Brand name is a big thing in a business such as theirs.
False!
If one night in the Hilton New York is $350 on Expedia and the same night in the Hilton New York is $290 on Steve's Booking Site, enough people will use the latter site (despite ZERO brand recognition) that it will push the commissions lower. Brand name is NOT the moat.
There is something in the contract between Expedia et all and the hotels that requires a hotel to NOT go to advertise nightly prices for one site (or it's own site) that are lower than those advertised on Expedia et all. I don't know the exact details, but there is something in the contract between the major OTA's and the hotel which prevents transparent price compeition.
It goes something like Expedia mandates that the hotel tell Expedia the minimum price per night which Expedia may charge, and the hotel cannot provide a lower minimum price to a competitor. So.......Expedia take 18% of that minimum price due to their dominant position, and a competing OTA web site could offer the hotel a lower commission, but it sill needs to show the same minimum price to the customers (us).
So we would see $200/night from both sites, but Expedia would take $36 while the competitor OTA might take only $20. Since the competing OTA cannot compete to us the customer with a lower price, they lose in the battle of service to the hotel and service to us.
A vastly superior structure would be for the hotels to tell ALL OTA's the amount that they must receive per night, and then the OTA's have the responsibility to make a profit on top of that. This would crush OTA commissions, which would be great since OTA's are just a commission taking middle man.
Some day they will get crushed as the commissions are just WAY WAY WAY to high for the service provided. Booking a hotel should have a commission of 1% (or less) and always be declining. That it currently is above 15% is ridiculous, and for some reason it pisses me off!!
I own a rental unit inside a hotel in the Philippines. There are so many commission takers that sit between me and the customer, it stinks! The room rents for about $200 per night, and we get about $20 per night profit after all the taxes and expenses and commissions are paid. Cwazy!! We don't have to do squat, so that bit is OK, but if I were more involved in the revenue and profit generation fighting these commission taking fiends would be a major goal.
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It doesn't seem that hard. Make a centralized "room listing" database. Charge 0.25% per rental. And then set up a system that allows the hotels to put their inventory into the "room listing" database, set up payment/refund/cancellation rules, and let OTA style companies try to sell the rooms. Try to get every hotel of any size and every AirBNB in the world into the "room listing" database.
The owners of hotel inventory pay 0.25% per booking rather than 16%.
The sellers of the rooms have to compete with each other.....on price, to sell the nights.
Each hotel / AirBNB can internally manage sold rooms and how to handle refunds, cancellations, etc. As long as the rules are spelled out clearly in advance, this is reasonable, and it would most likely be worth it if the process removes 15% commissions.
Basically, put Expedia and their 15% commission ilk out of business. |
