By Suzie Barber, founder and chief executive of Hotel Bonanza
Often the answer to a problem is right under your nose. In our case, as a 23-bedroom hotel in central London, the large whack of commission charged by online travel agents (OTA) was having a major effect on our margins, and the answer was to fight it – cleverly.
It is no secret that the relationship between OTAs and accommodation providers is at rock bottom, with hoteliers angry that ever-rising commissions are cutting their profits and frustrated by practices that are becoming commonplace in online travel.
Back in 2009 I was looking after the rates for a budget hotel in London’s Earls Court. I couldn’t believe how much commission it paid to OTAs. There was the standard rate of 15%, but the more you paid, the higher you were ranked in the search results. To get a prominent position, you’d pay up to 30%.
But this was the price the industry paid for filling swathes of rooms. OTAs had revolutionised the way people booked their travel and could command big bucks from its hotels as a result. Business is business.
But what if there was another way? What if we could develop an OTA that helped everyone get a fair deal, from consumer through to accommodation provider?
We developed Hotel Bonanza over two years and launched in 2016. We have slashed commission rates to a fixed rate of 8%, we offer consumers a membership scheme that gives a 5% discount – paid for by us, not the properties – for every room they book for an annual fee of £10. We don’t charge properties more commission to be ranked higher, and we are transparent with both accommodation providers and consumers.
This is a practical solution to a problem which has spiralled out of control. In our case, fixing the problem was about us using our industry knowledge, experience and experience of negotiation to come up with a simple solution to an industry-wide epidemic.
We know we’ll be competing with the enormous marketing budgets of the leading OTAs, but our growth plan is built on targeting, innovation, simplicity and word-of-mouth recommendations from happy customers. We’re starting small, but we have a good deal, big ambition and a strong message.
Hotels will once again be in a position to offer regular customers perks because the commission rate we charge hasn’t wiped out their margins. Customers who sign up with us will know we’re about fairness and goodwill; in today’s world a brand’s ethics matter to those who part with their hard-earned cash.
Our model is a gentle revolution in travel. While we might not compete on shouting the loudest, we do compete on the most important level – offering a great deal.