Booking.com has no reservations about its new re-sale practice for canceled rooms.
Since the start of this year, Booking.com has implemented a function, market by market, that changes what happens when a customer cancels a hotel reservation. Now the online travel agency (OTA) automatically takes the canceled room and returns it to the pool of inventory on its site.
The billion-dollar, Priceline-owned, Amsterdam-based OTA considers this change to be a service, not a power grab. Many smaller properties do not have the capacity (or even the interest) to access Booking.com’s extranet daily. So they were not immediately responding to room cancelations.
In some cases, the delays in response led to rooms going unfilled. So the Booking.com change can help reap gains that would have otherwise been lost.
Yet some hotel managers don’t see the company’s grabbing of canceled rooms for re-sale as a service.
Canceling machine
Some hoteliers dislike losing the opportunity to respond to a cancelation, which could be interpreted as a last-minute market signal that the pricing on the room isn’t right.
A cancelation might prompt a hotelier to rethink its rate for that particular night, given the short notice and local market conditions.
Perhaps a rate of, say, 150 euro a night that seemed appropriate when uploaded into the Booking.com system two months earlier doesn’t look as appropriate with only a few days left until the date of vacancy.
The hotel may instead be able to hike its rate at the last minute through its own website, e-mail marketing lists, or social media channels. In such cases, it could benefit doubly: By re-selling the room directly through its own channels, instead of Booking.com, it could skip the commission and also net a larger total rate.
Alternatively, a room cancelation might mean a rate is now too high, given market conditions. One response might be to re-package the room in a rate structure outside of Booking.com’s restrictions, such as by tailoring a package offer for the room that includes another perk, such as a free breakfast, and selling the package through the hotel’s own website.
A package price is unlikely to cause Booking.com to retaliate by threatening to have the hotel’s overall listing demoted in the search results.
There’s one last reason why a hotel owner might want to take control over the re-sell of a canceled room.
Hoteliers might feel a greater personal incentive to put heads in beds at the last minute than Booking.com does, because the OTA behemoth faces no penalty if it fails to re-sell the room on its own. When keeping occupancy levels high is an important metric for a hotel manager, he or she has a deeper interest in taking control of the sale of that canceled room.
Automatic for the people
Booking.com tells Tnooz that any hotelier who doesn’t appreciate this functionality in the reservation system can have it turned off.
The distributor says it has proactively informed its partners about this change.
But it does seem that some hotel owners have missed any step-by-step instructions on how to turn the functionality on and off, as warranted, and what their advantages and disadvantages might be.
Wrestling over guest data
Hotel trade publications, such as Hospitalitynet, have in recent weeks claimed that Booking.com is eliminating transmission of customer e-mail addresses to hoteliers.
The OTA denies this, telling Tnooz that e-mail addresses from guest reservations can still be “easily retrieved in the extranet.”
Yet Georges Panayotis, a widely followed industry commentator who runs the Paris-based hospitality consulting firm MKG Group, points out that Booking.com, like all the major OTAs, have been making changes that “are not in favor of the hotelier.”
In an interview with Tnooz, Panayotis warned that, for any hotelier that relies up to 50%, or even more, of its occupancy through the Booking.com channel, “it is very hard to be in a bargaining position.”
“This is why we call for a reaction from the hoteliers, to manage more carefully their reservation sources and to be more careful when concentrating their distribution on a limited number of channels.”
The big OTAs appear to be taking more and more power over inventory and customer data from hotel owners. Recently in Germany HRS hiked commission rates and demanded “last room availability” and “best available rate.”
The company would point out that those commission rates are used to attract customers, via paid search, SEO, display advertising, affiliate networks, and print/billboard/broadcast advertising.
Yet despite grumbling, the OTAs continue to add to their inventory, as hotels are tempted by their capacity to fill more rooms and generate more revenue, at less cost, that a small hotel, or hotel chain, could on its own or through many wholesalers and consolidators, who tend to charge higher levels of compensation.
Commission jujitsu
Hotels take a risk when they heavily rely on the OTA’s marketing savvy and inventory to fill rooms, rather than diversify through a portfolio of partnerships and marketing efforts.
Booking.com’s typical 15% base rate of commission has for years been the cheapest rate among comparably-sized OTAs using the agent model in Europe, such as Expedia, Hotels.com, (Priceline-owned) Agoda, HRS, and Trivago.
