A Netherlands-based start up is aiming to "give business back to hotels" through a 0% commission model that takes on online travel agencies such as Booking.com and Expedia, who charged commission on room reservations made through its portals.
Bidroom boasts a 0% commission model and relies on annual subscriptions and memberships for profit.
Speaking to Arabian Business, co-founder and CEO Michael Ros said the concept offers both hotels and guests more value for money by eliminating agency charges.
“The hotels are very happy with us, because they’re getting their control back. Other booking platforms charge such high commission. So we give them their business back, plus direct reservations, so all the hotels came on board with us,” he said.
“Because we don’t take commission, we create a win-win situation for both guests and hotels. If we don’t charge commission, hotels save a lot. And if we give on behalf of that back to guest, the guest is happy to save 10%. Hotels earn much more on reservations, so they’re more willing to give better discounts on room rates. We’re also a closed platform, so prices are not public,” Ros added.
Bidroom currently operates worldwide with over 120,000 hotels in cities including Dubai and Abu Dhabi. The firm has strong presence in Europe but is looking to expand in the Middle East, with its Arabic website launching at the end of September.
Ros, who was previously the founder of a trading agency in Netherlands, initially came up with the idea of a 0% commission model after receiving complaints from hotels on high commissions of up to 25% charged by online travel agencies.
“When we spoke to other hotels, they all have the same complaint. So we wanted to change something, create a simple model that offers commission-free bookings,” he said.
Unlike competitors Booking.com and Expedia, Bidroom does not focus on transactions, allowing it emphasise on acquiring new members. Users can also test the service for free before subscribing. According to Ros, the platform’s model can be compared with that of Amazon Prime, Netflix or Spotify, whereby customers pay an annual fee and in turn, save cost.
“We’re still a mosquito and Booking.com is an elephant. But we’re a very annoying mosquito. We have to do something different to disrupt the market and that’s exactly what we’re doing. And we’re not afraid. The 0% commission model is something people have to get used to it... The economy is changing into a membership economy anyway,” he said.
“If you checked Netflix 10 years ago, no one was using it, because of its business model. It’s the same with Amazon Prime. People used to tell them they’re crazy. But now, we see it growing, which is great to see. Of course it’s a new method for people to pay an annual fee for hotel bookings, but education is important when you’re introducing a new model. So yes, you are paying a fee but at the end, you spend much less for your travels,” he added.
As users become more price sensitive, Ros expects platforms with similar models to be established.
“I hope more companies will adopt a similar model. We are the first to introduce it so we have this advantage, and with more players, people will talk more about memberships. Business models like ours will become more common, and people will get used to them. For example, Netflix has competition, but it makes it stronger. We want to stay the biggest in the market,” he said.
Bidroom also allows guests to see different rates with other platforms, with links to hotel websites included for direct bookings.
Online travel agents such as Booking.com and Expedia are responsible for a large part of Dubai’s hotel room distribution, leading hotel owners to rethink revenue percentage paid to hotel brands, according to Simon Allison, the founder of hotel owner investor group Hoftel.
Allison explained that Dubai hotel owners are opting for a new group of unbranded 'white label' operators to run their hotels, as opposed to international brands who take too much of the profit, and too little of the pain of slow market conditions.
"One of the things owners pay a lot for is distribution, and online travel agents do a lot of the distribution. So owners are questioning why they are paying the brands these fees for the room nights when actually, someone else is effectively selling them," he said.For all the latest travel news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.