Booking.com says it isn’t harming hotel owners by putting canceled rooms up for resale
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.
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.
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.
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.
Sean O’Neill is Editor-in-Chief of Tnooz.
Before joining us, Sean was the future of travel columnist at BBC Travel, senior editor of BudgetTravel.com, and an associate editor at Kiplinger’s. He now lives in New Jersey, after having worked in London for four years. He's on Twitter and is excited for #Rio2016.