For Hotels, There’s No Room Left for Online Travel Agencies
foxbusiness.com
foxbusiness.com
Booking.com has been amazing for us. They take 15% but it is completely worth it. We don't have "a name" nor do I have time to invest in the relentless SEO content marketing necessary to differentiate us when people search "hotels in the Luberon" or "Provence hotels." Since we are a very small place (just 3 suites,) it's an unprofitable use of my time to be generating blog content and engage in full-court-press inbound techniques -- so unless you are a chain or happen to be featured by travel writers, good luck being discovered via inbound searches.
We do have a website and a good direct booking system, but we probably get 3 bookings per year directly from our website yet between Booking.com and cross-listing on AirBnB, we are completely booked through most of the season. Our booking software is integrated with Booking.com and AirBnB so we are able to have all of our channels coordinated with a minimum of work. If one considers Booking.com as a lead-generation system, 15% is a huge value. I would easily spend far more if I were marketing directly through ads. Our TripAdvisor page is free -- we haven't paid the yearly €799 fee for an enhanced listing but TripAdvisor still is great for us since we have 4.5 stars.
Guests from Booking.com are far less work than from AirBnB or direct. AirBnB customers seem to still not understand what Instant Booking means -- we get almost daily inquiries of "do you have availability for some date" -- yes, obviously that's why you are able to instant book! AirBnB guests tend to want to have long conversations while Booking.com people just book and show up with a minimum of fuss. We also have a very liberal cancellation policy, unlike many places in the region -- we found that just letting people cancel whenever they want works out fine in the long term because are area is high demand so cancellations don't really cost us anything because we quickly get rebooked during peak season. So everyone is happy. In terms of taxes -- our prices have all of that included.
My point is that sites like Booking.com and AirBnB have made our business -- we essentially incur no marketing costs. So we love Booking.com! It honestly doesn't matter one bit of you book directly with us or via Booking/AirBnB -- our prices take our costs into account so you aren't "hurting" us if you book through a third party. We are just glad to welcome any guests however they find us. The big chains probably get hurt the most by third party booking sites because they are already spending money on marketing and have name recognition, where for ultra-small-timers like us, you probably would never have heard of us without those third party sites.
The short version: third party sites add huge value to our business -- they get to do the hard work of marketing us while we can focus on the guest experience.
What software do you use to sync Booking.com and Airbnb bookings calendars? I was using http://www.sync.rentals/ but they seem to have reliability issues (or maybe websites don't like them). Anyways I would love not having to write my own tool for this task and it would save me a lot of time.
Business opportunity for someone?
And for us consumers services like hotels.com are really a great help, makes bookings fast and constistent. And they are secure; making me not worry about booking a hotel in an unfamiliar country.
This would make it far easier to build a hotel search engine, which would cause an explosion of competition and innovation in this area. This in turn would undercut the power of the leading agencies, and drive down referral pricing.
But they won't do this. You see the same problem in so many industries. Vendors act like data about their offering is more precious than the offering itself. They make it as hard as possible to build an aggregator, so the aggregation market gets tied up by a tiny handful of players who are willing to invest enough to build a scraping infrastructure. Then they panic that these aggregators have too much gatekeeping power, but rather than encouraging greater competition amongst aggregators, they respond by trying to put the genie back in the bottle.
Meh. For that to be true, it would have to be the case that all consumers care only about price. I'm pretty sure that's not actually the case. As long as there are consumers who will pay more for $WHATEVER, there will be a market for $WHATEVER. The point is, you can still price discriminate, even if you make your data available as a simple JSON (preferably JSON-LD) file.
The current state of the airline industry makes a pretty strong counter-argument.
That's why we don't see a lot of competition and innovation in the airline industry.
Are you familiar with SABRE/AMEDEUS? The flight industry did exactly this and it's been a disaster for them. Heck, they even handle hotel bookings as well.
If it's a disaster, it's a much smaller one.
per query/booking/inventory update
The airlines own the GDSes but carriers are a commodity now.
Huh? Sabre is owned by TPG and Silverlake.
