Hotel commissions and the current “merchant model” will disappear within five years, at least in America, a new report by Hospitality eBusiness Strategies, said.
The US-based consultants on Internet business said online bookings for hotels will grow to more than 50% by 2009 with call centres and agencies playing a diminishing role.
“In our view the standard travel agency commission which is currently 10% will disappear over the next five years in the same manner as it vanished in the airline and car rental sectors,” the report, The End of the Merchant Model as We Knowit by Max Starkov and Jason Price, said.
It said it expected the rate to drop to 8%, then to 5% and then become a simple flat booking “reward” of between $5-$10 and after that probably disappear for good.
The report gave as the reasons the decline in importance of agencies and the GDS in general, the shift towards Internet distribution, changing buying habits of travellers and the increased online expertise of major hotel chains.
As evidence the report said that for the first time, there were more hotel bookings in America on online than through the GDS system and it expected this trend to continue.
The merchant model which had helped online booking companies in recent years is also likely to disappear as hoteliers “get the upper hand over online intermediaries.”
Hotel chains will cease to do deals with online agencies and instead work more closely with preferred partners.
Independent hotels will become “increasingly choosy and careful with third party relationships”, the report said.
For their part, the online agencies will embrace the dynamic packaging model as their high profit generator because they can charge higher mark ups than with hotels only.
The report said that US companies like Expedia, Orbitz and Travelocity were already saying that dynamic packaging was the fastest growing segment of their bookings.
* see BTE Analysis