The holiday intermediary business

As the summer moves towards the end, millions of Europeans are getting ready to return to their new homes in Asia and the Middle East. It is a migration happening year after year. Similarly tens of millions of Chinese look forward to the Chinese New Year celebration to make their way back to the mainland. While this type of “tourism” leaves a smaller footprint on the economy —as most individuals would stay with their families — there is another type of tourism that, thanks to technology, has seen new patterns of behaviour in recent years.
According to a survey commissioned by IHG (Intercontinental Hotels Group), as many as 72 per cent of the interviewed believe that booking a hotel through an online intermediary, is cheaper than booking directly with the hotel. But not all that glitters is gold. These types of price comparison websites are experiencing massive competition. Nowadays it is extremely easy for any web developer to connect to some APIs and produce a hotel price comparison website. Hence, differentiation is key.
The sales strategy of hotel price comparison and booking has become aggressive, and often hyped to build up a sense of urgency in the consumer. In the same survey, IHG has highlighted that 27 per cent of the surveyed picked either the wrong date or the wrong property because they felt pressured. Amazingly, 43 per cent, nearly 1 in 2, admitted to have made some sort of mistake in booking — wrong room type for example — because they felt rushed.
As a consumer myself I recall that before my first visit to Taiwan, I booked on a price comparison website that kept flashing a red warning: “Only one room left”. With hindsight, it turned out that the hotel was quite empty and worse, the room I booked had no windows. The picture on the booking website was misleading and I rushed through because I did not want to miss the opportunity of booking the last room left at that — not surprisingly — low price.
One of the world’s most popular booking websites also states — in the usual red colour — how many other visitors are browsing the same property at that precise moment. Any Project Manager would have learned that as humans, we think in terms of Importance and Urgency. Seeing that the only one room left, in the fancy hotel we are considering to book, is being seen by 25 other potential buyer, would pressure most of us to act fast. What we do not realise is that the number shown, does not really represent those who are literally viewing the same identical room at the same exact moment, but pretty much anyone who has been shown that very hotel in any search list.
So, for example, I have opened on my screen the Deluxe Room in Hotel X in City Y and I am one step away from booking. Meanwhile someone else — somewhere else — has just begun a casual search for any hotels in City Y, and while they are browsing the long list provided by the comparison website, they happen to scroll through Hotel X. That would trigger the “red warning” to me, so that I feel pressured to complete the transaction as soon as possible.
In addition, price comparison websites tend to deviate attention by splitting the costs and play around with currencies. For example, local taxes are never included in the price displayed, and when they are, usually are stated in percentage or worse, in local currency without conversion. Often breakfast is sold separately and displayed in a tiny line next to the huge price in green. Lastly, cancellation policy is commonly unfavourable to the consumer.
I generally receive emails claiming that I qualify for a 50 per cent discount. Upon baiting on the link sent to my email, I realise that the discount is applicable to a very limited selection of hotels and almost all the times for tiny, non-refundable rooms.
Booking directly is often cheaper by an average of 25 per cent, which is the operational cost (read commission) of the booking intermediary. Hence, whenever the booking website is offering a 25 per cent discount, we know for a fact that such price is the same price that we would get by booking directly with the hotel.
Whenever an additional cost is factored in, the obvious conclusion is that price would be more favourable when we buy from the party with less costs. In retail, for example, the exact opposite of the travel industry occurs. It is well known that countries where online shopping has become a habit, retail sales of any goods has decreased. It is the famous case of sneakers shops. Retailers complain that buyers would go the physical shop — maybe in a mall — to try on a specific pair of shoes. Then leave the shop and buy the same exact item online, saving significantly compared to the retail price. Physical stores need to factor in additional costs, such as rent and salaries of salespeople, while online shopping can do without.
Back to the hotel comparison websites, it is important to highlight that they offer a great “first touch” in the city that we do not know yet, allowing us to browse through the properties available. But in order to save some money, sometimes it is worth giving a try connecting directly with the hotel.