The Booking Truth
If you never use booking.com or any other Online Travel Agent (OTA) I give you a virtual high five. You can stop reading now and bask in the silent applause of independent hoteliers everywhere. But if you use OTAs, I want you to know what you’re getting. You’ll tell me it makes life easy, in an Amazon kind of way and that you’re getting the cheapest deal. Easy, it is. Cheapest, it’s not.
In 2020, Which? Travel found that guests are paying 12% more than they need for hotel rooms because of commissions to OTAs. These commissions can be up to 25% and the entry level is 15%. There is no way a sensible business does not factor for this by gently adding a margin to the headline tariff.
Of course, the OTA model says they use the commission for the benefit of the hotels by paying huge sums to Google etc to gain headline visibility on search engines. It works. But who wins? Not you, paying over the odds for your room because the hotel pays commission. If you’re happy with that, in exchange for a faceless, fast transaction, fine. But at a time when we are re-evaluating our connections with everyone and everything, let’s re-evaluate booking a room for a night. After all, this is one of few transactions that involves trusting someone you don’t know to look after you when you are at your most vulnerable – sleeping.
We’re all becoming more sophisticated on-line so why do booking.com and expedia still dramatically dominate? Adam Raphael, editor of The Good Hotel Guide, has delved into the family trees of these two giants in a recent blog. As he notes, according to the Competition and Markets Authority (CMA) two thirds of you consult an OTA before deciding where to stay. That’s understandable, given the quantities they pour into search engines to capture your instant gratification. My tiny violin is working overtime at the news that Google stock is likely to drop 17% or more since Feb 2020 as (amongst others things) booking.com’s spending on ad words drops from $4b to around $1.5b.
Then, how many of you realise that you are paying for a virtual agent? According to a US survey, almost a quarter of visitors think that in booking through an OTA portal, you will pop out onto the hotel’s real-time booking system. Not so, my friends. And, as Adam again notes, 95% of the OTA business is controlled by just two mega-giants: Expedia and Priceline. Expedia affiliates include Trivago, Tripadvisor (remember those days?), Travelocity, Hotwire, hotels.com. Priceline, basically, is booking.com.
To be fair, the CMA is keeping a close eye on the ways in which you are persuaded to part with payment for your overnight break via a third party. Did you know: if we pay more commission, we get bumped up the search results. You think this is logical, right? But the flip side is that the hotel is going to increase its price to you to compensate because that makes business sense too.
Then there’s my favourite, because you won’t know this unless I tell you: the OTAs have long tried to impose contractual restrictions on hotels from offering cheaper tariffs elsewhere (what is called “most favoured nation” or rate parity clauses). This practice has taken a hammering from European courts. In 2015, French, Italian and Swedish competition authorities got binding commitments from several OTAs to avoid these clauses. Here in the UK, booking.com and expedia pledged a voluntary undertaking in August 2020 but how this plays out post lockdown only the hotels on the receiving end of the practice will know.
Returning to my Amazon analogy: it’s got its uses, and so have the OTAs. As Keith Makepeace, the force behind the chic, family-run, way-of-life Soar Mill Cove in the South Hams says: “OTA’s can work if you base your income module around this and if your product is letting identical boxes which can be compared to other boxes based on distance, dimension and price.” Sounds fun. Keith took his hotel off the OTAs last year. It was a bold move but valid for a hotel which is a destination in itself. And as for the best price, Keith offers “a John Lewis style price guarantee [because] reassurance is probably key to keep loyalty for us.”
Yes: most hotels will continue to use OTAs because in a noisy world we need a loud voice to get your attention. But, once grabbed, be savvy and look a little beyond the headline; you will always get the best deal – in personal service as well as price – if you contact us direct.
This piece first appeared in Devon Life