One billion dollars, made up of 1,000,000,000 one dollar bills laid end-to-end, would measure 96,900 miles. Booking.com and Expedia spend over 10 times that much each year on online advertising (that's a money trail that would wind around the planet about 40 times.) And who is paying for this spending? You are! That is to say, the hotel or villa guest who books via any one of the myriad online travel agencies, review sites or meta-search databases out there, from Expedia to Booking.com, from Trivago to Tripadvisor, from Agoda to Priceline...
Those sites earn hefty commissions off both independent and chain hotels or vacation rentals - enough to pay for the advertising above and still make a funny-bone-tingling profit. As these sites become go-to travel portals for both independent holidaymakers and business travellers, the very use of these sites by the end 'user - or hotel guest - leads to an increase in the cost of your vacation of around 20%.
See below for how to escape this trap, vacation for less and enjoy a cheap holiday by avoiding the middlemen in their expensive suits...
How Hotel & Villa Guests Unwittingly Increase the Cost of their Holidays
To appreciate the enormity of the sums of money being raked off online travel transactions by internet giants, a quick look at the figures is an eye-opener:
- In 2016, Priceline (the group behind booking.com, Agoda, Kayak etc.) let us all into the secret that it had forked out 3.5 billion dollars on online advertising.
- In 2017, Expedia spent a record-breaking $5.3 billion on internet marketing.
- This year, 2018, the travel behemoth Booking Holdings managed to spend a sum exceeding $1 billion on Google advertisements in a single three month period.
For those wondering, OTA stands for "Online Travel Agent" and describes sites such as Booking.com, Expedia, and more.
Where do OTAs like Booking.com, Hotels.com or Expedia spend your money?
The marketing spend of these companies is largely paid to run google ad campaigns, on purchasing search engine keywords, and on meta-search referrals - the latter being sites such as Tripadvisor or Trivago - ostensibly independent review sites but in fact simply additional channels owned by travel industry giants to push more bookings through their commission-based listings. Throwing billions of dollars at the search engines allows the large travel OTAs to hijack the guest booking process, inserting themselves between the guest and the hotel as a middleman.
Questionable Booking Conversion Tactics
The large travel portals frequently maximize their revenues by using tactics to more or less bully the browser into purchasing through them. Who has not come across colorful banner texts flashing their messages into the visitor's mind:
"Hurry! Only 1 room left at this price"
"75 other people are looking at this room"
"3 people booked this room just now"
"Congratulations! You've just secured the best rate."
"FOMO" (Fear of Missing Out), and creating urgency, is what this tactic is all about, supported by weasel words and often unsupported claims. Don't be misled by these powerful enticements: stay calm, do your research, and bag the best price - from the hotel itself!
"Rate Parity" What is it and How Do I Get a Better Hotel Room Price?
Forcing hotel room suppliers to grant these OTA portals "price parity" is another tactic the travel giants use. They will ensure that the hotel offers them a nightly rate that is equal to or lower than any rate the hotel offers publicly elsewhere. In theory, this means that if you see a room on a booking site for US$100, then the hotel must also sell the room at US$100 or more on its own website. However, the savvy guest, knowing that the hotel in question will lose a large commission on the booking to the portal, will request a better rate, or a room upgrade, or another freebie from the hotel for booking directly, perhaps by telephone or email. Remember, some hotels only list their cheapest rooms on the OTAs, keeping their better rooms for guests who book direct, whilst others respect price parity but include free Wi-Fi, complimentary meals or drinks, and other advantages to guests who book with them directly.
Such controlling clauses have been deemed anti-competitive in several countries, and several European countries have already made the practice illegal. As examples, in France, Austria, Italy, and Belgium all OTA rate parity clauses are completely prohibited. Both Belgium and Switzerland are following suit, but until rate parity is a thing of the past, your best bet is always to book directly with the property at which you plan to stay.
How does the Savvy Traveller use OTAs and Travel Apps?
Online travel agencies, travel meta-search or comparison sites, and review-driven websites can all be helpful tools when planning and booking a holiday. By all means use them, but never forget that the service they provide "for free" is what generates the billions of dollars they earn annually, primarily from commissions taken from your vacation spend.
Yes, their apps may be useful and conveniently accessed from your mobile, but again bear in mind that when you download and use a free app, you become the commodity. You will probably use the app often and make travel reservations through it, and thereby cement the app's owner as the middleman who gets paid each time you book a flight, stay in a hotel, or simply click on an in-app ad.
So Stay Smart, and Book Direct.