From the latest edition
The best online hotel prices aren't always where you think they are
Ask 10 business travellers a good website for booking travel and, chances are, they will give you 10 different answers. In fact, many will name several sites, splitting their bookings for short-haul and long-haul flights, accommodation and even car hire. They may have originally chosen these sites for their prices, but once they are registered and have become accustomed to the idiosyncrasies of the booking engine, they will probably stay with those sites. Yet things are changing so quickly in the travel industry - and particularly on travel websites - that there's likely to be a better deal elsewhere.
To understand why, it's a good idea to look at what travel agents are doing and why. Much has changed for them in recent years. Go back just a few years, and there were frequent predictions of their demise. How could they compete with increasing numbers of travellers using the web to book their travel? How they coped was by offering their services on the web in an easy-to-use format. In many cases, they also undercut the prices that were available directly from the hotels and airlines and, as a result, they thrived.
Yet just in the last few months, things have changed again. Airlines have cut commission payments to agents from 10–15% down to 1% or even zero. By contrast, hotels pay anything from 8% to 30% commission depending on the volume of business. As a result, website agents are now aggressively promoting hotel rooms, which have become the products with the largest mark-up.
Looking at this mark-up, it's no wonder Hubert Joly, president and CEO of global travel firm Carlson Wagonlit, describes hotel accommodation as "...a dream for a company like ours." The big travel management companies have large firms as their clients - the sort that can obtain good rates on airfares on their own.
However, the same might not be true of their accommodation requirements (although in many cases, large travel management companies make their money in the form of an annual flat-rate management fee from large companies, rather than agency commission).
"Corporations feel that hotel expenditure is the next frontier [to be conquered]" says Joly, "and frankly this is an area we've neglected. In the past, travel managers have focused on air travel. But that market has become concentrated. By contrast, the hotels are fragmented and they're profitable."
Joly believes that Carlson Wagonlit, with its huge volumes of turnover, can offer better rates than its online rivals in the majority of cases. In addition, firms that supply substantial volumes of custom may be able to get hoteliers to throw in sweeteners like executive floor upgrades, free breakfast and car parking.
If you are booking your travel individually - or you work for a smaller firm - you will lack this clout, so where are the bargains? In the past, many travellers turned to online agents like Expedia, Travelocity or Lastminute.com.
What has changed recently is the attitude of the hotel chains to these online agents. Many hotels have shaken up their booking systems to price according to market demand, rather than merely quoting unrealistically high rack or full-price rates. As a result, individual travellers can often now find comparable, or even cheaper, rates on a hotel's own website.
To give some examples, Marriott has adopted "rational" pricing on its website, while InterContinental and Hilton offer "best price" guarantees. A spokesperson for US chain Marriott said: "The only time you will find a better rate [than is available on the hotel's own website] is when it's an exclusively negotiated one [like a corporate deal] or where it's a wholesale rate [like those granted to tour operators]." Chains like Radisson SAS, InterContinental and Sofitel can offer Apex (advance purchase) rates at slack times and these can undercut what the online agents quote.
Global chains were forced to act because the online agents negotiated overly generous commission payments in the days following September 11, when hotels were desperate for business. Said a Marriott spokesperson: "The online agents wanted really low rates for rooms, which they then sold off at ridiculously high prices."
In addition, the online agents didn't make it clear which rates included taxes and which did not. They also imposed heavy cancellation and amendment fees (up to 100% for all nights booked), whereas most rooms booked directly with a major hotel can be changed or cancelled without penalty until the late afternoon on the day of arrival. Even if you were to "no show" for a stay of several nights, a hotel would only bill you for the first night, whereas the online agent would charge you for the entire stay, "so there was an integrity as well as a cost per sale issue," added the Marriott spokesperson.
Finally, at times of high demand, the online operators often showed a hotel as being fully booked, when in fact the site had merely sold its allocation of merchant hotel rooms (ie, those bought at wholesale price from the hotel, then marked up for sale on the site).
With business now looking up, hotels are increasingly calling time on these deals. InterContinental recently went as far as to sever its ties with online agent Expedia. According to an InterContinental spokesperson: "We will only work with partners who do not engage in confusing and potentially unclear marketing practices." As a result, Travelocity became the hotel group's "official third-party distributor".
The hotel chains don't want to turn their backs on the online agents completely. They find that they reach a different sector of the business and leisure market - that is, those of us who have grown used to using the sites. But now with business travel returning to pre-September 11 levels, the boot is on the other foot. Christian Ruge, business development manager of the Accor group's new first class Sofitel Bayerpost in Munich, said: "Major hotels were paying a lot of commission to online agents in the past. But we've had a good couple of years so now they have to deal on our terms. If they don't like it, then it's goodbye."
The lesson for those of us using the web to book our accommodation is to shop around, and to make sure that whichever hotel we choose to stay at, we check the price on that hotel's website before we start typing in credit card details. With "best rate" guarantees becoming more common, it can be a complex search to find a real bargain, but at least you can be assured you found the lowest price available.