Yet hoteliers have noticed lately that if they want to gain prominence in the OTA’s listings, they have to become ‘preferred’ hotels and pay 18%. Booking.com enables properties to buy preferred status on night-by-night.
If used often, the effective commission rate becomes higher than the up-front rate charged by Expedia Inc, which dictates OTAs commission levels and, in general, doesn’t allow the option of alternating commission rates for different service levels.
Reputation management
Some hotel relationships with online travel agencies are so thoroughly dysfunctional that no amount of analysis will figure out precisely where and when everything went wrong. For years, Booking.com has prided itself on avoiding that type of relationship with its hotel partners.
But there’s trouble in the family. The company has lately been adjusting its practices in ways that have raised concerns with some hotel owners. The booking giant may need to bacon-wrap its messaging if it wants to retain its reputation as the lesser evil among global distribution platforms.
In other words, if it doesn’t watch out, Booking.com risks becoming the OTA That Pushed Too Hard.
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About Sean O'Neill
I think that is a good move by booking.com, often rooms are hot commodity especially during peak holiday period. Often rooms are being cancelled due to changes in plans that should not rob others from getting the sought after rooms IMHO.
Regards
Thanks for your comment, Jason!
The replenishment feature is actually very Hotel friendly.
If the room has been cancelled then it should be available and will then be added back to the site for re-sale which is surely a good thing?. The hotel can then alter the rates if need be or even close the room off it it has become full in the intrim period.
The automated tool just basically does the job of a hotelier leaving then more time to do other work.
Like any online system, changes have to constantly be made to keep up with changing trends and more demanding consumers.
Thanks, Russell!
Quite simply, its not booking.ciom’s call, its the hotelier’s. This is totally a commercial stunt, they hate being robbed of commissions by high commission tariff hotels.
Every hotel i have spoken to thinks this is a disgraceful practice.
Robert,
Much obliged to you for chiming in. Given your authoritative experience with helping developing cutting edge marketing and ecommerce solutions, your opinion has great weight with me.
Best,
Sean
Quite simply hotels pay for a service when they sign up to an OTA and its the OTA’s job to sell rooms in an effective manor. Booking.com is a world leader and this is be because of the new and innovative ways it looks to sell hotel stock.
Hotels may not always be acceptant to change but above everything figures speak for themselves. If a hotel manages a good ADR, a low cancellation rate and steady annual room sales then everyone is happy.
All large OTA’s HAVE to listen to hotels views as a very strong partnership must be formed in order to yield maximum results. If this is graded “disgraceful” as you put it, then comprise or adjustments would in time, be made.
Best wishes.
Hi Russell,
Yes, your comment reminds me of an interview Glenn Fogel of Priceline did earlier this year while visiting Asia when he said exactly the same thing.
http://www.tnooz.com/2012/06/19/news/priceline-why-the-online-agency-model-still-works-for-us-especially-in-asia-pacific/
Best,
Sean
Great minds think a like lol.
All your articles are interesting reads so keep up the good work,
All the best,
Russ
Dear Sean!
Could you, please, give the link to the authorised source, who provided this information:
Booking.com tells Tnooz that any hotelier who doesn’t appreciate this functionality in the reservation system can have it turned off.
The distributor says it has proactively informed its partners about this change.
We are not at all happy with the option & would like to turn it off, but our account managers from Booking.com (Moscow, Russia) say we can’t choose & there’s no possibility to switch it off.
Thank you in advance!
Sincerely,
Lilya
Dear Lilya,
I spoke with Anoeska vanLeeuwen, Director Corporate Communications for the company.
Perhaps there’s some miscommunication within Booking.com.
I would ask that you go higher up in the company, above the account managers, to find out how to turn it off. Please keep Tnooz posted on what happens.
Kind regards,
Sean
Thank you so much!
Will keep you updated in case it doesn’t help.
Regards,
Lilya
Dear Lilya,
The option can be turn off but manage by Booking.com instead of via extranet itself. I informed our account managers from Booking.com (Penang, Malaysia) and they had reply and confirm that the option had switch it off as per requested.
Hope this information help.
Thanks, Miyco!
When I worked for a major O.T.A., I was asked to contract Group Minimum 1. That’s to say, I was sent out to convince hoteliers that a group could consist of just 1 pax. Internally, we all knew that it was a complete sham of a proposal, purely created to do away with F.I.T. rates, so we didn’t have high hopes. Remarkably, it worked around 50% of the time.