Airlines would like lower fees, but it's not as bad as hotels. They have shed most commissions over the years.
every single airline uses a common messaging format for reservations, routing and itinerary generation BECAUSE of SABRE/Amadeus and doesn't have to roll their own systems to do it.
please tell me how this is disastrous.
Airlines can't publish their inventory because they agreed to only allow GDSes access to that data.
Getting access to the GDSes as a small startup is extremely difficult, and the obvious value-add (searching many possible trips) is punished by the pricing structure.
Second, messing around with price & doing complicated, on the fly pricing helps them cut a little extra margin (price differentiation). One price for a regular business customer. Another price for last minute online booking engines. A whopper of a price for the couple deciding to take a date from the bar to a room. This is a low margin industry, largely. These things matter.
Third, they're afraid of commodification. Standardization & informational liquidity are the path to commodification. They like the idea of a travel agent recommendation, not a spreadsheet with a "book now" button.
And since the job of the aggregator is simple, more competition ?
* To innovate, the GDS only think about how the messaging should be differently handled.
* To buy a ticket, an airline/travel agent uses almost the same syntax throughout the world (this is a miracle, when you can't even order cabs in the same manner in the world).
* Airline companies implement similar interfaces (between different GDS) to handle ticket processing. Which is another miracle: think freight handling done with the same messaging protocol.
Now add to the mix modern protocols and you get nice APIs. The hotels CAN be the only one properly consuming the APIs (w/ gorgeous and easy to use platforms), but if they can't do it well, let tech-aware organisations do it.
Instead, these hotels are fighting for breadcrumbs and insulting companies which have done more to facilitate accomodation than any other hotel in the past 40 years.
That's massive revenue, not "breadcrums". Certainly hotels shouldn't avoid that revenue just because it might "insult" a different company.
It's all XML based and sometimes it's a bit confused but a lot of hotel booking sites work by forwarding OTA/HTNG schema messages to booking engines (e.g. Siteminder). A heck of a lot of hotels are already bookable through those engines.
> OpenTravel provides a framework where all companies in the electronic distribution supply chain can work together toward the common goal of creating an accepted structure for electronic transmissions using XML messaging. This enables suppliers and distributors to speak the same interoperability language, trading partner to trading partner.
Had you not explained, I would never imagine this is about hotels.
The same thing is appealing for hotels, IMO.
A commoditized market has products, by definition, that compete on one factor, price.
If you care about cleanliness, quietness, or other qualitative features being areas of active competition, you don't want a commoditized market.
People don't just buy generic meat they buy Grade A (means something) Prime Rib (means something) Angus Beef (means something).
No, but it does mean that goods are perfect substitutes that compete only on price, although it is a condition which in practice is approximated more often than actually attained.
> People don't just buy generic meat they buy Grade A (means something) Prime Rib (means something) Angus Beef (means something).
Right. "Meat" isn't even approximately a commodity. A particular cut and grade might be approximately a commodity (though makers will actively seeking to decommoditize it by building brands; no one wants to sell into a commodity market, since basic economics mean that competitive factors will drive market prices in such a market down to producer costs and eliminate profits.)
Maybe it's different for recreational travelers, but for at least one business traveler my hotel room was just a place to park my clothes and stuff during the day, and to sleep at night. As long as the AC worked, and the bed was anything close to reasonable, the rest was moot.
Hotels seem to aim their products at their primary customers (business travelers), and the product they sell is designed to primarily meet their needs. They compete on non-room amenities (bar quality, workout rooms, etc.) and on loyalty points, which frequent business travelers can use to make personal trips to vacation destinations. None of these things have any value to a family that makes 1-2 trips a year.
AirBNB does target my needs, with detailed pictures of exactly the space I'll be living in, diverse housing options, with many of the amenities that I desire above. I also care a lot less about cleanliness when I'm traveling with family. Yes, I want clean sheets, towels and other personal items. However, I don't care about a little dust in the kitchen cabinets, some spots on the windows, aging/peeling paint, or a few spiderwebs in the corners. My kids are going to make a mess no-matter what, and I certainly don't clean my home to hotel-standards every night.
