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In the end, hotels have a strong incentive to book you on their own websites. Even if the rate is the exact same to you on brand.com vs. third party, the hotel pays the third party 15-25% of the rate in commission for booking the reservation for you. It's expensive to the hotel to have you book on another website and means they have to cut corners somewhere to cover their costs.
I know of no hotels paying anything close to that in commission. Maybe 10%, often less.
I don't want want to book through a middleman if there is a problem with the reservation I don't have to argue with who messed up. And I don't think I've found anything that is a better price than going directly to the airline or hotel. IMO
^^^ However that's not the case with foreign travel, you're better off with a tour group and agent.
I know of no hotels paying anything close to that in commission. Maybe 10%, often less.
I'll respectfully say you're then not aware of the hotel business if you believe it's less than 10%. I can tell you from 17 years working in hotels (and currently working in a corporate office of a major hotel company - that flexes its muscle to get the commission down to 18% on its brands), the commission is exorbitant. Expedia, et al. defend it by saying they are doing free advertising for the hotels, but it's hard to argue a hotel could not divert that money they are giving up to other marketing efforts.
That said, when the deal is sell to Expedia and give 18-25% (or more for some independent hotels without negotiating savvy) vs. let the room sit empty (meaning no money at all for tonight's stay), there's a temptation to make a deal with the devil.
"But the conversation surrounding hotels and Expedia always comes back to commissions. The scuttlebutt is that InterContinental Hotels Group and Expedia are going toe to toe in its current contract negotiations—and to no one’s surprise, the commission structure is the biggest obstacle. It will be interesting to see how it plays out. Given Khosrowshahi’s comments, it’s hard to imagine Expedia giving in too much. Whether the commission rate is 15% or 30%—or somewhere in between—is a big difference for someone’s pocketbook. Who will blink?" (InterContinental Hotels Group is best known for Holiday Inn).
The problem here is the guest doesn't realize the hidden cost because it's the same price online to them - or so they think. Hotels could probably sell their rooms for significantly less overall if they didn't have this huge expense to factor into the operations of the hotel.
As practical concerns to you as a guest, however...
1) booking through the hotel's website means if something goes wrong you only deal with the hotel or chain versus fight with a third party. My experience is when there's a problem (especially with a reservation), the hotel and the third party usually go back and forth blaming the other - but that means you get stuck in the middle.
2) My experience is - fair or not - hotels sometimes give third party reservations less preference than brand.com reservations. Book through the hotel's/brand's website and you'll probably get a better room selection.
3) If you want loyalty points, some brands will not pay loyalty points if you book a reservation through a third party website. Again, preference for you is book through the brand's website.
@GBCommenter, that article you provided was a good read. I had no idea Expedia was that huge. $2 billion in sales and marketing expenses in a year. Assuming they're profitable their revenue must be even higher than that. I'd say the hotels can't really complain about the travel agencies since they're the ones who negotiated the rates. They're just paying market value for a service the travel agencies provide. If they don't like it, they can refuse to do business with them. Being that you're in the hotel business, do you know how hotels try to get customers to book through their own websites, as opposed to booking with an online travel agency like Expedia? Not sure about most people but I usually look at a site like Trivago first, pick the hotel I like, then compare their prices to the prices on the hotel website. If the prices are the same I book through the hotel website, if not, I go with whatever is cheaper. Do the hotels look at what's being charged on the travel websites and adjust their prices accordingly every day? Seems like that would be one way of getting more customers to book through their websites instead of Expedia. If the average customer behaves like me when booking, I can see that as an effective strategy. The online travel agencies provide the advertising for the hotels, but if the hotel websites offer the same price, I'd think most people would book through the hotel website. Then the hotels avoid paying the commissions.
Also regarding the "best rate guarantee", I booked a hotel using Amona a few months ago because it was significantly cheaper than the hotel website. How would I convey that the third party website is cheaper than the hotel website to the hotel staff? Would I be entitled to any compensation
@GBCommenter, that article you provided was a good read. I had no idea Expedia was that huge. $2 billion in sales and marketing expenses in a year. Assuming they're profitable their revenue must be even higher than that. I'd say the hotels can't really complain about the travel agencies since they're the ones who negotiated the rates. They're just paying market value for a service the travel agencies provide. If they don't like it, they can refuse to do business with them. Being that you're in the hotel business, do you know how hotels try to get customers to book through their own websites, as opposed to booking with an online travel agency like Expedia? Not sure about most people but I usually look at a site like Trivago first, pick the hotel I like, then compare their prices to the prices on the hotel website. If the prices are the same I book through the hotel website, if not, I go with whatever is cheaper. Do the hotels look at what's being charged on the travel websites and adjust their prices accordingly every day? Seems like that would be one way of getting more customers to book through their websites instead of Expedia. If the average customer behaves like me when booking, I can see that as an effective strategy. The online travel agencies provide the advertising for the hotels, but if the hotel websites offer the same price, I'd think most people would book through the hotel website. Then the hotels avoid paying the commissions.