Since then, I’ve watched hotels get shafted with all sorts of nonsense conditions. Rate parity, of course, is one of them. I’d say that Booking.com’s latest demand takes the biscuit. It doesn’t even make sense in theory. What’s next I wonder?
Dorian, thanks for sharing your views! Fascinating about the group minimum.
Ok, this all has led Hospitalty On to initate a petition for hoteliers against OTA practices. War is on?
You can find it here: http://hospitality-on.com/?page=evenement-petition
Thanks, Olery!
Good for you guys! At last!
For Hoteliers who can’t manage their Extranet or Bookings as efficiently as they would like, the automatic replenishment of cancelled reservations is a way for the Hotel to maximise their revenue. If the rate for the cancelled date is amended and the date of cancellation is very close, the Hotel has the opportunity to adjust the rate at any time to fit the current market, the rate would be loaded back at the updated price – not as it was when booked. On top of that, if Hotels are unable to judge the market at any given time and have a very short term pricing strategy, they have the option to adjust their polocies so guests are commited to that booking for a longer period of time.
Thanks for your comment, Kyle
Makes perfect sense Kyle, at last some-one who understands the concept!
Look at suppliers such as Skoosh.com that never really scratched the surface in regards to TTV across the online hotel booking market. So maybe the reason other OTA’s are more successful is because they try new and imaginative ways to help hotels sell their bedroom stock?
All these previous negative comments but people are forgetting one thing – Hotels have the choice to work with who they want!!!
Just like we as shppers have the choice of what supermarket we go to. I would always go to a supermarket that has its shelves full and amazing deals on, same with OTA’s. A guest will only book online if the hotel has availability, if it doesn’t then the guest is less likely to return to that said supplier.
Hence one of the reasons I am guessing for the auto replenishment. If the last tin of bake beans is taken from a shops shelf the employee must replace it in order to get another sale and retain that customer.
Successful OTA’s will only do things that help the hotel sell stock fast and in great quantities whilst sustaining a healthy ADR.
Change is never normally accepted well at first but when the Y.O.Y figures show big growth then who’s the bad guy!?
Or, Kyle, or the sensible hotelier could put the cancelled room back into its own system and give all its distributors the chance to resell it.
It’s patently obvious that Booking.com is simply trying to keep the rooms for itself and stop its competitors getting access to them.
I’m amazed by the number of people here who know better than hoteliers what is good to them. It is very easy to forget that the owner of the room is the hotel itself, not the OTAs. However the points mentionned on the clients side are very true: many hoteliers do not sell efficiently on their own website while OTAs do..
When a hotel is full, it also happens very often that the property is overbooked. If a cancellation occurs, the decision of taking the risk of maintaining the overbooking situation must be taken by the hotelier himself. In such a situation, why would the hotel have to sell it through OTAs rather than selling it direct online of through voice or… ?
one thing that was not mentionned is the situation that hotels are used to with Booking: Booking sends an email on the Friday saying “this new feature will be available as from Monday. Contact your account to desactivate it and desactivation will take one to two weeks”. Does anyone think this is a fair practice? Should they not email to hotels with at least 2 weeks notice?
Guilain,
Thanks for providing such a clear example of your argument. Great points!
If a hotelier is smart enough and yielding their business properly, they would be keeping an eye on their rates and inventory on a regular basis.
Receiving a cancellation shouldn’t suddenly alert them to a massive change in market or shock them in any way. Hoteliers should be forecasting the local market conditions properly in the first place.
Successful R+Y Managers predetermine rates and adjust when required, not when a random cancellation comes through.
Just because a cancellation comes through at some point, doesn’t mean they couldn’t have adjusted their rates prior to this, and after this for that matter.
Also, this article suggests that cancellations could be from rates being too high when in fact there are many other possible factors. Perhaps the potential guest noticed the deposit/cancellation policy was less restrictive at the property across the road.
Even if the hotelier has the “opportunity to respond” as you put it and subsequently put that cancelled room back onto their own website, who can be sure that another potential guest is going to purposefully seek out that website, most probably not knowing it even exists, and then deciding to book with them. As opposed to one of the world’s largest leading online accommodation websites and is popular and readily available, whereas the hotel website would have less traffic.
Its better to sell a room than not at all.
