Recently, I have noticed two pieces of news. Firstly, many hotel markets have experienced a severe decline in performance. Secondly, the revenue of some large platform companies continues to grow, especially OTA related to hotel online booking.
Simply put, the market has formed two extremes: ice and fire.
And then today’s strange thing happened.
Due to my repeated business trips in a county-level city recently, a strange thing suddenly occurred: a hotel with a room rate of 300 yuan last week actually rose to 800 yuan the following week on a non major holiday.
I believe that the price increase of hotels is also a normal fluctuation in the market, so I had to move to a hotel with a budget that matched my travel expenses. Being constantly rushed around the city due to high housing prices is also unavoidable.
But until today when I checked out, the unintentional chat between the author and the front desk triggered a “new continent”: the front desk manager reported that they did not raise prices, it was the platform that was raising prices, and the profits from the rising housing prices actually went 100% to the platform.
This sparked a strong interest in the author, as I have been directly involved in the OTA industry for 10 years and find it unbelievable to see such a “one-sided” situation.
As an intermediary platform, OTA usually takes a proportional commission, or reserves a room, and the platform assumes the risk of not selling the room after reserving funds.
But I am truly shocked by the practice of platforms like today, where they do not rent rooms, take rebates, and then sell at a markup and take 100% of the incremental portion.
So I communicated with the manager and discovered many strong business behaviors of the platform:
- The platform raises prices on its own, ensuring a steady profit without loss
For example, the room booked by the author shows a selling price of 210 yuan on the system, while the actual settlement price is 190 yuan, but in reality, the price paid by the author is 300 yuan.
That is to say, the platform not only earned 20 yuan from hotels, but also “extra” earned 90 yuan from customers, totaling 110 yuan, which is about 36%.
That is to say, the platform does not bear the risks of the contractor, but obtains the profits of the contractor. The reason why hotels are willing to compromise is because the platform is too dominant.
- The platform has access to hotel data and has the ability to ‘kill’ users
Although the hotel manager cannot articulate the concept of PMS, in reality, the manager’s sales management system uses the system provided by the platform. Even if a guest cancels upon arrival, the system can still monitor their actual check-in.
In such a situation, the hotel manager will receive a warning, and if such a situation occurs again, they will face punishment.
To be fair, I think this is reasonable and reasonable. Introducing a business should earn a commission, but on the other hand, it also shows that the big data of hotel operators has been firmly controlled by the platform.
What I am truly concerned about is whether these platforms will misuse big data. Especially now, OTAs generally have comprehensive data on users’ travel (major and minor transportation), accommodation, and tourism vacations, providing deep insights into users’ consumption power and habits.
In addition, with industry data such as PMS, the information held by big platforms is almost “unfathomable”. I have a feeling that I am running naked in front of these platforms.
The feedback from the hotel manager also made my concerns a reality. She directly stated that the price the platform sells to consumers is “a thousand faces per person” because she can easily obtain information from customers who enter the hotel. This may be closely related to the long-standing criticism of big data killing.
The author places particular emphasis on reminding consumers that market regulators should pay more attention and be cautious.
- Using information asymmetry to ‘eat the plaintiff and eat the defendant’
In history, platforms in the airline ticket industry have taken advantage of consumers’ lack of understanding of airline refund and change policies, arbitrarily enforcing policies to seek illegitimate benefits, such as canceling orders with a fee of 10% being tampered with by the platform as 20%.
And the owner of this hotel told me that she has caught the current platform violating regulations:
The guest standing at the front desk was told by the platform that cancellation is not allowed and the fee needs to be fully deducted.
On the other hand, the platform’s customer service told the front desk that canceling the order will not be held responsible.
Customers are being manipulated by the platform in this way.
- Multiple platforms collude to manipulate regional market housing prices
Everyone may be accustomed to the “mutual killing and dismantling” between platforms, but now a possible new situation has emerged, which is the cooperation between platforms to jointly drive up housing prices in the region.
According to feedback from hotel managers, during periods that are not major holidays, the platform will fuel the situation by scanning prices and raising room rates, similar to using news to speculate on stocks.
As the author met this time, the hotel manager said that it was due to the arrival of “Zhongyuan Festival”. It’s also ridiculous to think that when did Chinese people spend Zhongyuan Festival in the hotel and have to double the house price?
Originally, the hotel was happy to encounter this situation, but due to the platform taking away all the price increase, the hotel simply couldn’t laugh.
- Compulsory participation in the activity of ‘I make trouble, you pay for it’
The platform often initiates themed activities and automatically lowers the hotel PMS sales price by default, without secondary confirmation and without the need for owner consent.
This makes hotel operators operating near the cost line suffer greatly. If they restore the original price on their own, they may face penalties from the platform, such as downgrading and flow restrictions.
- Other forms of ‘exploitation’ behavior
For example, various sales behaviors that encourage hotels to participate in various secondary traffic purchases, striving to extract more marketing expenses from hotels.
After listening to the hotel manager’s above introduction, I believe that some platforms are a bit lawless and need to be managed by regulatory agencies or CCTV 315.
Due to the development of online marketing, most of the traffic for many hotels currently comes from platforms, leading to the abuse of their dominant position by platforms: on the one hand, they crazily exploit hotels, and on the other hand, they make innocent consumers wrongly pay and believe that price increases are the fault of the hotels.
For its arbitrary price increase behavior, the author even doubts the legality of possible price collusion and market manipulation.
In fact, as an OTA intermediary platform, the best approach is to make money in a fair and just manner, and to work together with hotel entities to overcome difficulties during market downturns.
But now it feels like the hotel has completely lost all pricing power. When it’s good, it has nothing to do with the hotel entity and is taken away with the incremental markup, but when it’s bad, it has to be increased in marketing expenses by various platform arrangements.
Originally, there was an excellent example in the intermediary industry, which was Lianjia, which focused on transparent pricing, fair treatment of all ages, and reasonable profit margins to lower the transaction threshold and costs in the market.
And platform companies, in the profit driven nature of the capital market, are still using so-called technological means to continuously suppress the profits of the hotel industry and increase residents’ travel costs, even though they have already obtained huge profits.
This situation should not continue!
