Web Reservations International (Hostelworld, Hostels.com) Up for Sale

In case hostelworld will be sold to a major player, this will definitely not a good news for hostels in generally.
I doubt that someone who wants to improve hw will be buying the company, but someone who wants to get more profit out of it. That is how it works..

If I would own one of those properties relying 90% on hw bookings, I would be very very worried about..

Let´s take priceline for example: What would they do after aquiring hw?
Improving?
They have a very successfull hotel booking site…booking.com (I used them sometimes and found it very handy and comfortable)….and it would be most likely, that they implement several features from there.

First step: Make the booking visible for free for the customers: Just stop charging them 10 % commission and booking fee during the booking process! They will let them book for free, just keeping cc data in case of no-show, but send a bill to the hostel every month to the hostels starting with a 12 % commission charging the hostel.

Next step: On hw you can scroll down all properties, on booking.com after a certain number of hotels you have to turn the page.
Who wants to be on page number one and even on top??…uh, now you can bid for your position, just adjust your commission rate to 15 or even 20 %...no joke, that is how it works on booking.com…

Final step: Combining the hotel site and the hostel into a meta search site where you put in what you are looking for and for what budget and you get the list of accomodation providers just in time, doesn´t matter if your business is hotel, b + b or hostel or whatever…

It is just a scenario, anyone who has a more positive prediction?

In case hostelworld will be sold to a major player, this will definitely not a good news for hostels in generally.
I doubt that someone who wants to improve hw will be buying the company, but someone who wants to get more profit out of it. That is how it works..

There are companies with a long-term strategy. Google, for example. I can imagine they´re interested in the deal - it would make some sense for them.

If I would own one of those properties relying 90% on hw bookings, I would be very very worried about..

We sell a lot of beds through HW, but almost half of them are "own bookings" (redirected from our website to HW´s booking engine). The rest wouldn´t be gone either. When people travel, they need to book a bed - regardless HOW they book it. They will not buy a cheeseburger instead of a bed. Hence, booking websites don´t matter that much.

First step: Make the booking visible for free for the customers: Just stop charging them 10 % commission and booking fee during the booking process! They will let them book for free, just keeping cc data in case of no-show, but send a bill to the hostel every month to the hostels

That would be an excellent strategy. Most people don´t understand the "deposit" bullshit anyway. People would prefer a website which is actually free. For the hostels, it wouldn´t matter how they pay the commission - once per month or guest-by-guest by charging them 10% less when they check in.
There could be another advantage: if you have a no-show, you mark the booking as no-show in your inbox. HW would charge the customer for the 1st night´s worth. The no-show-fees would be set off against the commissions each month. The actual advantage is that the hostels would never get the customer´s credit card details because they wouldn´t need them. That´s more security for the customer.

Next step: On hw you can scroll down all properties, on booking.com after a certain number of hotels you have to turn the page.
Who wants to be on page number one and even on top??…uh, now you can bid for your position, just adjust your commission rate to 15 or even 20 %...no joke, that is how it works on booking.com…

I wouldn´t be too worried about that. Look at booking.com, the really popular properties (those with loads of reviews) are almost never on page one. Apparently, most people are smart enough to use the "sort by rating" or "sort by price" feature. When I watch people using HW on our internet terminals, that´s exactly what they do as well.

I think Bookingcom´s flexible commission is a very stupid move. They would make much more money by having only the most popular properties on page one. I don´t understand why bookstores grasp that (they put bestsellers into the shop window) and booking sites don´t.

If the new owners of HW dare to increase the commission, we would have the Hostelbookers (or another) booking engine on our website the next day. I wouldn´t allocate anything to Hostelworld during seasons we know we´ll be full anyway. HW would make less money, not more. Without availabilities in the most popular hostels on HW, people will start to think it´s useless, HW would lose them as customers and make even less money. Their monopoly market share would be gone in no time.
I can´t imagine the new owners will be that stupid.

Final step: Combining the hotel site and the hostel into a meta search site where you put in what you are looking for and for what budget and you get the list of accomodation providers just in time, doesn´t matter if your business is hotel, b + b or hostel or whatever…

So what? I think meta search sites are the way to go anyway. There are people who want to stay in a hostel and in nothing else, they will pick a hostel from the meta search. There are people who want a cheap bed, no matter where. Chances are good they´ll end up booking a hostel because hostels are cheap. There are people who didn´t even consider a hostel (there are still so many people in Europe who think "hostel = YHI = yuck") but would book one when they find one with good reviews on a meta search.
Popular meta search sites will be good for hostels and bad for hotels, not the other way round!

