Online booking agents behave like royalty

Saturday, April 16, 2022 10:00 a.m.

Hotels are often locked into rate parity agreements with major online booking sites. These deals, in the end, often prove unprofitable as hotel rooms sit idle because they have not been advertised at lower prices. (Photo by Archive Photos/Getty Images)

As the nation begins to plan for summer vacation, after two torturous pandemic-fueled years, a collective sigh of relief should be heard from Somerset to Stoke. But there is little respite when a failing system creates a false competitive market.

For years, the network titans of the travel industry have been able to control the price of vacations with artificial competition – pitting customers against each other – making it seem like there’s either high demand , or real bargains to be had.

Some of the online booking agents can be accused of behaving more like monopolies; setting an ever-increasing cost that leaves less change in the pockets of hoteliers and vacationers. There are no winners in this system.

These monopolies focus on increasing their share when booking a stay rather than user experience and getting the best service and price for their customers.

The artificial competition between booking sites gives customers the false impression that they are saving money on their vacation. Instead, at the same time, hotels are receiving increasing commissions from the big booking platforms that eat away at their bottom line, driving price hikes across the board, for consumers and suppliers alike.

The online travel agencies of big, established brands are able to reinforce this dominance by spending billions a year bidding against each other on search engines – and it’s all perfectly legal.

With skyrocketing costs, they charge hotels commission rates that average 15-25% on each booking, creating a price disparity in which customers and suppliers lose out when booking a hotel room. In real terms, that’s less holiday cocktails at sunset and less paella in the sun. In other words, less of what we love about vacations.

Additionally, hotels are often locked into rate parity agreements with major online booking sites, meaning they cannot advertise a lower rate to any guest.

This creates a problem: rooms were sleeping when they could have been filled by customers to support the hotel’s activity. With 30-40% of revenue coming from additional sales after guests have stayed, such as food and beverage and parking, hotels cannot afford to have unoccupied spaces.

But look out there and Big Tech just might turn the tide in this lose-lose situation. By digitally connecting travel providers to public booking consumers, removing the costly middleman, the end could be near for price setters.

Playing a game of chess with the giants won’t be easy, as their next 6 moves will be planned down to the smallest detail. But at some point, customers will get tired of being pawns in their game, and you can bet your bottom dollar the travel titans will be overthrown.

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