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Consumers searching online for flights and hotels frequently are extremely focused on price and when a company charges a fee that’s its competitors don’t require that can turn into a major determining factor in their selections.
Such was the case in the 2007 to 2009 period when Priceline.com led the trend and eliminated consumer booking fees on flights, and Expedia followed a couple of years later. The fees were only a few dollars, around $5 to $6 for domestic flights and $10 or more for international trips, but both Priceline and Expedia made market share gains when Travelocity and others stubbornly hung onto their fees.
Priceline Group’s interim CEO, Jeffery Boyd, thinks a similar dynamic may be under way in alternative accommodations when considering that HomeAway instituted a traveler booking fee for the first time earlier this year, and Boyd’s Booking.com unit, which now offers 493,000 vacation rentals and apartments, refuses to charge travelers a fee when booking alternative accommodations.
Boyd thinks consumers will notice the difference. Unlike when online travel agencies in the early 2000s were charging travelers a fee of $5 or $6 on domestic flights, HomeAway’s fee is more substantial — 6 percent of the rental amount excluding taxes and any refundable deposits for vacation rentals.
“So we like that [no-fee] business model,” Boyd said during the Priceline Group’s second quarter earnings call August 4. “We like that hand of cards that we’ve been dealt. I think that HomeAway’s customer bases and their owners are chafing a little bit at a substantial increase in fees.”
Some vacation rental owners are not only chafing — they are going to court. HomeAway faces several putative class action lawsuits over the fee, which it instituted in February 2016.
Boyd thinks consumers will appreciate that Booking.com doesn’t charge travelers a fee on alternative accommodations and that they will increasingly be shopping around, comparing apartments and vacation rentals as they currently do for hotels.
“In fact and ultimately, in a competitive marketplace for these types of properties, consumers have been shopping around for hotels for 15 years, 17 years now,
Boyd said. “And it’s probably the case that over time, they’ll shop around for vacation rentals, and ultimately it’ll be about finding the best value. And I’m hopeful that we’ll be able to provide the best value.”
Comparison-shopping, or metasearch, sites such as Kayak, Hipmunk, TripAdvisor and Tripping are already ramping up access to alternative accommodations’ inventory in a quest to enable consumers to compare one property against another — an effort that is far more complex for alternative accommodations than it is for often-cookie cutter hotels.
Jen O’Neal, founder in CEO of vacation-rental metasearch site Tripping.com, consumer behavior when it comes to searching for vacation rentals has already undergone dramatic change.
“The vacation rental market isn’t just evolving towards the way consumers shop for hotels — it’s already there and it’s taking off in a big way,” O’Neal says. “Demand for price comparison is skyrocketing as consumers become increasingly aware that rentals are often listed on multiple sites at multiple prices. This year alone we’ve already generated over $250 million in gross bookings for our partners (which include Booking.com and HomeAway) and we expect the demand for price comparison to grow in line with the alternative accommodation market, both in the U.S. and abroad.
That trend will undoubtedly pick up even more momentum in coming years.