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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Because the “original price” for a lot of time-sensitive things like stays in hotel rooms is somewhat “just a number”. The hotel understands that if the room stays empty on X night, then it’s not making any revenue on that night. Since it’s not possible to simply build or demolish rooms on a day-to-day basis to exactly meet demand, instead it is the price that adjusts.
It’s a volume discount to a service in exchange for that service doing some of their marketing and advertising for them and bringing in more customers. In turn, the travel service gives a small portion of that discount to you, the customer, and keeps the rest as profit.
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”.)
It’s totally legal and based on bulk buying, etc. The hotel sells a guaranteed amount of rooms, the booking company acts as a middle man and profits. They both come out ahead.
That said, I’ve learned that I will ALWAYS buy direct from the hotel. I’ve had a few cases where there were problems and the hotel’s answer was always “You must contact the seller to fix this”. I was not the hotels customer, I was the customer of HotelMiddleMan.com (made up example). Sometimes, the hotel didn’t even have a reservation in their system due to some kind of mix up between the reseller and the hotel.
So my wife and I book through the hotel company directly. Sometimes it does cost more, but then the hotel has the info and a stronger obligation to fix it for us.
When COVID happened we had a large trip planned to DisneyWorld via a middleman. The discounted price was excellent. But when Disney was easily offering refunds, my wife had to really jump through hoops to get the middleman to cancel everything and refund our money. It all worked out in the end and we got 100% of our money back, but my wife had to spend hours and hours on the phone and email over and over. It wasn’t worth the stress.
Very legit. Or at least it used to be when I used Priceline to book rooms. They had a feature, name your own price, where you selected a specific area and the star level of hotel you wanted. I used it when I traveled back and forth to okc for work. I always picked south of 40 on meridian because it was close to work and there were a ton of hotels. It’s not the greatest area but it wasn’t THAT bad. I wouldn’t book till I got to town and would select the area, select 4-5 star, put in the price I was willing to pay, $38 per night, and click book my room. It was always either a Wyndham garden or a Hyatt place that would give me the room. Id walk on maybe 10 minutes later and check in. The desk folks were always incredulous at cost of my room. Always worked out great!
The same way you can: VPN to a cheaper country, book the hotel/whatever from there with departures/arrivals where ever you want. Always book incognito, even on a VPN.
Also: other ways.
It’s definitely legit i have booked more than lime 50 hotels and whenever i call the rate is ALWAYS higher maybe only ONCE was it lower
Hotel rooms are almost never rented for the listed price; there are a near infinite variety of discount schemes, as it is better for the hotel to rent a room for half the “rack rate” than to let it sit empty for a night.
In the case of the travel apps, one tactic is that they get a huge discount from the hotel in exchange for guaranteeing or even outright buying a large block of rooms.
The hotel industry is fiercely competitive and even a few percent higher profit is worth fighting for.
The way my hotel worked was that third patty travel apps come with cheaper rates but were nonrefundable. You use Expedia or whatever and get a reservation for a rate lower than a walk in, but once you make that prepayment it’s set in stone. The hotel is guaranteed money and the customer gets a lower rate (if they show up).
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