Priceline’s Booking.com, the major competitor to the Expedia group’s behemoth of online travel booking sites, will start charging hotels commission on resort fees.
They believe the shift away from selling consumers a total rate, and moving money into the resort or destination fee bucket, cheats them of revenue. And of course it has reduced commissions that hotels pay.
It also cheats consumers, and Booking.com (as well as Expedia and other sites) have been fully complicit by not displaying total price to consumers from the outset. Booking.com mostly sells reservations taking a commission on realized revenue after checkout, while Expedia sells more prepaid bookings. For Expedia to match they’d need to calculate the resort fee with each reservation at time of booking. And if they’re doing that there’s no technological excuse not to display it to consumers as part of the price being compared.
Expedia Dancers Don’t Help Customers Understand the Full Cost of Their Trip. Flickr: Juggernautco
Hotels like to have their rates displayed without these charges because it makes them look cheaper to consumers. If they unilaterally started showing full room costs while competitors did not they’d be at a disadvantage.
Similarly if hotel booking sites start showing full costs to consumers, it makes them look more expensive for the same hotel than competitor sites that do not show full price. So there’s a huge incentive for online travel agency websites to hide full prices from their customers.
Of course another model would be to deliver the best information possible to customers, in order to help them make the best travel decisions, and earn loyalty for future bookings. The idea would be to reduce the myriad websites consumers use shopping travel and simplifying the reservations process. That’s ultimately the model that Google is pursuing, and that online travel agency sites are fighting them on.
This will be interesting to see play out.
- Will other booking sites match?
- Will hotel chains push back, as part of their commission negotiations (threatening to pull inventory)?
If the Booking.com effort succeeds, will Expedia follow suit — or try to compensate with higher commissions on base rate? If they too move to tax resort fees, that reduces some of the incentive for hotels to use these hidden charges.
Right now a hotel benefits both with deceptive selling to consumers and commission savings. This would reduce or eliminate the commission savings.
At the same time Las Vegas has found that fraudulent resort fees hurt their business because they’re price floors when hotels need to discount in the face of declining occupancy — in other words, simply because demand curves slope downward — and they’re charges that lead to guest resentment.
There are two possible paths forward if the change for online travel agencies to tax resort fees sticks.
- It makes resort fees less common, and online agencies can benefit by helping consumers understand the differences between hotels for their total trip cost
- Online agencies make even more from resort fees, creating even more of an incentive for the online agencies to support the practice and obfuscate these charges from their customers.
The hope of course is that one of the online agency sites sees the benefit of actually helping consumers understand trip costs, by displaying all-in prices, and pursuing share shift through better service.
It always amazes me, by the way, just how poor online travel agency websites are at helping consumers pick hotels when their entire business is predicated on convincing customers to use them to book their hotels (and travel packages). It’s time for some disruption.