Online Travel Agent Sites and the Illusion of Choice

Expedia gobbling up rivals

So you go pull up your favorite online travel agent site and you don’t like the hotel prices you’re seeing. No problem, there are dozens of others to choose from, right?

No, there are really just two. Unless you count the small ones making up 5% of bookings, every brand you see is from one of two companies. It’s just an illusion of choice in a matured internet age.

When you set out on a trip around the world now, it’s 10 times easier than it was to set out on one in the mid-90s. (See 25 things travelers couldn’t do 25 years ago.) You have access to reams of information at your fingertips and you can book most of your major transportation tickets and places to stay in advance.

But should you?

If you really want to keep your budget low, maybe not. It turns out that two companies control around 95% of the hotel booking sites.

OTA Consolidation and Three Giant Travel Conglomerates

A hotel booking duopoly of Expedia and Priceline charges high commissions, emphasizes the properties paying them the most, and pushes down the ones that pay less. The best article I’ve seen on this is a well-researched article (with footnotes even) called Impact of OTA Bias and Consolidation on Consumers. An OTA is “online travel agency” and if you know two of them, you really know them all.

We only think we have lots of choices when we book online. The reality is that Travelocity, Orbitz, Hotels.com, Hotwire, and Trivago are fully or mostly owned by Expedia now.

The main competition for this bulging monster is Priceline. But hold on: they also own Agoda, Booking.com, and Kayak on the hotel booking side. They also power some smaller sites that are really just presenting Priceline’s/Booking’s hotel booking system as their own. In 2018 they bought the formerly independent hotel comparison site that was the main competitor to (Expedia owned) Trivago: they acquired HotelsCombined.

Then when you’re gathering information or booking a local day trip, you’re probably using a third giant corporation that has more legs than a Siamese twins octopus. Our third entry TripAdvisor owns (take a big breath if you’re reading this out loud) AirfareWatchdog, BookingBuddy, CruiseCritic, EveryTrail, Family Vacation Critic, FlipKey, The Fork, GateGuru, Jetsetter, Oyster, SeatGuru, SmarterTravel, Tingo, Travel Pod, and Viator–for a start.

Think you can avoid all this by booking a house through Homeaway, VRBO, or BedandBreakfast.com? HomeAway  swallowed up much of its non-Airbnb competition, earlier this decade, owning VRBO, VacationRentals.com, OwnersDirect.co.uk, Stayz.com.au, and even BedandBreakfast.com. But then the bigger fish got eaten by a whale. As of late 2015, they’re all owned by…Expedia.

hostel booking monopoly

Looking for a cheap hostel somewhere? If you can’t find a good price with Hostelbookers, you might just pop over to Hostelworld and try that site instead. It’s kind of pointless though: they’re the same company. A worldwide hostel booking monopoly.

This consolidation has been a boon for the companies. They’re raking in record profits as more people travel and Wall Street loves them.

But do you know who’s paying for all those profits?

Eventually, you.

Cutting Out the Online Travel Agent Middleman

The commission a hotel or hostel pays for each travel booking ranges from 10% to 25%, with many of them falling close to 20. So every time you book a $50 room somewhere, the online agency is probably getting $10 of it. If it’s a $10 dorm room in a hostel, the owner is probably only receiving $8—before paying expenses to run the place. If you booked it for seven nights in advance, he or she pays that commission on every night.

Do you see now why that independent hotel or hostel will be ready to strike a deal with you if you walk in at 5:00 pm and say you want to stay for a few nights in a row? Can you imagine how much leverage you have if you’re going to stay there a week?

For Hilton or Hyatt, these commissions are something to grumble about at board meetings and try to negotiate each time the contract comes up. They keep looking for ways to get you to book more direct, like with bonuses and perks through their loyalty system. They will reward you to bypass the OTAs because that saves them a huge commission payment.

For those hotels and inns that are not part of some big chain though, these commissions can wipe out most of their profit margin. They need the OTAs because the companies have millions of customers and huge traffic from people ready to book. But the owners hate that they need them because it’s so costly to get customers that way. The really small ones don’t even sign up because they can’t afford to give up that much revenue. So they’re invisible if you’re doing all your searching via a website owned by Expedia or Priceline.

Most independent hotels feel like a corner pizza shop squeezed harder and harder by the local mob boss. If they don’t pay the high fees for “promotion” that go beyond the already high commissions, Expedia will push them so far down the listings that they’re practically invisible. So they either join a hotel brand that’s willing to pay or they try to market without the companies that control 95% of the market—through their website, PR, word of mouth, or social media. 

How You Can Work the Hotel Booking Duopoly to Your Advantage

There are a few things you can do to make the most of this situation. The first is to recognize that (surprisingly) prices still aren’t equal across the board. You may pay less by booking direct, especially if you’re a part of the loyalty program for a chain and even better if you have their credit card. You may find a better deal at one place than another by using HotelsCombined.

Here’s a more proactive step thought that savvy negotiators have done over and over to their advantage.

