If you stay in a lot of hotels, as I do, it seems odd that after reaming you out of $150 per night they also need to charge you $7 for a short phone call, $7 to wash a T-shirt, $20 for breakfast, $13 for Internet access, etc. A friend who owns hotels explained what is happening…
A standard travel agency sells you a hotel room for $X and takes a commission, usually 10%, passing the remaining 90% on to the hotel. Thus 90% of what you pay can be used by the hotel to make your stay pleasant, invest in high-speed Internet, put in a phone system. Some online services such as Orbitz and Travelocity act as travel agents, finding the best rooms that they can and taking a fixed percentage commission.
Expedia, a company spun off by Microsoft in 1999 but presumably still substantially owned by Microsoft and Bill Gates, uses its dominant market position to arrange favorable deals with hotels. The deal might be that Expedia gets to buy up to 50 rooms per night for $75 each, for example. If the market is soft Expedia can resell those rooms to consumers for $100 per night. If the market is tight Expedia can resell those rooms for $200 per night, pocketing the $125 difference between what they charge the traveler and what they pay the hotel. If things are so bad that nobody wants to pay $75 on a particular night, Expedia dumps the vacant rooms back on the hotel. Much of the profits that hotels formerly earned and invested back in their properties is now being captured by Expedia.
So if you book via Expedia and have to pay $20 for breakfast, have some sympathy for the hotel owner. He might have gotten less than half of what you paid Expedia for that room.
Okay, maybe I’m cheap (well, really cheap). When I travel it is usually for business and I find myself stayin in a motel room for one or two weeks at a time. If I take advantage of the services that the hotel offers, it can really eat up my daily expenses and, eventually, my boss will start to question my expense vouchers.
So…
First thing I do is have the hotel empty all of their mini-bar stuff out of the frig.
Then, I take a trip down to the local grocery store and stock up on fruit, picnic plastic (bowls, spoons,cups), microwavable meals, snacks, milk and even some beers.
The next trip is to find a laundro-mat.
All this happen in the evening, ’cause 8-5 (or longer) is spent in the office.
I can save tons of money this way and even affors to splurge on a couple of nice meals and a couple of dvd rentals at the local blockbuster (oh yeah, I NEVER view the movies that the hotel offers).
Sure, I have to do some wiring with the tv and (kinda) live like a monk, but it works out pretty good for me.
Plus, if I stay over the weekend there is always extra money to go see the sights.
Oh, and there is always the breakfast buffet to look forward to 🙂
Why is sympathy deserved? Can’t the hotel owner opt not to deal with Expedia in the first place? If so, surely the hotel owner is only doing so out of overall financial gain.
Barry Diller’s InterActiveCorp (formerly USA Networks), which also owns Ticketmaster, Hotwire, Home Shopping Network, Match.com, CitySearch, Hotels.com and Evite, bought out Microsoft’s stake in Expedia 2 years ago. Note: all of thee businesses are exceedingly lucrative online middlemen, not glamorous but marginally profitable content businesses (which they cleverly unloaded on egomaniac Vivendi Universal’s then CEO Messier).
So why do I get exactly the same deal when I book directly with the hotel? I guess in that case the hotel owner should feel sorry for me? But at least now I know why many “Expedia Special Prices” are more than you would currently pay directly to the airline or Hotel.
What pisses me off about so many “luxury” hotels is that all their money seems to be spent on oh so attentive staff. People, as you know, are any company’s greatest expense. By saving on people they could make the showers work better, or put in a bed that isn’t 20 years old. And if I am staying in a hotel for a week, or weeks at a time, I want it to feel like home. That means no friggin’ maid cleaning up after me every day; my home isn’t a sterile enviroment, and neither should a hotel be. When I want the sheets changed and bed made I’ll leave a note on the door, thank you.
And don’t even get me started that they get away with advertsing. (and earning stars for) things like having a spa pool, which in reality are a handfull of jets in the corner of a cold, tiny, swimming pool hidden in the basement with no natural light what so ever.
Yes Holiday Inn, Hilton and Radisson, I am talking about you.
Gary – How do you get the hotel to empty the mini-fridge? They always refuse when I ask.
It is clear from your post that you need to be updating the various Bill Gates wealth clocks. I believe the calculations only factor in profits from Expedia and the like to the extent they’ve accrued to MicroSoft rather than to Bill Gates personally.
Whenever possible I stay in mid-market hotels such as Courtyard by Marriott. No outrageous fees.
I have no sympathy whatsoever for the profits of hotels.
My significant other once worked for the afore-mentioned Courtyard by Marriott; their standard room rate is @$110/night, much higher on busy weekends. She was told, should she need to make an offer to make a customer happy, that she could sell a room for as little as $15/night (yes, that’s $15) and the hotel would still make an acceptable profit. Not break even, PROFIT.
With margins like these hotels can take their increased fees and stick them up their arses.
Also, very few travel agencies recieve commissions anymore; the “old school” travel agency survives nowadays by charging fees to their customers, particularly in corporate travel management.
No sympathy here. I try my damdest to find websites of local hotels so I can deal directly with them and cut the middleman. Are they grateful for my efforts? No way. They consistently charge me more than their agents. Maybe they sign contracts that they can’t undercut their channel, who knows? It is absolutely stupid that I can use Priceline and get 50-75% off rack rates, but I can’t just walk into a hotel and ask if they have any rooms left tonight and work out a discount. They always quote the rack rate.
i will buy it in Expedia , no Q.