How do travel apps that claim they can book, for example, a hotel for cheaper than the original price, do it? Is it legit?
In: 235
In some cases, the hotels have contracts with the big sites like hotel.com where they MUST allow that big site to have a lower price by X than any other listing for the same hotel anywhere else, even on their own website.
So in that case, yes, the app will have a lower price.
Here are some ways they do it:
* **Buying in bulk**. Some travel apps negotiate with hotels to buy a large number of rooms at a discounted rate, and then sell them to customers at a lower price than the hotel’s website. This way, the travel app makes a profit and the hotel fills up its rooms.
* **Dynamic pricing**. Some travel apps use algorithms to adjust the prices of hotel rooms based on supply and demand, seasonality, location, and other factors. This way, they can offer lower prices when the demand is low or the hotel is not popular. For example, Skyscanner shows an interactive price chart that shows the cheapest days to book a hotel.
* **Last-minute deals**. Some travel apps specialize in offering deals for hotels that have unsold rooms close to the check-in date. This way, they can help the hotels avoid losing money on empty rooms and attract customers who are looking for a bargain. For example, HotelTonight offers discounts of up to 60% for bookings made within seven days of arrival.
These methods are usually legit, but you should always check the reviews and ratings of the app and the hotel before booking.
It’s called allotment. Hotel abc guarantees to big travel platform xyz that a certain type of room will be allotted to the platform (usually) for a very good rate. The allotment can be restricted depending time of the year or other conditions.
The hotel is usually guaranteed that allotted rooms will be booked even in low season and also they’ll have better visibility on the platform
[removed]
It’s an arrangement between the hotels and the travel companies, whereby the travel companies will book rooms in bulk for a discounted rate, and in exchange, the hotel doesn’t have to worry about advertising etc and the travel company caries the risk of not being able to sell the room
Oooh! I work in the travel industry. I even worked for a hotel booking app for a while and did sales operations so I can answer this:
1) Contracting
If an agency sells a ton of Hotel XYZ, they will ask for special rates that they can lock in for a long period of time. Some have structured overrides. “If App ABC sells 10,000 rooms with Hotel XYZ, they get a 5% discount. If you sell 20,000 rooms, they get a 7% discount, etc”
Sometimes these may have a limit to the number of rooms so that hotels can control their margins. “Resort XYZ is doing a grand opening and we want to make a splash. I’ll give app XZY an extra 15% discount, but only for their first 100 bookings for a maximum of 1,000 room-nights.”
Hotel XYZ may also structure seasonal rates or black-out discounts for certain times – like Christmas / thanksgiving week, or ski season in Colorado.
2) Last minute deals
Hotels are eager to get their rooms filled, so they can offer huge discounts to websites that specialize in last minute deals.
3) Commissions
If Hotel XYZ pays Agency ABC a 10% commission for any bookings, that is 10% margin that Hotel ABC can play with. What if you take 5% of your margins and offer and additional 5% discount to your travelers? You make 5% less than your 10% commission, but more than 0% if they don’t book through you.
4) Dynamic Pricing
This is where things get weird. These apps have incredibly complex pricing algorithms that factor in a ton of stuff. Sure, seasonality and booking window (how many days you book before you travel) are all considered. But that is child’s play.
Some apps can even profile what kind of user you are by your user patterns within the app. One time I personally did a pricing project for a hotel app to profile users by price-sensitivity.
Do you have a high search-to-book ratio, sort your results by price and we know that you also have an account with a competitor’s app? You can be profiled as a “price sensitive” shopper and they may increase your discount by 2-3%.
A corporate user may only have an account with our app because we have billing process set up with their corporate office, and they have a lower search-to-book ratio and don’t filter by price. They are more concerned to filter by hotel location and properties that have space to park a trailer for a traveling work crew. We may decrease that user’s discount by 2-3% because we know they are less willing shop around.
That is just one example. There are dozens of other ways that we profiled customers based on app user patterns and booking patterns. 1-3% doesn’t sound like a lot, but whenever you multiply that by hundreds of thousands of transactions they really fine-tune these pricing levers to generate big money.
