by Nawar Alsaadi

Online travel agents and online travel comparison sites present a major component of the global tourism market today, a component that is likely to grow and mushroom over the next many years as more people log online and more people experience the connivance and the security of reserving their hotel room online, but does the internet offer the best deal?

From my experience as a hotel owner and a marketing manager that have dealt with dozens of online travel agents, the answer is clearly no.

The reasons for the above vary, but they can be segmented in the following main segments:

- Excessive commissions.
- Misleading Promotions.
- Payment per click pricing (mainly for online comparison sites).

Excessive commissions

Major online travel agents charge a minimum 30% commission for each room sold on their website, this is a huge percentage and no other industry pays a third of the value of a business transaction as a commission, what is worth mentioning however is that the 30% commission standard, was not the historical standard charged by travel agents, the standard stood at 8% to 10% for decades.

The problem with higher commissions is that they squeeze the hotel into charging an artificial RAK rate in order to compensate for that excessive commission; in addition those same agents forbid the hotel from charging lower rates when selling directly, this in return create artificially higher prices for everyone and not only for the online travel agents customers.

Worst Deal! & Worst Price Guarantee!

As an insider in the industry, it is clear and apparent that the “Best Deal” means the best deal for the agency and NOT for the client, as hotel owners, we are constantly offered the possibility of being selected as a “Preferred” or “Best Value” partner, If we agree to offer the agency a higher commission, or if we agree to offer the agency a higher allotment, the rule is: if you offer more commissions and more allotments, you will be first shown in the city listing and widely marketed, no matter how high you price your room.

The above is a clear attempt by agents to mislead clients into thinking they are buying into the best deal, while it is very likely they can find better, not even by going to another site, but by browsing the same agency site for the none best deal offers!.

The best price guarantee and best deals promotions are highly unregulated and are heavily abused by online travel agents to the determent of the consumer.

Pay per click

When online comparison sites first came to the market, it was a welcome development, since it seemed that they were finally going to pressure the online agent into being more transparent in regards to prices and commissions; however it turns out of being a case of outsmarting the online travel agents into fooling the client.

Online comparison sites do not allow smaller reservation sites (with lower commissions) to list on their sites, under the pretext that they don’t offer enough choice, however the real problem is that smaller sites that usually have lower commissions and lower prices do not have the budget to be listed in the comparison site, or the small website commission is not high enough to be shared profitably with the hotel comparison site.

The above are three of the main problems facing the online hotel industry today; problems that are harmful to both, the hotel industry and the client.

The fragmented & very competitive nature of the hotel industry has hindered the industry ability from creating an efficient distribution model, thus giving rise to the online hotel consolidator.

The internet major business advantage is in its ability to bring closer the client and the supplier, the internet most successful business models are the ones such as EBay and Dell, where the middle man is pushed out of the equation, hence bringing more efficiency and transparency into the market.

What is happening in the online hotel reservation market today is exactly the opposite, the internet has actually reduced efficiency and with the recent wave of consolidation between the major online travel companies, the client choice is getting more limited by the day, while hotels are squeezed into a situation where you either play by the agents rules, or you are out of the game.

Nawar Alsaadi is a small hotel owner and founder of Global Hotel Discount.