Marriott Taking Back Control Of Inventory From Travel Sites
from the go-direct dept
Earlier this year, there were a bunch of stories about how badly the hotel industry had misunderstood the web, and how it was impacting their bottom line. The various big hotel chains were desperately seeking ways to reclaim their lost inventory that was being sold at a discount online. They had assumed that business travelers would still book direct at higher prices – and were shocked to realize that business travelers were smart enough to go online to book cheap rates. So, now, more and more hotels are claiming that you have to go directly to them to get the lowest rate. The latest is Marriott who now guarantees the absolute lowest rate if you book directly through them. I wonder how this will impact all the travel sites. Clearly, the hotels won’t be giving them quite the same discount on rooms any more – and if everyone knows to go directly to hotel sites to book rooms, the general travel sites could take a hit.
Comments on “Marriott Taking Back Control Of Inventory From Travel Sites”
Oh, they'll take a hit alright.
So far Hotels.com’s business plan has been to get substantial discounts from hotels and then slap on an outrageous processing fee as likely a mark-up to what they’re getting. This is a business model? I started to notice that I was getting rooked by the sites about a year ago. So now I browse online and call the hotel directly to see if they can beat hotels.com’s rates or I go to Priceline if I think I can get the same for less.
Bottom line: the easy money for online booking from hotels is gone.
Now Common Practice
Marriott is not the first hotel to implement this practice, many other hotel companies including Intercontintal (which is Holiday Inn‘s parent company) and Fairmont also have this practice.
It is to the advantage to the hotel to offer the lowest rate through their own website as it significantly lowers their distribution costs and/or fees they have to pay to others. For example, for a room typically sold on hotels.com or Expedia for $100, the hotel is actually only receiving $75 in revenue. The hotels, however are forced to give these sites the low rates they demand for resale purposes because they cannot compete with the multimillion dollar marketing campaigns of these sites.
For package sites such as Site59 or Expedia‘s package product, the rates the hotels are giving these sites are even lower. Hotels offer heavily discounted rates to these sites only because they know the true rate will never be displayed.
Thus, clearly any smart hotelier will want to return the room revenue to their own market and turn away from the downward rate spiral these sites have forced upon their market.
Sellling Hotels Still Profitable
Hotels are still profitable, thanks to these kinds of markups. What site wants to live of $1 commissions?