getaroom
7 years ago
 

GetARoom: three question marks over the model but one reason the company will succeed

Getaroom – three reasons the model doesn’t work but one reason the company will
Here in Tnooz node land we have the pundit’s right to cast a critical eye over a business, even if the founders are proven entrepreneurial billionaires.
Robert Diener of Getaroom.com should need no introduction to readers of a blog about the online travel industry.
In 2002 the parts of Hotel Reservation Network/Hotels.com that IAC did not already own were bought and merged with Expedia.
The deal set Diener and his partners up for life and made Expedia the then biggest force in online hotels in the world.
A title – despite the challenges of Booking.com/Priceline, Orbitz and Travelocity – they still hold.
In July 2009 (was there a seven-year non compete?), Diener announced the launch of getaroom.com (a pre-Tnooz Dennis Schaal said this about the announcement).
Given the pedigree it was inevitable they would receive a lot of media attention (m-travel, Hotelmarketing.com).
Recently on PhoCusWright’s Centre Stage, Diener was interviewed by Carol Rheem of PCW giving the blog and tweet pit a chance to discuss and critique the GetARoom model.
The business is a twist on opaque pricing and a reversal of the Priceline and Hotwire models.
A consumer looks up a hotel on the getaroom website where prices are clearly displayed.
Then the consumer calls the GetARoom call centre to purchase the room. GetARoom will sell the customer the room over the phone at a price less than the one displayed on the site but will not tell the consumer what the price is (and therefore what the discount is) until after the customer’s card has been charged.
With Hotwire and Priceline you don’t know the hotel’s identity until after your card has been charged. With GetARoom you know the hotel at the time the card is charged but not the price.
For this to work three things have to happen: consumers have to pick up the phone; consumers have to be prepared to give their credit card even though the final price is not known; and hotels have to be prepared to give opaque cheaper rates based on a phone call as a gate.
Let me take you through each of these and tell you why these three elements will happen at a scale insufficient to make this work:
Consumers have to pick up the phone: consumers have abandoned the phone for simple transactions such as hotel bookings and point to point air. Especially in the US. It is instant gratification, no-talk booking that is and has driven the online revolution. Driving people back to the phone for a straight out hotel booking seems counter to the rest of the online travel revolution.
Consumers have to agree to charges without knowing price: the obvious analysis here is that consumers are going to be reluctant to do anything when price and potentially room type is unknown. Arguing against myself, I could say that credit card hesitation was the largest anti-online travel argument back in the old days and the industry and consumer found a way around that. But in this case it is more than just typical security related consumer CC hesitation. Getaroom is asking consumers to gamble with price. Consumers need significant rewards – beyond the odds rewards – to gamble on price. The less obvious analysis is around credit card charging rules and chargebacks. A chargeback is where a consumer denies a charge levied against their card. The online travel industry has to deal with the challenge of consumers denying charges for transactions without signatures or PIN/code based confirmation.  Mastercard Chargeback reason code number 4808 states that a charge can be challenged if…”the transaction was non–face-to-face and was not authorized.”. (manual here).  I can imagine an easy path for a potential customer successfully securing a chargeback by saying “they did not tell me the price. I did not know what the charge was going to be”.
Hotels have to be prepared to give opaque cheaper rates based on a phone call as a gate: hotels give deep discounts when they can protect the rates for unfettered booking and thus threatening regular rates. Scores of examples of this – package rates, secret hotels, closed user groups like travel clubs or loyalty groups, group rates and more. Critical to the hotels giving the discounts is a comfort level that the discounted rates are sufficiently hidden from general public access to protect the standard rates. Having to make a phone call does not seem to be a sufficient gate or level of protection to encourage a scale number of hotels to offer discounts. This is especially true for chain hotels. Chains are the number one participators in closed groups precisely because they can product their other pricing channels. If I am right here then either GetARoom ends up with only a limited number of hotels offering discounts or they have to provide discounts by cutting their margins. The first (limited number of hotels) is a bad customer experience. The second (cutting margin) risks hotel anger for breaking Best Rate Guarantee requirement and limiting scope for marketing and technology investment.
But – while there are three reasons why I don’t think Getaroom will work – there is one big reason why it will work.
Last time Diener and team tried to facilitate hotel bookings, they built a company and they sold it for billions.

