Capping The Cost of Hotel Advertising

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Most OTA (Online Travel Agents) charge a commission for every booking made. This results in an increase in price. Some commissions can be as high as 40% in some circumstances. There have been a number of platforms launched to change this model by adopting a subscription-based model. Platforms such a FinalPrice and Bidroom charge consumers a subscription fee and make their money from the subscription fees and pass on the savings to consumers who book accommodation, flights, and car rentals. While it may be beneficial for some, for others, paying a monthly or annual fee may not be beneficial.

Subscription services are increasing in popularity. Changing consumption habits are changing the global business landscape. Currently, there is a large shift underway in the way we consume goods and services; we are moving away from a pay-per-product model to a subscription-based model and would now rather subscribe to services than drum up the cash to own products. The way we consume movies, listen to music, or even drive around in cars, is changing. Today, we prefer to subscribe to streaming music on the go, rather than build up bulky CD collections; subscribe to Netflix, Amazon Prime, etc. instead of traditional video rental and subscribe to services like Zipcar to avoid the need to buy cars.

And it’s not just consumers; businesses are now moving to subscription-based services for tools such as billing, accounting, analytics and using products from Salesforce for CRM or Rackspace for cloud hosting. Businesses are recognizing the significant long-term economic benefits that subscription business models make.

And of course, the hospitality industry is no exception. For decades, hospitality technology has been old, cumbersome, and expensive. But with the rise of SaaS and cloud-based products, hoteliers can now opt for subscription-based services for hotel management which is far more intuitive and much more cost-effective than their predecessors.

While the above subscription-based services can assist hotels with operations and systems, the OTA’s are still charging hotels a commission for each sale. While a commission-based structure can work, the ability to increase margins becomes more difficult as for every $100 you bring in, you pay the OTA, say $20, so your margin is $80.

AirRentalz has taken a different approach to how it charges hotels. Adopting a hybrid model where it charges a fee for service and not just a flat commission, AirRentalz is capping the cost for hotels. This approach will allow the hotels to cap their cost and therefore increase their margins over time. In turn, this should allow the hotels to pass on some or all the savings to consumers which will increase their bookings and hotel occupancy levels.

Hoteliers are frustrated with paying high commission and having no control over their revenue and communication with their guests. We want to change that and make the market a fairer place for hotels and their guests. Our approach brings fairness to the hospitality industry. We are connecting hotels to their guests directly, giving control back to the hotels and the best prices to your guests with no brand hijacking, and no rate parity clauses.

The travel industry still cherishes the transactional model, where they try to make a profit on each purchase. As a result, the price became the defining criteria. AirRentalz is capping the costs for hotels and turn all commissions, incentives, and bonuses from hotels to discounts. While we do charge a commission, this is capped at a maximum of 10%, phased in over time and is cheaper as volumes and room numbers increase.