I have seen a few mainline hotel chains offer family-focused properties (The Hyatt House in Anaheim is one.) However, the family-focused ones aren't that common. An AirBNB apartment I can rent almost anywhere.
The one place where I do feel some brand loyalty, is actually on the airline side, where I have a strong preference for Southwest. And that was even more true back when I still had elite status with them and got free early-bird boarding. That was something I actually cared about since my company wouldn't pay for early-bird, seat upgrades, and the like.
Frankly the aggregators provide really low value to the hotel as a stakeholder in the process. They demand concessions and commoditize the hotel itself, which is obviously not in the hotel's interest.
This is a classic channel vs direct issue. The only reasons that travel agents and these aggregators exist is that they provided a way to offload inventory or increase demand. Now we have the internet -- so it is easy and cheap for hotels to engage directly with many customers. Why should my local Hilton Garden Inn give 20% of the gross to Expedia?
For the core customers of the business, the hotel can offer more value to the customer (things like online checkin, etc) while cutting out the commission to the middleman. Travel agents still offer value for complex itineraries, destination travel, integration with corporate ERP systems, etc.
It's really not.
> Why should my local Hilton Garden Inn give 20% of the gross to Expedia?
Because Expedia has the traffic to actually sell those hotels. Aggregators "are" the market.
Hipmunk came around this decade. But no clue on how good the acquisition is. Trip.com and HotelTonight are the last two properties I know off the top of my head and they were also founded this decade. Both seem to be doing decently.
I guess maybe you're right and now there isn't room anymore. But if things could come out 5 to 7 years ago, we could see some more pop up.
HotelTonight fills a niche but I think the market they play in is pretty small.
I agree, HotelTonight fills a specific niche and maybe that's what we'll see more of. A few sites filling niches. Trip.com itself also has to do some more superficial than substantial features to try to differentiate itself.
And maybe Hipmunk was always more hype than actually being big with it being a YC company and by a reddit co-founder.
Yeah, that's a load of crap. I always start with an aggregator, and if I find a place that I like, I check their website as well. Unless they're cheaper or offer some major perks, I book through the 3rd party site. Of the last 5 hotels I've booked, going through a 3rd party site has been a better deal 4 of those times.
Try checking from your phone while it is disconnected from your personal network.
I arrived at the hotel, they noted my HHonors basic membership and mentioned I wasn't receiving points due to booking with third party. I said I got the room for 10% less than their best online rate and their response was that I should have called bookings to talk to them. So now there's even more hoops to jump through to book direct? No thanks.
Price matching is great when it works, but infuriating when you can't actually back it up. It should all be automated, I can't imagine someone at Hilton is manually setting HotelTonight prices and not telling anyone.
Some processes and business practices are super hard to change.
Hotels will almost always match lowest rate because they care much more about having low vacancy and not having to pay booking.com for your reservation. And you won't sacrifice points or chances at upgrades.
Booking.com is a good way of finding low prices that hotels will match.
Disclosure: Used to work at TripAdvisor.
I booked for a noticeably (~10%) cheaper price directly through a hotel website, but I wasn't able to get just a room. I had to book a package which included free tickets to a nearby tourist spot.
There is a place for the booking sites, especially for exploring several hotels at a time. And they do offer some reviews and comparisons that can be useful. Sometimes, they also offer the cheapest price but usually it is just as cheap to call the hotel itself or book through its website. And it really feels good to pay the hotel that offers the services, instead of some tech company in the US.
Most of the times I booked through booking.com it was "cash on arrival", so these sites are nothing more than ads. I think the problem is travel agencies, that book bulk of rooms to rent them later (just a guess, can't read the article itself due to paywall).
I can confirm this. I believe the hotels only pay a monthly fee for listing and that's all.
Expensive ads. Cash on arrival does not mean that the hotel does not pay a sizable commission. Roughly in the range as the cut iTunes, Play, Steam take for transactions that, unlike hotel service, create zero cost beyond the initial investment. Occasionally, hotels might even offer you a cheaper room if you cancel your reservation, to get out of that obligation. Maybe some sites are much cheaper, but the big ones like booking.com take everything they can, and they can take a lot.
