Dick Smith Latest Rant on Online Travel Agencies

A rant from Dick Smith has been an interesting story in the media this week.

I for one agree with Dick on this occasion. I generally try to book directly when booking my online accommodation. You often even get cheaper rates.

Article is below.

https://www.smartcompany.com.au/industries/tourism/dick-smit…

Entrepreneur Dick Smith has slammed online travel agencies (OTAs) such as Expedia and Booking.com for “exploiting and extorting” Australian hotel and motel owners and has called on consumers to boycott the services.

The outspoken businessman believes small businesses across the country are being shafted by the online booking giants, which he says are charging owners exorbitant rates for booking referrals.

“Motels are forced to sign up, or they won’t get business,” Smith told SmartCompany after posting an online video about the issue.

“In the 1950s, if hotels didn’t pay criminal gangs money their premises were burnt down … it’s similar,” he said. “They’ve worked out a way of extorting money from small Australian businesses.”

OTAs have boomed alongside the proliferation of the internet in recent years, with US-based Expedia Group (which owns namesake Expedia.com, Hotels.com and Trivago) and European company Booking.com emerging as major players.

But despite being popular with consumers, the business owners SmartCompany spoke to said the services have been a curse, rather than a blessing, on the local accommodation industry.

“They’re ripping us off,” Golden Hill Motel owner Mark Henderson says.

Several owners reported paying anywhere from a 12–17% commission on booking referrals through OTAs.

Many motels charge customers more in an attempt to absorb the added cost, but this has triggered customer rage.

“Customers get upset when the rate is higher,” Henderson says, “but if you walk in off the street I might charge you $100, rather than $120.”

Another motel owner, Charlie Loftus, says customers had been “brainwashed” into thinking OTAs were cheaper than direct booking.

“Trivago has recently been running a campaign with the innuendo that hotel sites and hotels directly are not the cheapest option when they are,” he told SmartCompany.

Loftus believes government regulation has failed to keep up with the disruptive impact that the internet has had on the accommodation sector, and that small business owners were paying the price.

“The internet has introduced a completely new system into the accommodation sector,” he says.

“Government regulation hasn’t kept up with the explosion of the internet.”

Smith, who has called on customers to avoid the platforms, believes search engines have made it difficult for smaller players to compete with OTAs, which benefit from top ranking spots on Google.

Henderson echoed that sentiment, saying that search results for his business turned up OTA booking pages before his own website.

“It just isn’t a level playing field,” he says.

SmartCompany contacted Expedia Group and Booking.com for comment.

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Comments

  • +7

    I may be naive to the accommodation business, but I would have thought that the providers would be building into their accommodation rates all of the costs that they incur, including electricity, water, credit card fees, staff wages, food waste, laundry, marketing expenses, vacancy costs, etc.

    If they wanted to, they could effectively rely on the OTAs to carry the majority of their marketing.

    For walk-up customers, they could offer a rate based on the level of vacancy at that time.

    • +6

      No no, they want business without having to incur marketing costs, or paying anyone else to market for them. Because you know, customers materialise out of thin air.

      And anyway, there's a fairly set amount of business, they're not competing with OTAs for business, they're competing with other motels and hotels for the same business. They're basically complaining about each other.

  • +3

    “Motels are forced to sign up, or they won’t get business,” Smith told SmartCompany after posting an online video about the issue.

    “In the 1950s, if hotels didn’t pay criminal gangs money their premises were burnt down … it’s similar,” he said. “They’ve worked out a way of extorting money from small Australian businesses.”

    Jesus christ talk about hyperbole.

    OTAs are giving these places business. They don't want that business, they can feel free not to sign up, or try their own online marketing. This is a bullsh*t argument, but I'm no longer surprised when it comes from DS.

  • +2

    how this is different to food ordering sites like menulog and eatnow?
    Maybe its new era, hotels should offer better rates directly.

  • +4

    "Several owners reported paying anywhere from a 12–17% commission on booking referrals through OTAs."

    How is this any different to the commission they pay travel agents?

    • Dick Smith would say that at least those people doing the booking through Australian Travel agents are Australian people.

      His argument is based on these tech companies being from overseas.

