Recently, Jason Clampet of SKIFT.com posted an interesting article about the state of war between hotels and Online Travel Agencies. Here at Bidroom.com, we believe that “the war” can be ended sooner than later. It is up to the hoteliers. Continue reading to see our responses to the points posed in the above mentioned article.
As a part of the article, the author presents the common asks of the hotels. One of them is to stop uncompetitive practices:
“The most effective action to create more price competition would be a ban on anti-competitive most-favoured nation and rate/condition parity clauses across Europe. This simple move would free all market participants to compete on price and quality, not simply through one-sided imposition of restrictive contract terms.”
This is a great point made by the hoteliers. The things are slowly going in the right direction, but until the parity clauses are gone, Bidroom makes for a great alternative for hotel managers. Thanks to the private environment that Bidroom offers, hotels don’t have to worry about breaking parity clauses, and are enabled to offer competitive prices.
The hoteliers would also like the OTAs to end unfair and misleading commercial practices:
“OTAs are currently engaging in numerous practices such as advertising false discounts, search results which are distorted by commercial factors rather than the best deal for the customer, and hidden commission arrangements. Customers are not aware for example that a service that appears free in fact carries a hidden commission charge of somewhere between 15 and 30 per cent. We believe that it is appropriate to demand transparency from OTAs, asking them to explain clearly to the customers on their websites how their businesses really work.”
Clampet further explains their point:
“OTA revenues come from the commissions hotels are charged for the bookings they intermediate. Whilst these used to be around 10 per cent, commission rates have increased dramatically over the last ten years.
Commissions charged by OTAs are typically 15-30 per cent of the value of the stay, although there is anecdotal evidence that they are sometimes even higher than this. In the UK commissions are generally paid on the VAT inclusive rate so the actual commission costs to hotels are closer to 18-36 per cent. Booking.com further supplements these commissions by asking hotels to pay for preferential placing – typically a further 3 per cent.
OTAs spend a large proportion of the commissions that they collect on metasearch where they bid against the hotels that pay them the commission.”
We are really displeased with the current state of things, and that’s why we started Bidroom.com. It’s high time for OTAs to stop treating hotels as their prisoners. Instead of high and variable commission rates, Bidroom takes fixed 2% commission, and asks the hotels to offer their guests at least 5% discount off their offer at other booking platforms. This way, both hotels and guests can save significant amounts of money, especially long term. There are no hidden costs, as – even though the bookings take place in a private environment – transparency is one of the keys to success for Bidroom.
Another point that the article makes against OTAs, is that they are taking over the accommodation search results:
“Rapid growth and consolidation has allowed OTAs to develop considerable influence over all online sales through their very large marketing budgets. The Priceline Group (booking.com) is reported to be the biggest spender on Google AdWords, with a spend of nearly $1.8 billion in 2014. By dominating in paid search, OTAs have increasingly become a ‘toll booth’ on internet sales of accommodation.”
We call it “brand hijacking”. This is another thing that Bidroom aims to take down. Because they are presented in a private environment, Bidroom’s offers aren’t visible in Google search, and thus, doesn’t interfere with hotels on-line branding and marketing.
Clampet also notices the ways OTAs are finding to make hotels pay higher commission rates:
“Hotels are told the more commission they pay, the higher they will appear in the sort results.”
This is not the case with Bidroom, as every hotel pays the same commission rate, which is 2%. At Bidroom.com, by default, the cheaper the hotel room is, the higher it shows on the list. Additionally, the user can sort them in multiple ways, like by the percentage of discount, star rating, TripAdvisor rating or the distance from the city center. So again, Bidroom proves to be a righteous alternative to the major OTAs.
But OTAs aren’t unfair only to the hotels, but also to their users:
“Lastly, we have discovered that OTAs frequently tell customers that they are receiving a discount when it is not actually the case. One method for doing this is to compare the cost of the requested dates with the cost of dates across a 14/30 day period on either side of the search and show a ‘discount’ calculated against very highest price available in that range. Therefore, if you request the cost of a room on a Tuesday, you could be shown a ‘discounted’ price which is simply the difference between the actual cost and what that room would cost on the most expensive day that month. This is not a discount in any meaningful sense.”
Again, that’s where Bidroom proves to be better than the major OTAs. The minimum of 5% discount is always real, as the hotels, when signing up to Bidroom, set their discount rates to prices offered via other booking platforms. This way, the system automatically reduces the price.
The OTA market is pretty much a duopoly, and it hasn’t gone unnoticed in the article. The users have a really limited choice, even though it may not seem like that at first glance.
“Consumers may believe there are a large number of OTAs in existence but in fact many belong to two powerful players, Expedia and The Priceline Group. In turn, these large companies also own metasearch sites such as Trivago and Kayak. Through organic growth and acquisitions, these companies have become Wall Street giants. Priceline Group, the world’s largest OTA group has a market capitalisation of nearly $70 billion – greater than the four largest hotel companies combined.”
In Bidroom.com lay all the hopes of the hoteliers. The platform aims to disrupt, and change the OTA market once and for all. The real alternative to Expedia and The Priceline Group has arrived. With revolutionary low commission rate, Bidroom is already the fastest growing OTA. Now it’s time for the hoteliers to take advantage of that, and stand up to the unruly giants of the market.
Here at Bidroom, we care about our industry. That’s why we offer our services in hopes to end “the war”.