Also regarding the "best rate guarantee", I booked a hotel using Amona a few months ago because it was significantly cheaper than the hotel website. How would I convey that the third party website is cheaper than the hotel website to the hotel staff? Would I be entitled to any compensation
Expedia is definitely huge - and hotels would remind you they incur the costs of actually running the hotel and maintaining it - hence less money for advertising to book online through brand.com. That's why Expedia can afford to spend $2B on advertising to convince you. It's also no accident how Expedia presents their website - everything on it is designed to keep you interested in their site as long as possible because the commission is that lucrative.
You are right, the hotels (or their brands) signed a deal with the OTA (Online Travel Agencies) and Expedia would be quick to say a bit of what you did - if there wasn't value to the hotels/brands they wouldn't sign with Expedia.
It's really a deal with the devil. Hotels have pressure to sell everyday since you can't sell tonight's stay tomorrow - hotel rooms are a highly "perishable" product. As such, when there's not enough people staying in an area to fill all hotel rooms, the race is on to price rooms and make rooms available accordingly to sell the most. That means the OTA's get in on the action and hotels are tempted to find as many ways to sell as possible.
What ends up happening is you have a full discipline in the industry called Revenue Management. All the big brands (i.e. Hilton, Marriott, IHG, Best Western, etc.) spend a lot of money paying people to study these trends to find ways to get you to book the most rooms with them at the highest rate possible in a specific time.
We constantly are looking at the websites and comparing - and Expedia does the same thing with brand.com. However, most of the agreements state brand.com and Expedia must have "rate parity" most of the time (same rate showing publicly on both sites). When the hotel changes price, it usually automatically feeds to Expedia and they match per the agreement. It's just the hotel actually gets a lesser amount than you paid Expedia (in the case of my company 18% less).
I don't do "e-commerce" but my company has a full department of people that work on how to sell online against Expedia. Definitely part of it makes Google very rich because the brands and Expedia spend a bunch of money on keyword searches, etc. so the guest is incentivized to click the link to their website vs. the other company.
On Best Rate Guarantee - if your hotel is a brand, go to their website and look for something that speaks to the guarantee. In the fine print, the brand will tell you the exact steps you have to follow and what they offer. To be honest, it's relatively difficult to actually "cash in", but point is the brands want you to book through their website vs. Expedia (or any other source).
Most of the time the rates are the same if not better when booking via the hotel's primary website. In addition, promotion codes for AAA, AARP, Senior, Gov't, Weekend Specials, etc. are usually only available per the hotels website. The biggest plus about booking via the hotels primary website (in my opinion) is that you can usually pay during the day of arrival. Even advanced purchased rates are usually lower than the third party rates.
Southwest always has good rates. If I'm not mistaken, Expedia doesn't include SW flights but I could be wrong. They also do packages, so it may come out cheaper if you did it through them vs. going on another website.
Actually as often as not, the legacy carriers have equal or better rates than SW. It's a misnomer that WN is always the cheapest.
I'll respectfully say you're then not aware of the hotel business if you believe it's less than 10%. I can tell you from 17 years working in hotels (and currently working in a corporate office of a major hotel company - that flexes its muscle to get the commission down to 18% on its brands), the commission is exorbitant. Expedia, et al. defend it by saying they are doing free advertising for the hotels, but it's hard to argue a hotel could not divert that money they are giving up to other marketing efforts.
That said, when the deal is sell to Expedia and give 18-25% (or more for some independent hotels without negotiating savvy) vs. let the room sit empty (meaning no money at all for tonight's stay), there's a temptation to make a deal with the devil.
"But the conversation surrounding hotels and Expedia always comes back to commissions. The scuttlebutt is that InterContinental Hotels Group and Expedia are going toe to toe in its current contract negotiations—and to no one’s surprise, the commission structure is the biggest obstacle. It will be interesting to see how it plays out. Given Khosrowshahi’s comments, it’s hard to imagine Expedia giving in too much. Whether the commission rate is 15% or 30%—or somewhere in between—is a big difference for someone’s pocketbook. Who will blink?" (InterContinental Hotels Group is best known for Holiday Inn).
The problem here is the guest doesn't realize the hidden cost because it's the same price online to them - or so they think. Hotels could probably sell their rooms for significantly less overall if they didn't have this huge expense to factor into the operations of the hotel.
I would agree for the major chains. However there are numerous small boutique hotels that consistently have a high enough occupancy rate that they are easily able to tell the OLB's to go scratch. Some pay a low negotiated commission, others just don't bother with the big online agencies. They would rather lose $200K a year in unrecognized profit than pay $400K a year in commissions.
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