You mean, take as much as is offered? The hotels are free to let the rooms sit idle & refuse the bookings; they wouldn't pay these commissions if they didn't make business sense.
A $100/night room that's empty generates $0 and costs $10-20 (amortised staffing and maintenance costs, insurance, permits, etc.)
A $100/night room filled with a 30% commission generates $70 & nets ~$50.
I think that most hotel managers would not list their preferences as: direct booking & ~$80 > empty & $0 > booking site & ~$50.
You got it: they're traffic funnels that you pay per conversion.
Also, the travel websites give the important details, amenities, nearby attractions, restaurants, public transit in the same format across all the hotels so I don't have to fiddle with each and every travel's website in a different way based on what their UX designer decided to do. Also, wayyy more photos on travel websites.
Disclosure - I used to work at TripAdvisor.
Customers don't want to go through the hassle of "discovering" a half-baked website filled w/ pretty little quirks.
This worsens the user experience by a ton, I find.
We were always instructed, depending upon predicted or actual demand of course (we had someone dedicated to trying to predict demand by populating a spreadsheet with prices), to be willing to haggle with someone that is dealing directly with the hotel if we felt it necessary to sell. I would always recommend that you deal directly with the hotel, especially if you think demand is low. Also, showing up just before the hotel reception closes and swaps to the night shift porters is a great time (10-11pm) as hotel staff are particularly vulnerable to haggling. At that time of night we just want to sell for covering staff wages/fixed costs.
Downside of showing up at the last minute is you can easily be ignorant of local market conditions and show up at 10pm when every bed in the area is occupied due to some local event that you were ignorant of.
This sounds great for someone interested in haggling, but if I don't want to bother with it(actually, if I'm specifically averse to it as I want to plan my vacation costs in advance), why should I go to the hotel directly instead of using booking.com?
And when I'm on a trip, the last thing I want to do is hope for the best at finding a hotel the day I arrive!
In all my experience abroad, as long as there is some effort made to communicate, language has never been an issue when it came to prices and sales. Sometimes this means we pass a calculator back and forth with different prices until we agree, but as long as there's an effort and money to be made, people are fairly open to alternative means of communication, even in remote nowhere locations.
Apparently, hotels that use booking.com as a sales channel sign a contract that prevents them from charging less for the same rooms on other sales channels.
In Germany and France this practice has been banned. (In Germany by a judgement of the Bundeskartellamt and the Oberlandesgericht Düsseldorf)
That said, the 24 hour cancellation policy is really useful since some of the listed hotels wouldn't otherwise offer it.
The hotel wouldn't put all their rooms there because they also have other channels (that also need to promise the customer that they'll get the room, inform the hotel afterwards, and the room must be available), and they don't want to risk overbooking. On the other hand, if they get a booking and see that all their booking.com rooms are taken, they'll likely assign another room or two to booking.com if they have them available.
Only if it's in the same country.
> book through its website
For some hotels, booking via website is often half-baked web app that's full of bugs, doesn't accept certain inputs, etc. Simply because webdev isn't the hotel's main activity. Reviews on the hotel's website are usually non-existent or only positive.
I mean, I hate the booking sites as well, but they are often "less bad" solution than booking directly.
Booking.com is Dutch.
But I could never book via anything then booking.com
Without it, how do I know the pros and cons of a hotel? Every hotel site will tell you they are great. But not if they are next to a noisy street, that the staff is unfriendly and that the rooms are much smaller then one would expect from the images.
sometimes you get kinda suboptimal rooms if you're
booking through an aggregator. They're making less
money off you and they know it
Example: I just checked the Ritz-Carlton in Berlin. And on booking.com it's clearly stated that Wifi is free. So I would expect I can rely on that. On the Marriot website the hotel, it's written in the small print that you have to pay extra for wifi. So I would expect them to fuck me over and bill some outrageous €25 per day or something for wifi.
