Accommodation

Company profile: Low-commission Hotel Bonanza tempts hotels from ‘big two’ OTAs

Posted by Ben Ireland on
Company profile: Low-commission Hotel Bonanza tempts hotels from ‘big two’ OTAs

An online booking platform for hotels is hoping to take on the big two OTAs with a promise not to raise the level of commission past 8%.

Hotel Bonanza celebrated its 10,000th hotel sign up in February, a month after its first marketing campaign launch in January.

Its puts a big emphasis on its fixed commission rate, but also provides discounts and deals to consumers who are members of its Bonanza Club.

Co-founder Suzie Barber explained that the idea has been in the pipeline from 2014, when she started helping her partner Bhavin Swaly with the rates and availability of his Earl’s Court hotel.

Barber, who is also a freelance journalist, said: “They were struggling with commissions, and that’s where the idea grew from. We wondered why commissions needed to be so high and whether we can we come up with an alternative.

“We did quite a lot of research into suppliers and accommodation providers in London and got the same response – commissions are going up and we are desperate for an alternative.”

Barber and Swaly, who live in Devon,  knew most hoteliers are in some ways stuck between a rock and a hard place with the big two OTAs; they are the largest source of bookings but come at a premium.

“It’s difficult for accommodation providers, particularly the smaller ones,” Barber said. “The big chains can negotiate better deals but smaller ones get the majority of their business from Booking.com or Expedia and it has been hard for them to push their direct marketing. It’s a no-win situation for accommodation providers and the big two keep getting stronger.

“Now, the commission has gone up to 10, 12, 15%… there needs to be an alternative”

Properties can be tied into price parity deals with Expedia and Booking, meaning they can’t advertise cheaper room rates via any other open channel.

This is the clever bit of Hotel Bonanza. As the rates are only offered to its members, it becomes a ‘closed marketplace’ so rooms can be sold cheaper than direct on a website and via the big two OTAs.

So, the theory goes that hotels can save money by spending less on commission through Hotel Bonanza, and instead offer customers incentives if they book through the platform – that could be anything from a discount to a free drink.

Members have to be signed in to see the discounts as they can’t be displayed on the open web.

Membership is free for three months after a hotel’s first booking, and £10 per year thereafter.

“Hotels tend to be quite anxious as they don’t want to be penalised by the big players, but if you have a closed membership, then all bets are off. That’s the key to Hotel Bonanza,” she explained.

The theory is there, but how does Hotel Bonanza take on the big two?

“You can’t take on Booking.com or Expedia with pay-per-click marketing,” said Barber. “We’d just never succeed. For us, it’s about our membership and building up a loyal club so we can give people true value.”

Since its ‘official’ launch in January, Hotel Bonanza has been pushing to boost its membership.

Barber said she wanted “everything in place” on the hotel side before building the membership but that the platform is now “starting to build up our booking numbers”.

To continue to grow that membership, Hotel Bonanza will push social media channels, destination marketing and use of Facebook groups.

It is also looking to branch out into other services in the long run, with tours and activities its next vertical. But Barber said the company is “certainly” looking at flights and transfers further down the line.

The medium-term plan is to have 100,000 hotels signed up by the end of the year, but before then there is another funding round to take on – following the £150,000 it raised in December – paid for mainly by the same accommodation providers that are its customers.

“There’s no question that we will need more money behind us, it’s a very competitive market, but we are ready.”

Barber is sure that Hotel Bonanza’s model will take off because “there is a massive appetite for change”. But one thing that won’t change is the 8% commissions.

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