The origins of hotel booking via Internet

Hotels.com

People constantly travel today. With the emergence of the internet, the way people play and book their holidays and accommodations has changed drastically. Before, they had to call the hotel or physically walk into the hotel to make a reservation. Now, there is a number of websites available that allow travellers to book hotels without using flight centres services. But how did it all start? According to the Skift podcast, where Hannah Sampson interviews Dennis Schaal, Hotels.com is one of the key players “who made the first breakthroughs”.

This essay will overview hotels.com, discuss its history and how hotels.com has transformed the traditional way of travelling. Also, it will outline who is behind the idea of creating this website and will provide the business model behind it. And lastly, the social ecology and how it has transformed the way we use and understand the internet today.

Hotels.com: overview

Hotels.com Logo.png
By Hotels.com – Hotels.com, Public Domain, Link

Hotels.com is a website that allows people to book hotels in any part of the world. It optimises user’s experience and personalises hotels based on the users’ preferences. This website is localised and provides prices in various currencies for clients’ comfort (Hotels.com, 2018). It gives “both independent and major chain hotels as well as self-catering in over hundreds of thousands properties worldwide” (Hotels.com, 2018). According to Hotels.com official website, Hotels.com, L.P. (Limited partnership) is a part of EXPEDIA GROUP that owns some travel websites, such as trivago and CheapTickets (2018).

Bookings are available to make online via the website and by calling to a local phone number that can be found on the website. The website provides reviews from TripAdvisor with the number of reviews and ratings. Payment for the services is made online.

According to Zandi et al. (2016), electronic payments have many aspects that benefit both: consumers and merchants (p. 4). Firstly, a card has access to the bank account with all the finances, while cash limits a consumer at a time; it gives a seller a hundred per cent assurance in the payment being successful (Zandi et al., 2016, p. 4). Secondly, every electronic transaction requires an email address where the digital receipt of a transaction is sent in order to avoid fraudulent transactions (Zandi et al., 2016, p. 5). Finally, it is convenient for both sides of a transaction as lowers the amount of time spent on the completion of a transaction for the buyer and lowers the labour cost for the seller (Zandi et al., 2016, p. 5).

The history of Hotels.com: how it all started

Dennis Schaal conducted a number of interviews for his online book called The Definitive Oral History of Online Travel (2016). One of these interviews was with Bob Diener, who narrates how he and his partner started what is now known as Hotels.com.

Bob Diener and David Litman are co-founders of Hotel Reservations Network (HRN) (now known as Hotels.com). Hotel Reservations Network was founded in 1991 with the idea to centralise the search for hotels and pricing outside travel agencies. The purpose of carrying it outside travel agencies occurred due to the unwillingness of travel agencies to book hotels as it did not help to achieve the desired profit (a commission that hotels paid was not as high as airlines paid) (Schaal, 2016). They established HNR before the internet and worked “over toll-free numbers”, but people did not understand why they had to pay strangers beforehand if they could pay at the hotel at arrival (Schaal, 2016).

How Diener and Litman’s business model has changed the way we view

The online travel agency (OTA) industry has changed how businesses have shifted their operations online. The business model that Diener and Litman started using on their website is known as a merchant model. According to Schmidt (2015), the merchant model is based on OTA industry example refers to the sales of the hotel rooms in large amounts to the websites, and later websites rent it out to people for their price.

It is Diener and Litman’s merchant model that has completely changed the travel and hotel industry (Schaal, 2016). In 1995, they launched a website called Hoteldiscount.com, but only a few people have known what Internet is at a time (Schaal, 2016). As the Internet was not interactive, it took a long time to respond to the clients because Diener and Litman had to manually make all bookings and transactions that could take hours to complete (Schaal, 2016).

“It is a business model that transformed online travel and the hotel industry. In July 1999, Barry Diller’s USA Networks acquired Hotel Reservations Network, and in March 2003 bought Expedia.com, and the two merchant-model practitioners came to wield tremendous power over hotel distribution – much to the resentment of the hotel industry” (Schaal, 2016).

