By June 2023, travel app log-ins were 87% higher than by the end of 2019. OTAs have taken over the hotel booking industry, and if you are running a small bed and breakfast, you must be lured to sign up for a popular booking platform. A few months later, you're drowning in fees, struggling to talk to guests, and feeling like another one biting dust. Sound familiar?
Platforms like Booking.com and Airbnb connect millions of travelers with places to stay worldwide. Last year most travelers used OTAs as the top online resource for booking (80%). While these platforms have made travel easier, they've also created a bunch of headaches for property owners and managers. Why are so many businesses stuck between a rock and a hard place, and what is your way out of it? Let’s sort it out.
Why Booking.com can be a let down for your hotel
At first glance, Booking.com seems great for property owners. It promises to put your place in front of millions of potential guests. Its popularity and success are only growing: in Q2 2023, it generated $5.5 billion in total revenue and a $1.3 billion profit. Its market share is estimated to be above 60%.
But dig a little deeper, and you'll find a mess of issues that can really hurt your bottom line and how you run things. Although varied in nature, problems with booking.com can be divided into several categories.
Problem 1: Booking commissions
Let's start with the big one: booking commissions. Booking.com typically charges 15% or more on each reservation. For a small business with tight margins, that's a big chunk of money. And it's not the percentage that's a problem — it's how it adds up over time. As you get more bookings through the platform, you're paying more for your own success. This is one of the major problems with Booking.com that impacts small hospitality businesses' growth.
15% is only the average commission – for different hosts, it can range anywhere from 10% to 25%. It typically gets higher if you use Booking.com’s member service.
For example, if a room is priced at $100 per night and the OTA charges a 20% booking commission, the property owner only receives $80 for that booking. Over time, these commissions add up to a substantial amount of your revenues and leave you with little to no budget for growth. This is particularly challenging for hotels with no prepayment options.
Problem 2: The dangers of payment processing
Then there's the payment processing. Booking.com's system can be confusing, often holding onto your money for a while before giving it to you. This might cause cash flow problems, especially for smaller operations that need a steady income to cover costs.
Many hotel operators, particularly in Thailand, Indonesia, and Europe, have not received payments from Booking.com for at least several months in 2023. Booking.com called the payment delays a "technical issue," and this issue led to drastic difficulties.
Real property owners' stories say a lot. Trandafir Rat in Denmark was owed €10,000 and risked losing his business. Loren Infeld in Thailand was owed about $3,500 and had to pay expenses out of pocket, which ended with a property seizure. In both cases, they placed numerous support requests, and didn’t see any resolution.
Problem 3: Communication is the lost key
Communication is another painful moment for Booking.com users, ranging from communication between hosts and the platform to communication between hosts and guests. The platform acts as a middleman between guests and hosts, causing delays and misunderstandings in the process. If a guest has a last-minute change or special request, it might take hours or even days to get a response through authorized channels.
When problems do come up, many property owners say it's hard to get timely and effective support from Booking.com. The sheer size of the platform means that individual concerns often get lost in the shuffle. During the abovementioned 2023 crisis, Emily Stanley from Bali was owed $11,000 in March and struggled financially until she contacted a finance officer directly.
Some landlords have been paid once their stories became public or after contacting company officials through Facebook or LinkedIn. Are these extreme measures worth the potential benefits?
Problem 4: A threat to economic sustainability
The Booking.com payment crisis highlights critical issues surrounding economic sustainability in the hospitality industry. To better understand this, let's define economic sustainability and explore its relevance to Booking.com.
Economic sustainability refers to practices that support profitable operations while ensuring financial stability and resilience against market fluctuations or crises. With OTAs like Booking.com, maintaining economic sustainability becomes particularly complex for those relying on ‘book now pay at hotel’ models. Several key issues threaten the economic sustainability of these properties:
- Pay-on-arrival bookings through OTAs are more vulnerable to no-shows and last-minute cancellations. Without upfront payments, hotels end up with empty rooms and lost revenue from late room booking.
- The Booking.com crisis highlighted how payment delays can cripple hotel cash flow. And OTAs often require hotels to offer the same or better rates on their platforms, limiting the ability to offer special deals for pay-on-arrival guests.
- Bookings through OTAs make it difficult for hotels to build direct relationships with guests. Pay-on-arrival hotels often receive limited guest information from OTAs until check-in, making it hard to prepare for guests' needs or upsell services in advance.
- Managing bookings from multiple OTAs for pay-at-property hotel guests results in accounting errors. Also, some OTAs restrict a hotel's ability to quickly adjust prices or inventory for pay-on-arrival bookings, and hotels end up making less money than they could have.