  • +7

    I think there is a giant hole in Mr. Smith's argument. Hotels and motels do not need to sign up to these online booking sites. Who is "forcing" them? The fact that he says if they don't sign up, they don't get business, shouldn't the hotel/motel owners be grateful for such a service?

    I also tried booking directly with a hotel once, their quoted rates were much higher direct than the booking sites. This goes for online flight bookings as well. Mr. Smith is slowly transitioning into a ranting lunatic in my eyes.

    • +1

      Exactly - 83-88% of $100 is still a lot better than 100% of $0.

    • +1

      The point is about these websites abusing their market power, and placing unfair conditions on hotels who need to sign up to them.

      Arguing that hotels simply don't need to use these services ignores the reality. Imagine if Coles/Woolworths forced a company (Dr. Oetker) to always sell them frozen pizzas at a certain price, and forced them to not offer them direct to consumers at a cheaper rate. It's not realistic for that business to find alternate means.

      His argument is also that both companies are based overseas and pay next to no company tax, so there's no possibility of an Australian company paying Australian taxes and wages to compete, which is a much wider problem than just this industry

      • I am not sure what the "abuse" might be? What you have just said is basically the act of negotiating a wholesale agreement?

        If a smaller company is faced with unfair conditions, why sign the deal at all? Speaking about ColesWorth, I know some friends in the food wholesaling business, they have chosen to not deal with ColesWorth for this very reason, that the deal you sign with them usually favours the supermarkets. My friends have chosen to deal with local grocers and restaurant/bars instead. Sure, dealing with the supermarkets will triple their profits overnight, but it also means that they need to carry 3 times as much stock and hence make their business a lot riskier.

        The same goes for these OTA sites, you increase your profits but probably at a lower profit margin, why whine about it in the process?

        Re: companies pay no tax, I am not sure what to tell you, a lot of Australian companies pay no tax either. With globalisation this is not going away anytime soon, so better get used to it.

  • +2

    This is a bit of a mixed bag… I've got a place that I stay at semi-regularly while in the city, and I've a note on my customer file to rate match booking sites. I know this because there was an instance that I rang and asked for their best rate & it came in at $20 more than a booking site, I asked for it to be matched and was denied. Consequently I booked on the booking site and when I checked in I was told that they'd match booking site prices if I called and asked, which I said I had done that to no avail, and the person serving (who knew I was a repeat customer) told me that they'd note on my profile to price match. Since then I've had no issues getting the cheaper rate directly from the venue. On the other hand, I've tried the same tactic with a different hotel (my regular was booked out) and was told they couldn't price match, so I went ahead and booked through the booking site.

    • +4

      I have literally stood in the lobby after talking to reception and booked via my phone because they wouldn't match. It's incredibly frustrating because I know the apps are taking a cut for little work and most of the competition in the OTA space is artificial but at the same time I'm not spending an extra $40 just for shits and giggles.

      • +2

        Haha, shits and giggles, isn't that why you need a hotel room?

      • It's beyond ridiculous frankly. For such a price driven industry they can't afford to do this to customers.

      • +2

        Same thing happened to me! Apparently it’s an agreement with the OTA’s where they cannot sell direct at the lower price, the hotels needs to maintain a high walk in price so the OTA website can show that it’s on “discount” / “special rate” if you book through them

      • Had the same experience last week (over the phone though)
        Called reception of hotel, they couldnt match but they got it close enough that I couldnt be bothered buying it online.
        I cant believe it isnt standard practice to match, to be fair they could easily do the bunnings thing and beat it by 10%, if uncle Dick is right they are still better off at the end of the day

    • I've a note on my customer file to rate match booking sites

      This doesn't line up with:

      I was told that they'd match booking site prices if I called and asked

      Because if it was standard procedure, why would your file need a note to begin with? Not to mention, why aren't they giving the same discounted rates to normal customers in the first place, and saving themselves the booking site commission?

      • That's the point of the post

  • +4

    My experience with wotif and booking.com is they are cheaper 9/10 times than booking directly with hotels for Melbourne. Usually they aresignificantly cheaper so I will keep using them.

    Staff at some hotels have even lied to me saying their websites rates are cheaper when they are not.

    Hotels can not complain about having the the best of both worlds.
    They want to charge a higher rate to anyone who comes in directly in person or through their own website who is likely buying a room without comparing prices or in a last minute situation. So you will pay more for it.