Next time you’re in a hotel, take a look at the door placard. It will state a booking rate WAY higher than what you’re paying. That’s like the “we don’t like you but we will take your money rate.” Then the hotel itself would have a rate where you go down and ask them to book another night. Or walk in off the street.
Travel apps started by taking “surplus” rooms and getting them booked out. As long as a hotel is open, they want to be occupied to keep their employees busy and rooms generating income. But still, there is a certain point where the extra labour of housekeeping or costs of electricity/water would mean they are losing money. A smart hotelier would know that number, would charge travel apps a bit more than that to still make a little profit. At this point, being listed on the travel apps is like being in the yellow pages: if you aren’t there, you might as well not exist, because this is where your customers are searching for hotels. But upset the boat, and your rate will turn into that one on the door
If you find a deal in an app, you can often call said hotel and they can offer that deal, sometimes a bit extra as they then don’t have to pay a portion to the app/website owners.
Some travel apps / sites have special agreements with hotels, car rental companies, and airlines to offer discounted rates. Typically, they have to be BIG, like Expedia, to negotiate such a deal. They make those deals because they now that those huge travel service sites will send them a lot of customers.
As someone who used to (pre-pandemic) work not only in the travel industry, but in the wholesale division, I think I can answer pretty clearly for you. Now my part off the division was to sell back to travel agents (so when your travel agent calls someone to book your room, they were calling me), not in the part that contracts the hotels, but I worked with those guys close enough to have learnt what’s happening.
Hotels have known that for a couple of decades now, that if they force customers to book only directly through them, they won’t make a lot of sales, so they have to get on as many platforms, or at least on the most popular platforms to make money.
These platforms all demand a commission, ranging from 5%-30% usually. Most commonly I found 20% in all of the Americas, Europe, Australia, and New Zealand, and 30% in Asia. (My company didn’t do Africa so I can’t say anything about there).
Less than 20% was for popular hotels offering deals, so they were already making less than usual and would force us to make the lesser amount too. Now I say popular hotels specifically, because we would refuse to contact any unpopular hotel offering a commission that low because it clogs up our inventory without making us enough money.
So now that I’ve explained all that, I can explain what happens with some hotels being the exact same price everywhere (so Expedia, your local travel agent, booking direct, etc), vs when the prices are wildly different across each platform.
Many hotels insist you absolutely must advertise at the same rate as them. So let’s say, Best Western Springfield USA. Best Western Springfield is selling 1 night at $100, they sell it to Expedia at $70 and your travel agent at $80 and xyzbookingsite at $90, they tell everyone they have to sell it for $100, and they do because they have to. This is why some hotels are the same price everywhere.
Now many other hotels don’t care, and they know they have to pay you the 20% (or whatever) commission, or you won’t sell them. So the Comfort Inn in Springfield USA is selling 1 night at $100, they sell it to Expedia for $70, your local travel agent for $80, and xyzbookingsite for $90. Everyone knows the knows the Comfort Inn in Springfield is not the most popular one in town, but it’s still good so they want to try to sell as much as they can which they do by lowering the price. Expedia thinks, well we can afford to only make $15 on this booking, so we’ll sell it for $85, your local travel agent advertises for lower than the hotel at $95, but will go down to $85 if you ask for a better deal, because they know they’ll still make $5 from it. Xyzbookingsite is just starting up, but they still want to look cheaper than the hotel directly so they only make $5 and advertise for less than the hotel directly at $95.
Edit: so really like u/tomalator said, where possible, book direct. If the hotel is $100 everywhere including the direct site, book direct so they can make more money, it also makes your life easier if you want to change something or if something goes wrong, because they don’t have to deal with another company and your booking is all directly in their system. However unlike what this user said, if the price is much cheaper on a website you trust and you would rather save a big chunk of money, go for the deal because when it comes down it, you probably have less money than a whole hotel and it will be more worth it to you to take the saving.
Latest Answers