Having said this actually, when a room is a cancelled there is generally notification of some shape or form sent through to the property just as it would have done when originally booked. Why can’t they adjust their rate at this point?
Cheers
Leigh.
Much obliged for your savvy analysis.
Great read, very insightful indeed. Would just like to point out an area of concern for smaller hotels with limited rooms in each category when dealing with booking.com – As compared with other OTA’s, we face significantly higher cancellations, although a healthy numbers of bookings received, which much be stated. This can be attributed to their lenient booking policies, which allows for room reservation without confirmed payment. Even in the case of ‘non-refundable bookings’, since the customer’s credit card is not verified, it is up to the hotel to verify and update on the extranet accordingly. This is a cause for concern as many customers make non refundable bookings with invalid credit cards, to enjoy the additional discount.
Excellent point — it’s not truly fair to compare apples to bananas — the big OTAs and individual hotel owners face different cost structures.
Thanks for raising this point!
I resent paying 15% commission to all these online discount sites – compared to 8% to a High Street, fully manned, fully brochure-stocked, Business Rates paying Travel Agent.
Frankly, these online discount sites should be charging maybe 2.5% for their comparable services and I am amazed the Hotel Chains do not start a commission rebellion.
It seems the Hotel Industry now uses these discount sites for their front line selling.
Much to my shock and horror, so does VisitBritain!!
http://www.visitbritain.com/en/Accommodation/
If a hotel or a even hotel chain didnt go with large third party online booking agent they would have to spend thousands of pounds in PPC advertising to Google. Paying 15% is a mere drop in the ocean to what they would have to pay to get the same amount of bookings!! You are lucky that you dont need too to do so but a time will come when nearly all bookings are made online and consumers will always use comparsion sites or large online booking agents to book thier room, purely for the choice they get.
Fair enough Russell. It looks that way, but 15% to sit in a “bedroom at the back of the house” running a discount web site is not value for money especially when comparing to the running costs of a High Street Travel Agent who charge 8%.
The internet is supposed to be “cheap”. I do not make 15% nett profit. If all my bookings came through these sites, I would be out of business.
It is time these online Booking Agents reduced their commissions so that everyone would use them.
Also, that VisitBritain uses these discount sites as their main avenue for their part in selling and promoting is pathetic. If they cannot promote British Hotels at non-discount rates …. well, it is a sad day.
Thank you for your point of view though. Appreciate.
Booking.com also has a no cancellation reservation system. Customer pays, for instance for three day stay, and has to cancel for force majeur reason, Booking.com already was paid, but can rent out room a second time around. Where is the justice in such system ?
There is no justice in the system, though Booking.com would say it provides tremendous marketing advantages for hotels and consumers.
Thanks for your comment, Bruno!
Bruno, Booking does not have a model where it buys and resells. Booking.com has a model where it enables customer to book a specific property through its systems.
It is false to say that it has a no cancellation reservation system. It’s only up to the hotel to do this or not. If a hotel has implemented several rate plans of which a non refundable one, it is the sole responsability of the hotel to accept/decline reimbursing its customer who has to cancel for force majeur reason.
Hi Sean, Just wondering if you know how much commission on average is paid out to the affiliate? E.g. if I booked a $100 room, how much would you recon I would get?
Have a site in Dubai & Cape Town which am thinking of adding a hotels section to.
Thanks
Hi Charles,
Commission varies per country but on average it is around 15% globally for the larger sites. So from a $100 room you would pay $15 commission. This is normally your only fee,
Kind regards
Thanks Russell!
Think I’m gonna have to try make my hotels section a lot bigger as only making a pound a day from Google Ads lol!
Thanks Again and keep up the great work!
Hi Sean
Enjoyed reading your article as I have been researching hotel res sites
Hope you have a chance to answer a reasonably simple question
I work for a company which has an online presence, and we currently work with Expedia and so far it’s been working fine – however we are looking at various other options such as Laterooms/Booking.com.
Are you aware of any site which compares the various hotel reservation sites so that we can see which is the best offering.
Any assistance would be very helpful!
Thank you for your time
Regards
Ian
Hi Sean,
Just wondering if you know on average, how many people it takes once you they have clicked on your affiliate link, to actually make a booking?
So far I have had 104 people click my affiliate link and not one booking! GRRR!
Also, had a look but could not find any, do you know any affiliate program like booking.com that offers cache? As booking.com do not.
Cheeers