As for reviews, maybe? Hotels have to care in (ahem) aggregate, sure, and it's probably true that more people see reviews on travel sites than on Yelp or Foursquare (although it's sometimes interesting to compare). But if you're a hotel loyalty program member, then they have incentive to make you want to think well of their hotel brand.
Anecdotally, I've never gotten bad service from booking from Hotels.com; it's not like the hotel staff goes out of their way to be difficult or anything. But I've noticed that I'm more likely to get a room right by the elevator when I book with them, while I've noticed that booking as a Hilton Honors member seems to be fractionally more likely to get me a free upgrade, or a welcome note from the manager at a hotel that didn't give me one two years before when I booked on the third party site. All anecdotal, possibly coincidental? But still something I noticed.
I'd probably assume that the hotel's own site has the
information right and it's Booking.com's information
that's wrong
In SF: Hotels.come was $180/night, hotel's website was over $300/night.
In Copenhagen: Hotels.com was $120/night, the hotel's website was over $180/night.
I'm not sure why these places are running sales on hotels.com, and not on their direct website. I try not to book on hotels.com because hotels have a reputation for giving those travelers the worst rooms (double beds vs. king bed, next to elevator, unrenovated rooms). However, it's hard to say "no" to 30%+ off.
To have a term of comparison, in the old times when travel agencies existed, the fee was more in the 5%-10% range.
Small hotels must submit to them to have any visibility on the net, and (I believe it depends on countries, in some the clause has been deemed as invalid) the contract states that the hotel must not expose to the net (on its own site) a price that is lower than the one on the aggregator.
Hotel chains might have the visibility and resources to bypass this perverse mechanism, and even if they pay the lowest fee of 15%, in times of low margins every fraction is important.
Once upon a time there were travel agents that put their name (and face) upfront to the customer, guaranteeing when they recommended (and booked in behalf of) a given hotel (or vector/transport), they usually knew (from direct experience or from "verified" reports) the qualities of the suggested hotel or travel arrangement.
And - just for your interest - the "real" adjective when talking of guests impressions reported on booking.com (and much, much worse than that on tripadvisor) is something that needs to be attributed with more than a pinch of salt.
I have personally reviewed every single hotel I stayed in, and none of my comments were removed or altered in any way. Which I sadly cannot say about HN.
(I have a suspicion that the overall hotel rating might be fake, and I rarely pay attention to it, but in my experience the reviews are spot on)
Don't overlook the value of a known cost. The alternative is to buy a bunch of advertising that may not result in any bookings (travel related CPC ads are expensive).
It's structured differently, but you still have a company with a (multi-)national brand presence funneling customers to independently owned hotels in exchange for a cut.
In a future where everyone books through hiltonhonors.com and spgdirect.com instead of booking.com, will the actual hotels make more money, or will the chains just start capturing more of that value for themselves?
Additionally, while I don't know for the GSA, for my state there's a waiver if there's a defensible reason you need to stay at a nicer hotel.
I tend to use GSA's published rates as a benchmark to vet reasonable cost when shopping around. It's typically the case that I can find lodging accommodations that are appreciable less expensive, but they're almost always at establishments of questionable quality.
I would probably just book directly these days. Hotels seem to have had it with dealing with the aggregators.
There used to be the $19.99 best western in Mississippi but now you cant touch anything for under 50. Flipping through the BW directory was very enjoyable.
It was quite fun to grab that $14.99 holiday inn room " great rate" because i was an 800 number expert.
We still go to a dinky place in Maine off the grid ($39 off season with dogs/$89 in).. I hope they never sell.
When the job market is saturated:
There's a desperate shortage / skill gap of programmers, truckers and pharmacists. Go join this trade school for 16k! The economy is going to hell in a hand basket if we don't churn out 1000 new Javascript programmers every 12 weeks!
When travel agencies want cement their dominance and pour cold water on new competition:
Things are full, really! Don't bother applying Y Combinator as an online travel agency. You're just wasting your time and won't be able to generate any VC or get a single hit to your website! It's futile for... reasons!
Who is this comment addressed to? The article doesn't make these claims, and you didn't reply to another comment.