How do travel apps that claim they can book, for example, a hotel for cheaper than the original price, do it? Is it legit?
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A lot of the stuff mentioned about how the contracts are negotiated is true, but to add an analogy that explains the more blanket explanation on the practical side of things:
Let’s say you want to buy Toilet Paper, and let’s say you are aren’t dead set on a specific brand for any reason but you do have some preferences. Charmin might have their own online store, but even if they did and they were your preference, you’d probably still go to Walmart just to be able to compare prices and to make your life easier, than say going to Charmin’s online store. Walmart offers you a convenience through the marketplace they’ve built, where multiple brands can sell their toilet paper on the same page.
Because they all have to compete with each other, because the different brand’s prices are all lined up side by side for you, they will inevitably sell their product at a cheaper price than at their own online stores that only carry their own brand of products.
They know you can’t see the other brands prices when you are on their own online store however, and more importantly, if you are going through the trouble to create an account and even go to their website in the first place, you have a strong reason for doing so, and they will capitalize on that and charge you more. They don’t care so much why you are choosing their “Charmin Store” over Walmart or Amazon, but they do know you expended extra effort to do so, that there exists a reason for that, and whatever that reason is, they can bill you extra for it.
Expedia, like Walmart, invests money solely in building a marketplace for others to display their wares. Neither manufactures their own toilet paper, their product is the convenience to you the customer of having a one stop shop for many related items and competing brands to choose from, and the savings that inherently come from the competition it creates.
Now some brands have certain strengths that allow them to ignore competition and charge higher prices anyways, as Charmin might for their ultra soft TP if they happen to know the other brand’s on Walmart are all of the single-ply-butthole-sandpaper variety, because their competition in that sense is the quality of the product. A real current day example of this is Coca-Cola and how they’ve been raising their prices so high, because they know you can’t just substitute that flavor for any other competitor, and their flavor is good enough with consumers for people to put up with the price hikes because Pepsi isn’t an alternative for them even if it were free.
Now when it comes to Hotels, Airplanes and Rental Cars (Expedia’s marketplace) their is no brand out there that can pull a Coca-Cola, because Hotels and Air Travel companies have raced to the bottom for so long that everyone hates them all just about equally. Hotels can sometimes capitalize on specific desirable locations of a single particular building, but that won’t be a brand level price effect.
Car rental companies are themselves selling another companies products and they will all have similar stocks, so they don’t have much room to compete there since even if their customer service is phenomenal, their ability to affect the thing you are paying for is incredibly minimal, since you’ll only deal with them for a few minutes when you pick up and drop off your car, between which your experience will be dependent on the brand who made the car your driving and all rental companies will generally have the same selection of brands since there aren’t many to choose from. Outside of crashing your vehicle or other rare instance/nightmare scenarios, there aren’t going to be many people who have specific tales to tell on one rental company over another, so for 95% of the eyeballs on their listings, they can only really compete on price with the other rental brands.
Airlines and Hotel brands you deal with the entire time you are using the thing you paid for, and thus could set themselves apart in more ways than rental companies, but again, those industries as a whole seems to have settled on “fuck everyone in the ass”, so once again we mostly just have price to compete, and there’s no other big draws out there to go to their site’s specifically to make your purchases.
Finally, when companies like Expedia, Amazon or Walmart come along, and create those marketplaces, it draws so many people in who don’t have any reason to seek out the “Brand Store” that the companies selling the products have no choice but to sell their wares on Expedia, Amazon or Walmart, because they will cease to exist to a large number of buyers if their name and product isn’t shown in that comparison chart or list. It’s easier to shave a bit of your margin and still have fully booked flights and hotels, than it is to have a higher markup on all the bookings, but still wind up 80% empty because they can’t make up for the volume lost from not being in those marketplaces.
Those marketplaces in turn also understand that these brands have a good reason to come to their marketplaces (Just like I mentioned with the Charmin Store bit above) and Expedia will squeeze American Airline or Hilton’s balls, just as fast as Charmin would squeeze your balls while Amazon and Walmart squeeze Charmin’s balls. Money may not grow on trees, but it can be made from pureed nut-sack.
^(1. I mention Walmart more than Amazon simply because I know Amazon Basics is a thing, but I wanted to avoid confusion cause that’s a very different thing happening there and very unique to Amazon.)
^(2. Pureed isn’t the right verb, but I didn’t want to make it unintentionally sexual by using the more technically appropriate term of “Juiced”.)
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