 70 percent off the regular rate. That's great for consumers because they get a great value and we guarantee that they have the lowest rate. It's also good for our hotel partners because we bring them great distribution across the Internet.

CAVUTO: But I have to pay you the full amount up front, do I not?

DIENER: That's right. You do pay up front, but you can cancel...

CAVUTO: And those are guaranteed?

DIENER: Those rooms are guaranteed. You get an instant confirmation number.

CAVUTO: From the hotel or from you?

DIENER: The confirmation number comes from us, but it's also immediately confirmed with the hotel.

CAVUTO: So the hotel knows about it. I don't go to the hotel and all of a sudden it's we know nothing about it.

DIENER: Oh, no. The hotel knows about it. I mean, we are a major partner for the hotel and we booked, last year, about 4 million...

CAVUTO: So how do you make your money?

DIENER: What we do is we purchase the rooms at a net rate. So say, for example, you go to a hotel, you know, in Chicago. We may purchase the room, say, for $70 a night. Then we'll mark it up, we'll sell it for, say, $100 a night. Now the regular rate...

CAVUTO: But why would they give it to you, let's say, for $70 a night at first, because they fear, well, they are not going to sell it anyway?

DIENER: Exactly. Occupancy rates at hotels today are somewhere in the 60 to 65 percent range. So we're talking 35 to 40 percent of hotel rooms go empty on a typical weeknight. So, and it is great distribution for the hotel because what we do is, and we offer them free distribution not only through our own sites, but we have over 24,000 affiliate partners on the Internet. Now, these are other sites that sell our hotel rooms. And they do not pay us anything to — actually, we do not pay them anything to be on their sites. I mean, what happens is once the consumer books to their sight, they're actually using our hotel room. And we pay the affiliate a commission.

CAVUTO: Well, Wall Street clearly loves you. Wall Street loves you. Here is one thing that I worry about for you. The economy is improving, shakily, but it's improving. Hotel occupancy, booking rates are up. So the more hotels feel comfortable, if not cocky, about filling their rooms themselves, would you be burned?

DIENER: We actually have had our greatest success and our greatest growth rates during the period of greatest prosperity for hotels, because regardless of how well the economy has done, regardless of how well the hotel economy has been, you know, pre-September 11, there is always a certain percentage of hotel rooms that go empty. And the Internet is a great distribution source for hotels and we can bring it to them at no upfront costs. So, regardless of how strong the economy is, we still do well. We do well in all markets.

CAVUTO: All right. But again, with these prices, these low prices.

DIENER: Exactly. We always guarantee the lowest rate. They may be higher as the economy gets stronger. But it will still be a good value for the consumer and a great distribution channel for our hotel partners.

CAVUTO: All right. Robert Diener, thank you very much, Hotel Reservations Network. He's the president and co-founder.

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