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Tue 22 Jan 2019 09:37 AM

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Online travel agencies 'taking advantage' of hotels, says Dubai start-up

BookedHappy aims to bring some business back to hotels through direct bookings, says founder Charlotte Gossage

Online travel agencies 'taking advantage' of hotels, says Dubai start-up
Gossage claimed hotels give OTAs up to half a million US dollars in commission every year.

Online travel agencies (OTAs) such as Booking.com and Expedia are taking advantage of hotels, according to the co-founder of direct hotel bookings platform BookedHappy.

Speaking to Arabian Business ahead of the platform’s launch, Charlotte Gossage said agencies’ powerful marketing tools have “intimidated” hotels and prevented them from lowering rates on their own websites.

The platform, which is set to launch next week, aims to bring business back to hotels through direct bookings. It will include hotel deals on the platform, but refer customers to hotel websites to enable direct bookings.

“Some hotels are slowly realising that even in an OTA contract, a hotel brand can give a lower rate. I think OTAs are taking advantage of their powerful position and intimidating hotels by preventing them from giving lower rates than them, when in fact, hotels can give lower rates through direct bookings,” Gossage said.

“OTAs have so much marketing power behind them that hotels also show guests that they rely on OTAs. So we all feel comfortable going through the agencies,” she said.

The founder said OTAs have largely affected hotel bottom lines due to high commission charges.

“OTAs told hotels, ‘Oh, we’ll help you to get your rooms filled,’ and then they took control. So hotels got a bit complacent, but room rates were at a four year low last year and hotels’ bottom line is really being affected,” she added.

Gossage claimed hotels give OTAs up to half a million US dollars in commission every year.

“I wouldn’t be surprised if some hotels were giving half a million dollars to Booking.com a year. But if you look at Booking.com and see how many bookings have been made, keeping in mind that the average room rate is around [$100], even 15 percent commission is a lot of money,” Gossage said.

The founder also said hotels should work harder to get guests to book directly through their websites by improving them and offering extra perks.

“The problem is that all hotel websites are cookie cutters and don’t stand out. Hotels can stand out more and that’s what we’re trying to do,” she said.

“If customers book directly through hotel websites, they’re most likely to get extra perks such as a room upgrade. According to case studies we’ve conducted, families with kids are more likely to get a nicer room if they book directly with a hotel as opposed to through OTAs,” she added.

In September last year, a Netherlands-based start up told Arabian Business it is also aiming to "give business back to hotels" through a 0 percent commission model that takes on online travel agencies such as Booking.com and Expedia.

Bidroom boasts a 0 percent commission model and relies on annual subscriptions and memberships for profit.

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.

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