Hostelworld just gets worse and worse since they monopolized the market by buying out Hostelbookers. I'm sure you have all been made aware of the new "Elevate" program whereby they will bump you higher up the list displayed for your city's hostels in return for giving them a greater commission (they still call it a service fee of course).
When you combine this with their new "Quality Score" which is supposed to influence how high up your hostel is listed based on customer care, number of reviews, site content, pictures, rates etc. you can see that "Elevate" is really just a way to circumvent all that pesky "quality" stuff by offering Hostelworld extra money to place you higher on the list.
Fun stuff. I for one will not be participating.
11 years
Was the raise in commissions right after they bought Hostelbookers? I expected Hostelworld to raise the commissions, but not that quickly.
It sounds like an "Elevate Hotels" program. If hotels can afford higher commissions than a small independent hostel with mostly dorms, hostels will get buried even further in the listings. Bidding for higher position in the listings is a trap...
11 years
I'm curious... why do we assume hotels can afford higher commissions than hostels?
How does this work for guests? Will they pay they higher commission, leaving hostels to receive 85% of the total on arrival or will hostels be billed by HW for the additional commission?
11 years
I doubt they would raise the price for guests. I wonder if any hostels have done it yet that could let us know, but I doubt they would say anything. :/
I talk with a lot of struggling hostels, where the owners work like crazy and barely keep their hostels afloat. The margins on mega hostel/hotel hybrids and hotels is much better.
Traditional hotels are built on a model where high commissions work and are expected. They pay a lot more money to get bookings than hostels with dorms. Hotels coming from Expedia to list with WRI aren't going to flinch at a higher-than-10% commission, because it's going to be cheaper than what they already pay.
Hostelbookers was trying to get hostels to sign up at 20% with anytrip.com. I'm sure that WRI is looking to push it as far as they can.
11 years
The issue is scale, not the nature of the property. A small hotel cant afford higher commissions any more than a small hostel. I think the (a?) problem is that too many hostels aren't really run as businesses, more as labours of love. That said, I wouldn't overestimate the profitability of hotels as the vast majority simply arent particularly profitable with the owners making their real money of the capital value of the property. I think we need to realise the reality of the situation we're facing here. Hostels are becoming a serious business, no longer the maligned little brother of hotels. As a result competition is getting fiercer and I for one have no problem with this. Any given hostel has no right to be in business if they cant turn a profit. Hostels in Aus for example have been dealing with much higher commissions than European hostels for a long time - try dealing with agencies that send up to 40% of your business charging 25% commissions. Hence, hostels in Oz arent cheap. The reality of higher commissions is that they'll eventually be passed onto consumers, though ultimately I doubt this will have much of an effect on overall backpacker numbers.
I'm not of course advocating higher commissions, just recognizing the reality of our situation. We've had it pretty good up until now - and as soon as life gets tough all I hear (read) are a lot of complaints and very few solutions. But I digress...
Still unsure how HW is going to collect this higher commission - if they still charge the guest 10%, when does the other X% go to HW?
11 years
I think they will just charge a larger deposit up front. In the new HW contract they state
"The percentage of the total Booking Price (for all the nights comprising a Customer's booking) that will comprise the Standard Deposit is specified in the Key Details at the beginning of this Agreement and the parties reserve the right to agree to vary the Deposit amount at any time, for example in accordance with any scheme(s) or programme(s) operated by HW from time to time through which Licensees can vary the Service Fee they pay and the Deposit that will be collected in return for certain benefits (the "Varied Deposit")."
It's obvious they are talking about the Elevate program there, so I assume that means they accomplish this by changing the deposit amount. You would think that would lead to less bookings though, as customers would be put off by having to pay more up front. All in all, doesn't seem like a good idea to me, just a money grab by HW.
11 years
Still unsure how HW is going to collect this higher commission - if they still charge the guest 10%, when does the other X% go to HW?
This situation is explained in Appendix 1 of the new contract:
APPENDIX 1
1. The following payment and offset provisions will apply so as to facilitate the effective payment of the Service Fee to HW by the Licensee:
1.2. in the event that the Deposit is less than the Service Fee, HW will retain the entire deposit and the Licensee shall pay the difference to HW;2. Where the Licensee is required to make a payment to HW pursuant to paragraphs 1.2 or 1.4, of this Appendix 1 the Licensee will effect payment of such sums either by setting up a form of direct debit or automated credit card payment, such that the appropriate amount can be collected by HW on a daily basis (save where an alternative form of payment is agreed by both parties).
The cost to the guest doesn't change. They will still pay 10% to HW and 90% to you. HW will then make a daily withdrawal of the X% difference directly from your bank account or credit card.
11 years
Hi
And how do you guys feel about the part of Appendix 1.2 where it is written "the Licensee will effect payment of such sums either by setting up a form of direct debit or automated credit card payment, such that the appropriate amount can be collected by HW on a daily basis (save where an alternative form of payment is agreed by both parties)."
I feel a bit uncomfortable about this 'automated' arrangement. I am not even discussing how asymmetric it is (in the sense that should HW have to pay the hostel then they'll do it monthly or however they see fit), but the technicalities accounting / tax of the mechanism...
Up to now the 'tax' treatment of the 10% was (could be) in some jurisdictions borderline, but now, this 'extra' payment without 'proper' invoice... might spell trouble with tax authorities :sick:
11 years
Never in my life have I heard of a daily direct debit system, least of all one where the amount varies daily. Direct debits usually take up to 3 days and thats when its a standard amount, I can't see any banks being keen on that option.
Unless HW is going to send daily invoices, I see this being a real sticking point for a lot of operators - particularly the larger ones who may have deep enough pockets to use the system regularly as they tend to have very strict accounting practices.
Related Pages
Log in to join discussion