First of all, LetMeGo is not only about low prices: it's about offers customized for each traveler depending on his/her needs (VentureBeat nailed it down here: http://bit.ly/5vioZZ ). Nevertheless, given that LetMeGo's pricing is "semiopaque" (the bids submitted by the lodging are ONLY visible to the traveler that submitted the itinerary), we think that some lodgings will offer prices below what they publish in CHAINWEBSITE.COM. This would be relatively similar to the way hotels do with other opaque-pricing service like Priceline and Hotwire that allow them to forget about parity. Time will tell if this assumption is correct.
By the way, we are not counting on large chains for our success. In fact, we want to work primarily with independent and small hotels, bed and breakfasts, and the large vacation rental market. Our system has been designed with them in mind first. Why? Because this area of the industry has a lot of potential that hasn't been discovered yet, and because I am against large corporations with too much power.
In reference to the chicken/egg dilemma, we have secured access to large databases of lodgings. We are inviting them all to list their lodgings for free using a very intuitive interface. They will only pay us a 10% commission per booking after they get paid.
We are staying away from the GDSs for now because most independent lodgings don't use them (outside the US independent lodgings account for more than 80% of the market). Also, because our service, as I mentioned above, is about custom offers and service, and not only about real-time and the-lowest pricing.
I had the "pleasure" of chatting with the VPs of Revenue Management of two of the largest hotel chains in the US and in the world. As you predicted in your comments, they didn't like LetMeGo's model. That, for me, was a good sign.
Thank you Matt!