As Hotels.com is a part of EXPEDIA GROUP now, it is fair to mention its business model too. Hotels.com is a significant part of EXPEDIA GROUP that provides accommodation worldwide in 89 cities with 39 languages (Costello, Davis & DeGregorio, 2017). EXPEDIA GROUP originally started using HRN’s business (merchant) model, which was successful in the US, but the expansion of the market towards Europe, Middle East and Africa forced the group to use two business models at once: merchant and agency models (Schmidt, 2015). The agency model allows hotels to provide a list of available rooms to OTAs without selling them and just paying interest to OTAs, which enables hotels to set their prices without OTA’s participation (Schmidt, 2015).

Expedia Group logo.svg
By Expedia Group – Expedia Group web, Public Domain, Link

Internet ecology of Hotels.com

As stated by McFedries (2003), internet ecology is “the relationships and interactions between people and the online environment, in particular the Web” (p. 68). Hotels.com offers a large number of hotels that website visitors can rent, and the website’s layout helps to narrow results based on many factors, such as price, star rating and facilities. Reviews on Hotels.com are so-called “footprints” that allow new users to make their choice of hotel based on other people’s previous experiences (McFedries, 2003, p. 68).

Hotels.com founders sold their shares of the company to the EXPEDIA GROUP, so it is fair to mention current leadership list:

  • President & CEO – Dara Khosrowshahi
  • CFO & EVP, Operations – Mark D. Okerstrom, MBA
  • Secretary, Executive VP – Robert J. Dzielak
  • CAO & Controller – Lance A. Soliday, CPA
  • SVP Global Marketing – Cyrill Ranque
  • Investor Relations – Alan Pickerill

As the company was the first one to launch the idea of self-booking via the internet, it has many competitors that offer similar services. According to the iSpionage website (n. d.), the main competitors for Hotel.com are tripadvisor.com, trivago.com, booking.com and kayak.com. All these websites provide similar services: finding and booking hotels around the world.

Users of the platform are hotels and visitors. Hotels.com provides hotels with a platform that can reach to a bigger audience as the website is adapted to 39 languages and various currencies. It also makes it clear for users because they can apply filters that will only show options that are the most suitable for their clients in their native language and currency. The algorithm of booking hotels online via websites such as Hotels.com includes six steps:

  1. “The client enters the online booking system website and reads through the booking rules;
  2. Next, one picks a hotel and, having made sure there are vacant rooms available and filled in all the relevant fields in a form, sends one‟s order into the system by email;
  3. The system automatically processes the order (except in non-standard cases) and sends a preliminary confirmation along with the terms and conditions of prepayment, and the client is placed on a waiting list;
  4. Upon receipt of relevant guarantees from the client (a deposit, a letter of commitment, etc.), the agent makes a final confirmation of the booking;
  5. A copy of the final confirmation is sent over to the hotel;
  6. Then the booking information is entered into the occupancy schedule with a subsequent automatic change of the status of the hotel’s room supply with the agent.” (Molchanova, 2014, pp. 75-76).

As was mentioned above, Hotels.com uses merchant model, where website buys rooms from hotels, lists them on the website and applies the percentage to the original price set by the hotel for the revenue.

Resolver.co.uk, on the other hand, helps customers to resolve any problems that may occur with the booking through Hotels.com. This website provides customers with information about their rights as well as helps to find all materials and build the case (Resolver.co.uk, 2018).

Hotels.com internet ecology diagram:

How is Hotels.com innovative in the travel industry?

Schaal’s interview of Hotels.com co-founder Diener showed us that they were innovators of merchant model that allows people today to make accommodation booking via the internet (2016). Today, fewer people go to flight centres in order to book their holidays because there are plenty of websites that follow Diener and Litman’s original idea that has completely changed the way we view the OTA industry comparing to it to the way it was even 30 years ago. This scheme allows people to book hotels anywhere in the world at any time of the day from any device that has internet access.