  • First, print out or do a screen capture of the best online travel agents rate you found.
  • Then call or walk into the hotel/hostel with that rate, and ask if they can beat it.
  • If you get a no, try their competitor instead.

Unless the owner or front desk manager is a complete idiot or doesn’t care how many rooms are rented, she will at the very least give you an upgraded room for the same price. That’s the easy ask if you get an answer that “the rates are fixed by their booking agencies contract” or some other excuse. A good amount of time though you’ll be offered a better rate, especially outside the USA where negotiating is more common. The higher the number of nights you’re staying, the more likely the discount.

The same goes for a vacation rental apartment or house through Airbnb that’s more than a few days: a bird in the hand beats an empty apartment with fixed costs that need to be covered. I’ve discounted our own house quite a bit for long stays and have plenty of friends who work out their long-term accommodation this way a good bit of the time.

A good hybrid approach is to book the first night or two of where you’ll be staying online, then go arrange a better deal for the rest of the time. Another hotel/guesthouse/hostel or an apartment for a longer term. If you are on site, you can look at it before laying down your money.

There are caveats to this of course: it sometimes won’t work with big chain hotels, especially in the USA, because of non-competitive pricing contracts. This may change though if what’s happening in the courts of Europe spreads across the Atlantic since this is viewed as an unfair business practice. Hotels that are independently owned are a different story, however. The chance of you walking back out the door may mean the difference between that day being a profit or a loss. Owners hate leaving beds empty if there’s any chance of filling them, even at a lower rate. (It’s the whole reason Hotwire and Jetsetter exist—to fill rooms that would otherwise be empty.)

The other big caveat is that it may be high season, a time when all rooms will be full. You have no leverage in these situations, so book as far in advance as possible or explore more travel variables to change the timing.

travel industry consolidation among online travel agent sites means very few real booking choices

What About Travel Company Competition for Flights and Rental Cars?

This has been all about hotels, but one last thing to remember. In 2005, we would walk into a travel agency in Bangkok, Calcutta, or Cairo and buy a plane ticket to where we were going next. Flash forward 18 years and my family did the same thing while vacationing in Siem Reap, Cambodia to get a ticket to Vietnam. Why? The price we got through the local agency was $50 less per person than anything we could find from the online travel agent sites.

Unless you can log in and read the local language, or set your VPN to be in the country where you’re flying from, you’re probably getting your home country’s price. Not the agencies though: they know the ins and outs and local deals.

Just because you seem to be looking at all possible choices online doesn’t mean you really are. It’s often an illusion. The best you can do is shop around a lot on multiple sites and use Google Flights and Skyscanner, though be advised they don’t include many of the budget airlines that don’t share info. Airfare is the one product you buy that has no transparency, predictability, or logic to it. To truly game the system, you would need to follow or join a service that sends alerts about crazy deals and mistake fares that only last a few hours before they’re gone. Or play the travel hacking game and get many of those flights for free.

As for rental cars, the prices aren’t as wacky or fluid, but you still don’t have much choice when you go do a search. Carrentals.com is part of Expedia, RentalCars.com is part of Priceline, and on it goes. Again, you’ve got to leave your options open and don’t forget to check back periodically. I checked Hotwire right before I left on my current trip, got a car for $313 less than the reservation I had booked direct a month before for my 18-day road trip. Bye bye Alamo, hello mystery company.

It ended up being Dollar, so no big difference. After all, there are only really three major rental car companies…

Comments
  1. Kevin Donnelly

    When I travel outside of the US I usually book one night at a hotel, online, even though I might be staying in the area for a number of nights. When I check-in I insure that there is availability for my additional nights but only commit for one. I also find out what time check-out is. The next morning I am out early checking other hotels and prices. The far majority of the time I find a better deal and s better location and I have switched hotels long before checkout time. In the mean time I have also done lots of site seeing. Don’t forget Craigslist – lots of good deals there too.

  2. Fred

    Booking for one night on airbnb and then making a deal in person has advantages and one disadvantage. First you get to the place and see if it is really the place you saw in the listing, in person it may be a dump, or has noisy neighbors, dogs, roosters, etc. or they rent out 4 other rooms in the same home and maybe don’t even live there. But on the other hand if you wait there is the posibility that someone will have reserved a night or two in the mean time thus blocking your idea to make a deal for a couple of weeks or a month. I f you are going to be somewhere for a while after you arrive for your one night rental and you don’t like it or can’t make a deal you can rent another place for one night a month in advance then cancel it after you receive the reservation with the persons phone number and address. You then would only lose the one nights commision of airbnb which would only be $2-3 on a $10-15 a night place. Go by the place and check it out and make a cash deal in person, you both save the commision and there is a chance to see the place and the person before hand.

  3. Sushill Shyam Sundar

    Great posts and well said

  4. Hank

    Great informative post, as always. Thanks!

  5. Lucas

    Nice blog…i really like it….there is also another way to book cheap and affordable Flight Tickets that is Google Flights

    • Tim Leffel

      Yes, I mentioned that, along with Skyscanner. I use both a lot.

  6. Azzi

    Hi, Really Awesome and help full article… thanks for sharing

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