The internet has brought us many things for which we must be eternally grateful, like memes of Michael Jordan crying. It’s also revolutionized travel, bringing price comparison websites just a click away.
As consumers, we’ve come to rely on these resources and also believe that at least one of them is going to be the cheapest solution to our travel needs on any given day. A new study by Which?, a leading market researcher, suggests that may not be the case at all.
It’s always been fair to say that online travel agencies and consumers aren’t entirely aligned in their goals. Yes, they want to sell you travel, but with so much consolidation – most are owned by Expedia – there’s a fair amount of price fixing, so that a healthy commission and markup can be extracted from each and every booking. OTA’s – aka online travel agencies make money via…
- mark up on hotel bookings
- commission from the hotel on said booking
- display advertisements
- data from their own loyalty programs
- featured hotel campaigns
It’s why you may see 20 travel booking sites all with a similar price, or in agreement on the lowest price possible for rate parity. Because they command so much of the market – responsible for over half of all hotel rooms booked throughout the world – they get to set the terms.
In fact, hotels can be removed or fined for displaying a price lower than the consortium. They’d certainly hate to lose half of their overall bookings, just for displaying a fair, extortionate mark-up free price.
With so much at stake, it’s hard for a hotel to show consumers – aka you – what they’re really willing to accept for a stay. Online travel agencies juice circa 20% or more onto the nightly rate the hotel will really take, so a $1000 hotel stay would be at least $1200 by the time you see it priced out online.
In their study, Which? found that 8/10 hotels were cheaper when contacted directly the old fashioned way, over the phone. If they weren’t cheaper, customers still ended up with a better deal.
Bookings taken over the phone are very different than displaying a price online, and accordingly hotels will go to great lengths to avoid paying exorbitant commission to booking websites. Secret or not so secret, hotels love avoiding commission and they’re willing to make it worth your while with a free breakfast, room upgrade, late check out or bottle of bubbles Maybe even all the above.
A phone call might go something like this…
“Hello, Palazzo Hotel, I see your rooms are $200 per night for a one week stay in June virtually everywhere I look online. I’d love to stay, and was wondering if you had any better rates for booking directly with you?”
At this point, most hotels will either offer some nominally lower rate, or some benefits for booking direct and helping to avoid these online travel agencies like Expedia, Hotels.com, Orbitz and such. It’s not advertised online anywhere and you’ll pay directly with them, so it’s easier to pull off.
More indie hotels already do this to an extent on their own websites, so it’s worth using the direct hotel website as a starting point after a price comparison search. Google Hotels is also muscling in to the space, creating a more direct flow between hotel and consumer, which could play quite a big role in the years to come, and with any hope, lower the margins.
Basically, no one is saying to avoid the internet, but rather that it can be lucrative to double check your best work the old fashioned way. Sometimes you can’t beat picking up the phone…