Today I learned – 21st December 2019

OTA’s advertising business has a $1 billion annual run rate

We know Online Travel Agents (OTA) such as Booking.com or Expedia as travel agents or websites where we make reservations. Taking advantage of listings’ desire for exposure, these OTAs charge the listings fees to gain premium positions on their search results, the same way as Google Search Ads works. In 2018, both Booking.com and Expedia recorded more than $1 billion in revenue each from their respective advertising business. It’s nice to have a side business that big, considering that it is not much smaller than what Pinterest and Snap, which make money through ads, generate.

The following chart features advertising revenue from a few select companies in 2018 with a few exceptions:

  • Hulu’s revenue is from 2019 annual report
  • Pinterest’s figure is the high end of their estimate for this year
  • Spotify’s figure is the approximate number for 524 euros
Source: Companies’ filings

Deceiving pricing practice in hospitality in the US

I am not a fan of the tipping culture here in the US as I wrote about it before. I find the pricing practice in the hospitality in the US equally annoying.

I was trying to book a place in Chicago for an upcoming trip. Here is how a room’s price looks on AirBnb:

The initial listed price you see is just 66% of the final price you pay. All the fees make up 33% of the final bill. Wonder what it’s like on OTAs such as Booking.com?

After everything is added, the final price is 25% higher than the advertised price. Resort fees are basically what hotels charge you for the use of amenities and facilities on top of the base room. Think of it this way, instead of pricing everything (base room + facilities) together, hotels break them out in order to charge more. It’s worth noting that not every hotel charges resort fees.

I am not saying that the properties have to eat up the taxes themselves. Nonetheless, I would feel more comfortable if they could just advertise the final prices, including everything. The prices will be higher, but so will be the competitors. So relatively speaking, there won’t be any loss of pricing appeal, but the consumers such as myself won’t feel deceived.