As a result, Hotels.com has completely erased the need of involvement of a third person in the holiday planning person because it provides all the needed information online: images of rooms, the location of a hotel, all the included facilities, the price and reviews from previous guests. Moreover, all the transaction can be made online, and receipts are automatically sent to a customer’s personal email as well as the customer is automatically in a hotel’s system as evidence of a successful transaction and in case of problem occurrence.

However, like any other system, Hotels.com has its flaws. There are many instances of a poor customer service experience that people shared on many forums, such as TripAdvisor. Case 1 shows that even though the customer cancelled the booking 3 months before check-in, they were charged for the first night. The website stated that their cancellation policy has no fees if the cancellation is made at least 24 hours before check-in. As turned out later, Hotels.com had a ‘miscommunication’ with the hotel, and on top of that, they provided the wrong number of the hotel. According to the customer, they have found more similar cases.

TripAdvisor logo.svg
By TripAdvisor, Fair use, Link

In case 2, the customer did not compare prices on the Hotels.com and the hotel’s official website and just booked through Hotels.com because of a promotion (10th night is free). How many more occurrences like this are out there? And how many more customers do not know about?

Finally, case 3 shows that the person who booked a hotel in the US from Australia was charged for an international transaction on a domesticated version of the website (au.hotels.com). When the customer was seeking help from the customer service, the person over the phone could not provide relevant information about the situation and the customer’s emails with the proof were not sending through.

Conclusion

To conclude, Hotels.com is a revolutionary system that has changed the way people travel today. Co-founders have introduced the business model that no one used before – merchant model, and it turned the hospitality industry upside down. It has inspired many people to start their own businesses using the same model and scheme. At first, it was a challenge to start this business and explain why people should pay money to some website when they could easily pay at the hotel and the first website that was operating on a non-interactive internet. But in the end, it has dramatically transformed the travel industry. Although, customers regularly express their indignation in online forums by sharing their experiences and warning other people to be careful or even avoid using the service. But all the flaws of the system do not change the fact that it is a prevalent way to travel and people do not seem to go back to the classic way of planning their travels any time soon.

References:

Costello, M., Davis, J. & DeGregorio, Z. (2017, March 23). Expedia, Inc. USF Student Managed Investment Fund. Retrieved from: https://www.usf.edu/business/documents/departments/finance/smif/analysis-expedia.pdf

Hotels.com. (2018). About Us. Retrieved from: https://au.hotels.com/hotel-deals/about-us/

Hotels.com. (2018, April, 23). Dancers! Goats! Pugs! :30. Retrieved from: https://youtu.be/guTP5i9JSrQ

iSpionage (n. d.). Top Competitors for Hotels.com. Retrieved from: https://www.ispionage.com/Competitive_Intelligence_directory/h/1/hotels_com_686F74656C732E636F6D

McFedries, P. (2003, April 4). The Internet Ecology. IEEE, p. 68. DOI: 10.1109/MSPEC.2003.1191786

Molchanova, V. S. The Use of Online Service Booking in Tourist Activity, European Journal of Social and Human Sciences, Vol.(2), №2, pp. 75-80. Retrieved from: http://oaji.net/articles/2014/739-1411568923.pdf

Resolver.co.uk (2018). Hotels.com complaints. Retrieved from: https://www.resolver.co.uk/companies/hotels-com-complaints

Schaal, D. (2016). The Definitive Oral History of Online Travel. Skift. Retrieved from: https://skift.com/history-of-online-travel/

Schmidt, A. (2015, September 29). What Business Model Does Expedia Follow? Retrieved from: https://marketrealist.com/2015/09/business-model-expedia-follow

Zandi, M., Koropeckyj, S., Singh, V., & Matsiras, P. (2016, February 27). Analysis: The Impact of Electronic Payments on Economic Growth, West Chester, PA: Moody’s Analytics, pp. 1-27. Retrieved from: https://usa.visa.com/dam/VCOM/download/visa-everywhere/global-impact/impact-of-electronic-payments-on-economic-growth.pdf

 

 

Sasha Alekseeva
About Sasha Alekseeva 3 Articles
An international student at the University of Sydney, majoring in Digital Cultures

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