My number one guess of a possible buyer is also Priceline/Booking.com. Hostels are already allocating beds to booking.com.

There are hostels on booking.com because some hostels wanted to sign up with them, not because booking.com desperately wanted hostels on their site. As far as can tell, they never did anything to push into our niche market - and still don´t.

I think HW would be a good acquisition for a complete newcomer to the business:

• They have a booking system which actually works. Apparently, that´s no small thing. Last week, I tried to book an Easyjet flight to London. I tried it three times with two different browsers, but kept getting error messages. You would think they can sort that out, after all, they sell almost all online - but no. I was pissed off and booked an Austrian Airlines flight. 50 Euros more, but Heathrow. I will save the same amount on trains. I never had any problem with booking something on HW. Apart from some problems with Italian Visa Electron cards, we never really heard of problems our guests had with HW.
• HW already delivers a substantial profit every year. A newcomer who wants to enter the booking market could spare himself the hassle of pouring silly amounds into a startup with uncertain outcome.
• HW practically owns the market niche in which most people start to travel - the bottom price end. Upmarket segments could be conquered with HW´s huge customer base - the older they get, the more likely it is they´ll look for fancy hotel rooms, be they for leisure travel or business trips. Use their brand loyalty and give them what they´ll want later in their lives.
• HW already started exactly that upmarket move with websites like boo.com - though I still think that´s a really silly name for a website. "Boo!" is a negative expression you wouldn´t like to associate with making holidays. It also sounds somewhat like "poo" (poo.com is available! :D ).

IMHO, the best things that a buyer of WRI could do are:

Become more hostel friendly, and maintain a strong lead the in the hostel industry. Changing hostelworld.com and hostels.com into sites that try to increase profits by taking more money from hostels and by upselling hotels instead of by increasing the amount of hostels beds sold is going to hurt the hostel industry and open up a major opportunity for alternative hostel booking engines. In the long run, strong competitors will decrease the value of hostelworld.com and hostels.com.

I see no reason to exclude hotels systematically. Some cites have a severe lack of hostel beds: Venice, for example (at least until we open shop there :)). People will look for alternatives like budget hotels or bed-and-breakfasts, but you don´t want them to use a different booking website. If there are enough hostels, the hotels are not shown anyway - unless you want them to be shown by using the extended search feature.

Where Hostelworld could increase the number of hostel bookings are source markets like Japan and Germany. These are countries with a huge population and a big number of middle class kids who can actually afford to travel - yet Hostelworld (and independent hostels in general: remember "hostel = YHI = yuck!") is pretty unknown there. They should throw all their marketing at countries like these - not to America and Australia, where everybody already knows them anyway.

Hostels.com brings in fewer bookings than hostelworld.com, and it is an "authoritative" domain name because is a single word keyword that describes exactly what is selling. Because hostels.com brings in fewer bookings, it's safer to experiment with that website.

Never thought of that, but you´re right. I have the impression that Hostels.com has always been something like WRI´s neglected stepchild. They bought it for a lot of money, but never seemed to know what to do with it.

More interesting reading:

http://www.travolution.co.uk/articles/2009/10/30/2982/business-as-usual-as-wri-considers-options.html

In a statement, WRI pointed out that “throughout the company’s history it has experienced a number of shareholder changes and new investments without significantly altering the operations or culture of the organisation,” adding that “the continuing focus of management is on growing and developing the business".

and http://archives.tcm.ie/businesspost/2009/08/02/story43499.asp

Indeed, the firm had started out as Hosteldublin.com, with the aim of selling booking systems to accommodation providers in the Irish capital. It quickly became Hostelireland. com, followed by Hostel world.com, reflecting global demand for a centralised booking system.

The company gives its technology to hostel owners for free and is given an allocation of beds to book in return. When a customer uses WRI to make a booking for a particular hostel - whether it is in Dublin or Dubai - the company keeps the deposit they pay. More recently, it has developed revenues from online advertising and selling the other travel services.

Mooney’s early responsibilities at WRI included handling the finances of the loss-making dotcom and making sure there was enough money to pay the bills. The weight of that responsibility lightened in mid-2002 when the company began to turn a profit.

Profits have rocketed since then, helped by a series of acquisitions that started in 2002 when the company agreed to buy rivals Hostels.com. Mooney remembers faxing off an agreement on Christmas Eve that year to pay $3.75 million for Hostels.com, even though WRI ‘‘hadn’t a bob’’. They had until January 31, 2003, to find the money and complete the deal...

...there is a chance that hostels have to pay taxes on the commissions the agents take if their agreement states that the hostel is responsible for those taxes.

The hostels have to pay taxes on the agent's income? :)

Do you have any links about those topics?