The Hidden Cost of Booking Sites

By February 27, 2015Tips, Tricks & Advise

Did you know that every time you make a booking for a hostel or a hotel through a booking site, you are increasing the cost of your room?

That might sound a bit absurd to you, but let me explain…

Almost every single booking site charges commission to the hotel or hostel when you make a reservation.

Now you’re probably thinking, well that’s pretty obvious isn’t it? The booking sites have to make money, how else are they supposed to do it? Partially true. The commission model isn’t necessarily the only way that booking sites can make money, but obviously it works for them.

But does it work for you? Obviously there is massive convenience in using booking sites to search, being able to compare different accommodation, including different types of accommodation, quickly and easily.

The problem is that most booking sites charge anywhere between 12-25% commission on every single night booked.

This commission is kept by the booking site and the hotel or hostel never sees it. You might think that this is purely the hotel’s problem, it’s not an extra charge for you on top of the room price right?

But, think about it. Say a hostel or hotel receives 50% of their bookings through online booking sites, at a rate of 12% commission. That means that 6% of their total room revenue is lost. This tends to translate directly into higher costs for the customer, since the accommodation has to raise their prices to account for this loss in revenue. Say that, instead, the hostel received all of its bookings directly. The hostel would then be able to either lower their prices by 6% and still receive the same revenue for the same number of bookings. Better for you, the customer, at no harm to the hostel. Alternatively, the hostel could keep the prices the same, but use that extra 6% to improve the property, either improving facilities, or providing more value to guests (such as free wifi or free breakfast).

You can argue that deals on booking sites save you money. Maybe in the short term, but this is still lost revenue for the property and has to be accounted for in the long run by raising prices at other periods. Nothing comes for free.

The worst part is, a lot of booking sites have rate parity clauses in their contracts. Rate parity means that the booking site has to be given the same rate as other booking sites and even the accommodation’s own site. This means that we can’t even encourage you to book directly on our website by offering you a better rate.

Some booking sites even use the commission we pay them to directly compete with us, by paying for adwords related to our property, making them pop up higher in searches than us. They have a lot more clout than we do when it comes to paying for things like this, making it difficult for small accommodation providers to compete.

So why do we list on booking sites?

Unfortunately at the present time it is a necessary evil. I’m pretty sure that if you asked any hotel or hostel manager in the world, they would say that if they could take their properties off booking sites and not suffer because of it, they would do it in a heartbeat. Booking site commissions are a huge, huge cost to any accommodation provider. Commissions on reservations seem to be steadily increasing as well. Previously most places charged 10% commission, which then climbed to 12% and the feeling is that soon this will go up to 15% (some places already pay this). Other booking sites are already over this amount.

The problem is because there are so many places listed on booking sites, it’s hard to survive if you’re not listed on there.

But it’s so easy to book on booking sites, why should we do it differently just to help out hostels and hotels?

What we would suggest is this; use a booking site to compare prices and reviews, then head to the booking site of the individual property, all you need to do is give it a quick google, and book on their website, where they pay no commission. All it adds is one small step for you, but makes a big difference to the hotel or hostel.

An even better idea is this:

Call the hostel.

Most sensible hostels, if you call them up and say you’re thinking about booking online, but would book directly over the phone if offered a discount, would give you a discount. Say a hostel normally would pay 12% commission, most would happily give a discount in the region of 5-10% as this is still saving them money and you get a discount too. Both customer and accommodation win, so why wouldn’t you do this?

This post makes us sound like we have an axe to grind, that’s not the case. We generally have a very good relationship with the booking sites, however we find that a lot of our guests truly aren’t aware of the facts regarding online booking sites. If you have any comments, or disagree with us, feel free to comment below!

The key lesson? Book directly and save! Either directly, or indirectly, the more you book directly, the more money you will save.

To book directly with us either head to our booking page, email us at manager@emperorscrown.com.au or call us on +61 89 227 1400.

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