A pundit has the right to cast a critical eye over a business, even if the founders are proven entrepreneurial billionaires.

Robert Diener of Getaroom.com should need no introduction to readers of a blog about the online travel industry.

In 2002, the parts of Hotel Reservation Network/Hotels.com that IAC did not already own were bought and merged with Expedia.

The deal set Diener and his partners up for life and made Expedia the then biggest force in online hotels in the world.

A title – despite the challenges of Booking.com/Priceline, Orbitz and Travelocity – they still hold.

In July 2009 (was there a seven-year non-compete?), Diener announced the launch of Getaroom.com (a pre-Tnooz Dennis Schaal said this about the announcement).

getaroom

Given the pedigree it was inevitable they would receive a lot of media attention.

On PhoCusWright’s Center Stage in Orlando, Diener was interviewed by Carol Rheem of PCW giving the blog and tweetpit a chance to discuss and critique the GetARoom model.

The business is a twist on opaque pricing and a reversal of the Priceline and Hotwire models.

A consumer looks up a hotel on the getaroom website where prices are clearly displayed.

Then the consumer calls the GetARoom call centre to purchase the room. GetARoom will sell the customer the room over the phone at a price less than the one displayed on the site but will not tell the consumer what the price is (and therefore what the discount is) until after the customer’s card has been charged.

With Hotwire and Priceline you don’t know the hotel’s identity until after your card has been charged. With GetARoom you know the hotel at the time the card is charged but not the price.

For this to work three things have to happen: consumers have to pick up the phone; consumers have to be prepared to give their credit card even though the final price is not known; and hotels have to be prepared to give opaque cheaper rates based on a phone call as a gate.

Let me take you through each of these and tell you why these three elements will happen at a scale insufficient to make this work:

  1. Consumers have to pick up the phone: consumers have abandoned the phone for simple transactions such as hotel bookings and point to point air. Especially in the US. It is instant gratification, no-talk booking that is and has driven the online revolution. Driving people back to the phone for a straight out hotel booking seems counter to the rest of the online travel revolution.
  2. Consumers have to agree to charges without knowing price: the obvious analysis here is that consumers are going to be reluctant to do anything when price and potentially room type is unknown. Arguing against myself, I could say that credit card hesitation was the largest anti-online travel argument back in the old days and the industry and consumer found a way around that. But in this case it is more than just typical security related consumer CC hesitation. Getaroom is asking consumers to gamble with price. Consumers need significant rewards – beyond the odds rewards – to gamble on price. The less obvious analysis is around credit card charging rules and chargebacks. A chargeback is where a consumer denies a charge levied against their card. The online travel industry has to deal with the challenge of consumers denying charges for transactions without signatures or PIN/code based confirmation. Mastercard Chargeback reason code number 4808 states that a charge can be challenged if…”the transaction was non–face-to-face and was not authorized.”. (manual here).  I can imagine an easy path for a potential customer successfully securing a chargeback by saying “they did not tell me the price. I did not know what the charge was going to be”.
  3. Hotels have to be prepared to give opaque cheaper rates based on a phone call as a gate: hotels give deep discounts when they can protect the rates for unfettered booking and thus threatening regular rates. Scores of examples of this – package rates, secret hotels, closed user groups like travel clubs or loyalty groups, group rates and more. Critical to the hotels giving the discounts is a comfort level that the discounted rates are sufficiently hidden from general public access to protect the standard rates. Having to make a phone call does not seem to be a sufficient gate or level of protection to encourage a scale number of hotels to offer discounts. This is especially true for chain hotels. Chains are the number one participators in closed groups precisely because they can product their other pricing channels. If I am right here then either GetARoom ends up with only a limited number of hotels offering discounts or they have to provide discounts by cutting their margins. The first (limited number of hotels) is a bad customer experience. The second (cutting margin) risks hotel anger for breaking Best Rate Guarantee requirement and limiting scope for marketing and technology investment.

But – while there are three reasons why I don’t think Getaroom will work – there is one big reason why it will work.

Last time Diener and team tried to facilitate hotel bookings, they built a company and they sold it for billions.

