A lot of people ask me why anyone would book a hotel through an Online Travel Agency (OTA) like Expedia, Orbitz, or Travelocity. In this post I will provide three examples of why it’s cheaper to book a hotel through an OTA.
Reason #1: Earn Points With The OTA Loyalty Program
While the benefits of buying airfare through an online agency is obvious (buying your ticket directly with the airline often does not get you the lowest fare because they do not sell mixed carrier itineraries), the value of booking a hotel is not quite as clear. While you don’t earn points for hotel bookings through an online agency with most hotel chains like Marriott and Hilton, you DO earn points with the OTA’s own loyalty program. Expedia and Hotel Club are two OTAs with loyalty programs. In fact, Hotels.com Welcome Rewards program has has a pretty generous program where you can earn 1 free night after 10 bookings. The rate on the free night is capped at the average rate of your hotel bookings, but this is essentially the same as getting 10% cash back (probably less than 10% as you will likely redeem for a free night that is lower than the average).
Reason #2: Pay Less In Taxes
I came across this article in the Ohio The News-Herald where the Ohio state government is attempting to force OTAs to collect taxes on the “retail” hotel rate charged to customers, not the “wholesale” rate that the OTA pays the hotel. OTAs make their money by negotiating cheaper rates with hotels and then marking those rates up by 10-20% when they sell those rooms to customers. Since the OTA only passes the wholesale rate taxes on to the customer, the government now wants a piece of the difference.
I was a bit shocked that this was still going on, but I did a quick check of an independent hotel in Chicago to see if this was indeed the case and it was!
Here is a screen shot of booking a one night stay at the Essex Inn on the hotel’s own website.
As you can see the total amount charged is $231.64 including taxes.
Now let’s see what the same hotel room costs on Orbitz.com.
The rate is the same ($199), but the total is only $228.40, which is $3.24 cheaper than booking directly with the hotel. Wow!
This makes me wonder why anyone would book directly with the hotel (unless you think you are getting loyalty points or more flexibility by doing so). Although to put things in perspective you are only saving $3.24 on a $200+ booking so it amounts to a 1.5% savings, but still why would you pay extra if you don’t have to?
Reason #3: Earn Cash Back Through Partners
In addition, Orbitz and many OTAs have relationships with marketing partners where you can earn a cash back reward for your purchase. One example would be clicking through a site like TopCashBack where you can earn earn either 6% cash back (on retail hotels) or 10% cash back (on merchant pre-paid hotels) for your hotel purchase. This is in addition to the savings on taxes. I highly doubt most of these non-chain hotels have these types of partnerships with cash back affiliate websites.
It’s pretty clear that if you are not an uber elite with a hotel chain, it can be quite beneficial to book your hotel through an online agency. In addition to potential loyalty program points with that OTA, you can save money on taxes, and earn cash back through partner sites. To me this is a total no-brainer!