    At the same time they don't want to lose indirect customers who are browsing online booking websites that make it very easy to compare prices and features and choose the best option. These websites are definitely better for consumers.

    • +2

      Staff at some hotels have even lied to me saying their websites rates are cheaper when they are not.

      Yup. But oh, of course they wouldn't like to a news outlet, would they?

      Another motel owner, Charlie Loftus, says customers had been “brainwashed” into thinking OTAs were cheaper than direct booking.

      • +3

        And of course most hotel websites are very poorly designed and take 20 clicks just to get a price. I can't help but think it's intentional.

        • +2

          Exactly. And designing, hosting, and maintaining a usable web-interface, booking system, and payment portal all take money too - which are all provided by the OTAs in addition to bringing in more business. That's savings for the hotel/motel already, not to mention savings from less staff having to answer calls to take bookings too.

  • +1

    Reminded me of this segment from The Checkout: https://youtu.be/FfkGVC1DF9s

    I've been meaning to try booking directly over the hone with a hotel (literally something I've never done) but to be perfectly honest, I just prefer the experience of using OTA's. I can see the hotels in the area I want to stay, filter by features I'm looking for and the price I want to pay and (sometimes) earn free nights without being tied to a single hotel/chain.

    • +5

      Whenever I've contacted a hotel directly for their best price it's always been higher than what OTAs are quoting. On one occasion I was in their reception so just pulled out my mobile phone and booked it with the OTA right in front of their faces.

  • -1

    for one agree with Dick on this occasion

    So basically, you're for Dick.

    You agree with Dick.

    You want Dick.

  • +1

    How the system works

    The booking websites are one level of cost in this system for hotels. When you go to a hotel's website you are often looking at an embedded "whitelabel" version of one of those websites, so the rates will be much the same.

    Then there are the distribution channels for the hotel's data. A hotel owner does not want to log into the countless online booking websites which may offer their hotel for sale to update their availability and rates constantly. Instead, they just have seller accounts with those sites to input their general info and photos. The hotel owner then inputs their rooms, availability and rates into a single distribution point which they also pay for separately. In some cases, the data hosted on some distribution points can include everything a booking website needs to present the hotel for sale - the hotel operator just needs to make an account with a booking site and pay for it!

    All the individual booking websites then read the data from this single point to build the room types list, populate the availability and rates, and also get automated updates when a room is booked or booked out so the date can reflect the room's availability. Quite often, this single point data service also offers the "whitelabel" website for the hotel to embed on their website. Each booking website takes the commission on the sale, which means they can add their own markup to the rates.

    So in the end, it makes life so much easier for hotel operators but it comes at a two-system cost on top of running the actual physical establishment, and if they don't get involved then they're simply going to miss out because we all love to compare and find the cheapest price online.

    If you call a hotel directly and book over the phone, they may give you a slightly cheaper price but you are doing them a real favour by giving them a bit of a kick in income from a sale which they would really appreciate. They then login to the single data point and reduce the availability for the room on the date you ordered with them, and it spreads to all the booking websites.

  • +2

    I had a friend in France once walk in off the street at a small hotel, and they wanted €100 for the night (rack rate). He had found it on booking.com for €60 (which is how he found out about the hotel in the first place), but they wouldn't budge on price. So he sat in the lounge next to reception, booked the room in that hotel on his phone via booking.com and 10 minutes later, they received confirmation of his room. He got his key, smiled, and said, "Merci" and went up to his room.

    So essentially, they got less than the €60 because of the website's cut, where they could have at least had that full matched amount.

  • I recently stayed for a night in Amsterdam. The hotel that I wanted said on their website that they supposedly offered a 10% lower rate than booking thru any other method, but when I tried using that, it would only apply the discount for stays of 3 nights or more, and, when I then tried to book for one night, it said that the only availability that night was in their more expensive class of rooms rather than the basic ones. I then did an internet search which found an online booking company, called ZenHotels.com who offered me the lower priced category of room, and included the 10% discount! When hotels behave like this, I don't care if they get screwed a bit by the booking agencies. The only downside of using the booking agencies is that you have to prepay for the room rather than only give your credit card details to have the hotel direct HOLD the booking.

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