Appendage:

I need to clarify my comments in point 2 above. The first time I called the getaroom call centre and tried to book a hotel with an unpublished rate I thought that I had to make my credit card available to be charged before knowing the price.  After this post went live a comment was sent to me that said that it  was possible to pull out of the transaction after the price was disclosed and before the card had been changed.  So I called the getaroom call centre again.  In that subsequent call to getaroom it was true that I was able to pull out of the transaction after being told the price.  But it is not a simple “they tell you the price and I say yes or no” sale.   The call centre agent said she would only tell me the unpublished rate (assuming their was one) if she thought I was ‘willing to do the transaction’.  This means she would asses my willingness to transact, take my cc and reservation details, tell me the price and (once I confirm) charge the card.  She made it clear that while I could pull out once she told me the unpublished rate, that she would only tell me the unpublished rate if she was satisfied that I was “willing to complete the transaction”. She would not be any clearer on how to she assessed this willingness – though it became clear that by asking so many questions on whether or not I could pull out that she was putting me in the unwilling basket.

Disclosure: See Hughes’s Tnooz profile – contributor in a personal capacity, views are not representative of Orbitz Worldwide.

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Tim Hughes

About the Writer :: Tim Hughes

Tim Hughes is an online travel industry executive who has been blogging since June 2006 at the Business of Online Travel (the BOOT).

The BOOT covers analysis of online travel industry trends, consumer and company behaviour and broader online/web activity of interest to online travel companies (with a bias towards Tim’s home markets of Asia and Australasia and with the odd post on consuming and loving travel thrown in).

In late-2010 the BOOT clocked its 1,000th post, 200,000th visitor and 300,000th page view.In his work life he is the CEO of Getaway Lounge - a premium travel deal site based in Australia.

Tim has worked for both Orbtitz and Expedia. Prior to the travel industry Tim was a commercial lawyer and venture capitalist. Tim’s views are his alone and not necessarily the views of Getaway Lounge or any of its investors.

 

Comments

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  1. Josh

    Beyond being naive Eddie Lubbers lives in a fantasy world where ex employment as a general tea server and now high on his new role as data base filler for fastbooking somehow makes him an expert. Wake up Eddie

     
  2. fred jones

    I think Eddie Lubbers has no idea. Ex admin employee of Hotel.com new employee of fastbookings.com. When one works for another corporation one has nothing to say. Stringing people along that your the boss while you work for fastbookings is bad news.

     
  3. Gary Berman

    Our site Ubid4rooms.com does exactly what they are attempting to do, but better.
    Guests can make one off confidenatial bids to up to three hotels, and get an answer back within 3 hours, and all done online.
    Based on the mantra that “a vacant room is revenue lost forever” Ubid4rooms.com gives hotels a chance to fill rooms at rates that are not published and essentially are opaque, not affecting any of the best rate guarantees or diluting the brand in any way.
    No mystery element as you choose the hotel and away you go.
    Hotels have full control on accepting or declining bids, so all deals would be subject to occupancy levels etc.

     
  4. Tim

    @eddie – thanks for the call for calm

    @Kevin – apologies for the hyperbole

     
  5. Kevin May

    Kevin May

    @eddie

    At first I thought maybe Tim was writing in his own currency (Australian Dollars), but it appears even the sum Hotels.com was sold for would still (at today’s prices) secure just Aus$333M.

    Happy to take the criticism on the chin with the promise that we will never over-reward Diener and Litman again.

     
  6. Eddie Lubbers

    I find your articles and especially your headlines inclining towards over-excitement. Again in this article with statements such as “billionare” entrepeneurs who sold their business for “billions”.
    Diener and Litman sold Hotel Reservations Network (HRN) for 300 Mio USD, a hefy sum, but let’s not exaggerate.

     
  7. uberVU - social comments

    Social comments and analytics for this post…

    This post was mentioned on Twitter by kevinlukemay: GetARoom: three question marks over the model but one reason the company will succeed http://bit.ly/9oxNCN [Tnooz via @timothychughes]…

     
  8. Happy Hotelier

    The hotel business in its most obscene form I would say, but I may be too old fashioned for this business. “I give you the secret cheapest rate, but I don’t want to know (be known) That I’m giving it to you.” How long do you believe the secret will remain a secret? The consumer will talk about it!

    Second question: Will http://getahotelroom.blogspot.com/ owner get compensation for being the first to use the name or simply be ousted from Blogspot??

     
 
 

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