Lowcosttravel group - is the OTA business model in trouble?

deeboy1

I stand to lose approx £900 accommodation costs from the demise of the lowcosttravel group, thankfully a lot less than some, and AMEX sounded remarkably confident somehow today that I'll get my money back for what I've spent on my credit card (we'll see).

However, I'm now worried that there will be a negative knock-on effect on other companies (given the seemingly complex and incestuous relationship that these intermediary companies seem to have); or that this is a sign the OTA business model is in danger and other similar businesses are likely to collapse.

Clearly in hindsight it seems lowcost had been in trouble for a few years (though I hadn't picked anything up). Maybe it isn't the case elsewhere. But I'm now concerned about my 000s of pounds of outstanding bookings with OTAs like hotelopia (worryingly also incorporated in Majorca), booking.com (Netherlands), Expedia (US) and others. Then there is travelrepublic and laterooms, both UK based but same model that I've used in the past.

Being UK-based doesn't seem to give you any protection (unless you've booked a package) and looking around many sites it certainly doesn't seem very easy to work out their financial health.

At least with booking.com, they often don't take payment in advance so there's no money at risk I suppose. But what about refundable bookings with other companies, where they take payment at purchase or before the stay? Should I cancel these in the event they collapse too or am I being over-dramatic? And how can I find out easily the financial state of these companies? Are there some that are known to be in good health or poor health?

Yes I do often book hotels direct, but there is no getting away from the fact that these OTAs often offer better rates that you can't match direct. Would welcome others' views!

richardw

The hotel industry doesn't like bed banks and if you watch TV commercials you'll notice Accorhotels and their brand Ibis advertising book direct deals.

I've noticed that gradually some of my favourite hotels just don't deal with pre paid bed bank websites anymore.

Engadine

I have to disagree, hotel chains do like hotel wholesalers/bedbanks, they do too much business with hotels for them not to. Yes hotels are advertising more and more to book direct but that doesn't mean they don't want to work with wholesalers. It just means they are becoming more restrictive on distribution of their rates.

It very much depends on the business model of each company. I work for a UK based bedbank and yes it had been rumoured for a long time about Lowcost but these rumours do not always come to anything. Unfortunately this time it did.

You need to check out who you are booking with, are they based in the UK, do they offer any protection. If based in the UK and offering flights they must have an ATOL licence, no need to be ABTA members unless the company wants to be.

I think cancelling your booking is being a bit over dramatic especially as you are booking with some of the largest OTAs. Hotelopia are part of Hotelbeds one of the largest hotel wholesalers in the world. Hotelbeds have just been sold by TUI to Cinven and Canada Plan Investment Board.

deeboy1

I agree hotels must prefer to do business direct and save on the commissions they have to pay, but if not all then nearly every hotel I have tried to book with recently is also available via one of the wholesalers.

Thanks for the info, Engadine, it is good to know that hotelopia are probably at the safer end of the scale then. But I think going forward i will try to avoid those that require upfront payment unless it's a killer rate and a small overall sum that I'm potentially putting at risk.

SW17

richardw wrote: »

The hotel industry doesn't like bed banks and if you watch TV commercials you'll notice Accorhotels and their brand Ibis advertising book direct deals.

I've noticed that gradually some of my favourite hotels just don't deal with pre paid bed bank websites anymore.

Not true, the hotel industry has no problem with bedbanks. What they don't like is certain rates given to bedbanks appearing online to consumers, as they want to control prices and distribution in that sector. Are your favourite hotels affiliated to chains?

All hotel chains would like more direct business, though the reality is that most of them are poor at acquiring and retaining customers. Accor's Ibis brand is something of a special case, given the low rates they don't work with too many intermediaries, particularly for online distribution.

To the OP - You ask a reasonable question. Is the model itself flawed? I don't believe so, a challenge is people wanting the lowest price and "protection" (often not quite knowing what protection is). Protection comes at a cost.

Will other companies go under? At some point, yes. It's always possible, and people's hunger for the cheapest price will always lead some businesses to take more risk to grow. It is nearly always cash flow that puts a business under, so businesses with weak balance sheets and a poor cash flow model are at risk. But not likely to be any of the companies you mention in your post, and diffcult to predict who and when.

deeboy1

Thank you SW17, that's somewhat reassuring!

richardw

SW17 wrote: »

....they don't like is certain rates given to bedbanks appearing online to consumers...

This is what I'm referring to.
I'm sure hotels are fairly happy with booking.com and the like offering rooms at similar rates, pay on check out, to their own website.

bagand96

The online travel agent model is not in trouble as such.

But the travel industry is a very volatile one. And this is no new phenomenon. It's always been volatile and always will be. Lots of competition, paper thin margins. It's often the ones with rapid expansion that end up going under.

But as I said it's not new. Rewind 10 years and look at all the tour operators and charter airlines that were around that aren't anymore. Rewind 10 years beyond that and ask the same question again.

Read up on a man Phil Wyatt. He basically made a business out of starting up a charter airline outfit, operating for a summer or two, liquidating, and doing the same again the next year. Made a good living out of it in the 90s and 00s.

Anyway I digress... The model isn't broken. LCH obviously we're. It's an ever changing industry. The OTA's have been the big growth over the last 5-10 years, so it's probably time for some consolidation.

jumperabv3

I don't like it when people use abbreviations ... you are asking if the OTA business is in danger i.e. if the OTA (=Online Travel Agent) business is in danger?

No, I don't think so.
I booked a flight to Thailand for myself, my wife and my baby as described here:

https://forums.moneysavingexpert.com/discussion/5495706

I booked the flights separately and will book the hotels separately (1st night was booked with Hotels.com)

Am I worried my booking will be cancelled? No ... of course in this world anything can happen but I'm feeling it's safe and sound ...

Why people book via shady websites it's beyond me ... for flights maybe, websites like Tripsta and GoToGate might offer cheaper rate (on SkyScanner) but either way never book the whole thing, I've never ever done such thing, what's the trouble to separate the hotel from the flight? It wouldn't come cheaper anyway.

And for hotels you got excellent websites such as:

Hotels.com
Booking.com
TripAdvisor.com

Yes, even TripAdvisor allows you to book hotels with them, and they wouldn't go bust so fast because their business model is based on much more than just hotel bookings.

Moto2

I tend to use all sorts of sites to find flights and hotels, I then (generally) go straight to the airline/hotel to book with them.
Airlines online but a phone call to the hotel usually secures a good price.

sillygoose

Isn't any tourism a bit of a gamble these days?

I won't know if my holidays plans are truly safe until I am sat in a Taverna nibbling on my Meze in a couple of weeks time...