Global Hotel ExchangeÂ went live the other day and, assuming there are no alterations in strategic direction, the hotel-booking site may be destined to be a resounding success or a quickly forgotten memory.
You can decide for yourself — or maybe Adam Smith will figure it out.
The brainchild of CEO Thomas Magnuson, Global Hotel Exchange promises a revolution in pricing transparency [see TLabs Showcase here] as it cuts out those nasty online travel agency intermediaries and provides free distribution for hotels, which load their room inventory and rates right into an extranet.
No need to pay any commission or provide net rates to Global Hotel Exchange.
Magnuson takes a lot of inspiration for the site from Smith and his free-market economics, which will have a lot to say in determining the fate of this startup.
Will supply and demand work out in Global Hotel Exchange’s favor? Will enough hoteliers decide to offer their inventory on the site and at what rates, and will consumers flock to the site to book their hotel rooms there?
The site launched with more than 5,000 hotels in 45 countries and counts independent hotels among them, as well as representation from properties flagged as Marriott and Wyndham, and the Waldorf Astoria in Manhattan and Trump Miami, for example. That’s about 111 hotels per country — not a large amount.
The site shows a mere four properties in Paris for a July 16 stay and they are all sold out, for example.
And, the rates for hotels on the site can be considerably higher than rates you would find elsewhere online.
Magnuson concedes the rates may not always be competitive at this juncture and he’s signed contracts with CRS providers, and hopes to have the implementation finalized within 90 days to increase the supply.
“If the world works the way it usually does, we may see different pricing behavior emerge,” Magnuson says.
Consider all of the contrarian — supporters might term it ground-breaking — thinking that Magnuson articulates about Global Hotel Exchange:
- The site won’t offer special promotions and won’t tolerate supplier restrictions;
- Hotels can’t buy premium placement in display results;
- The “look and feel” and the features on the site are purposefully “Spartan;” and
- There is an assumption that consumers know where they want to go and how much they want to spend and will welcome such a no-frills and flexible site.
On the flexibility side, consumers pay a $2.99 booking fee and their credit cards get charged for the room rate plus taxes when they arrive at the hotel. Global Hotel Exchange doesn’t charge change or cancellation fees, although the hotels may, subject to their terms and conditions.
When mulling a booking, a chart portrays the low and high room rates per month and what is forecasted over the next six months.
Transparency is the site’s mantra and when you book a room, the top of the page specifies that you will pay a $2.99 booking fee and then it details the room rate, estimated taxes and the total.
“We want to be out front,” Magnuson says. “That is our core principal.”
Hotel owners are free to set their own rates “and sell what they want to sell and when they want to sell it,” Magnuson says.
“Units go back and forth with no market restrictions.”
The site has an amateurish or old-school look to it — a far cry from the slick and attractive Room Key site, with its greater resources, for instance.
“There’s a difference between when you walk into WalMart and Nordstrom’s and the costs associated with that,” Magnuson says.
He adds that most consumers lead busy lives and know where they want to go and how much they want to spend and that’s why the designers of the site focused on what to include and what elements to leave out.
“It’s really a utility for people who know what they want, when they want it and what they want to spend,” he says.
The site currently has no user reviews about the hotels, but they are in the works.
“That is the last variable that is not present,” Magnuson says, referring to the reviews.
It seems that an ample portion of the site’s future is resting on faith — that consumers will show up at a site that is transparent, simple and flexible, and that the “market-based room rates” will make sense to hotel owners.
“It won’t take much time before owners can see that this is a no-lose deal in this type of economic environment,” Magnuson says.
But, will the site have the clout to put heads in beds and will consumers discard their love affair with discounting and low rates?
It looks like a long shot — but a lot of people doubted Adam Smith, too.