In the digital world and one that is in the midst of a global pandemic, middlemen companies like Expedia Group are increasingly in trouble as both customers and investors are favoring smaller, more versatile businesses. As online travel agents like Booking Holdings are facing problems due to their rigid business model and collapsing travel and tourism sector, smaller companies like Nustay are coming on top due to their adaptability and scalability.
Prior to the outbreak of coronavirus that saw airlines grounding their fleets, government closing down borders and hotels and booking platforms cancelling reservations, there was perceived security in the large-scale business operations of Expedia and Booking.com. Ultimately, the very same components that led to the expansion of these travel platforms and other international hotel chains, are now causing their downfall.
As online booking platforms rose in popularity in the past decade, this saw the global expansion of several brands, more notably Expedia, Booking.com and Airbnb. While the novel model introduced significant advantages in hunting for travel and hotel bargains, it has also been plagued by inefficiencies. So much so that we have seen local governments around the world passing stricter laws for short-term vacation rentals and cracking down on Airbnb’s. What was once considered a game-changer in the way people travel for business and pleasure is now a business non-grata in numerous jurisdictions. As a result, investors that were quick to jump on board and invest in the revolutionary platform a while back are now witnessing its revenue shrink amid a global pandemic and new regulatory framework they have no control over.
The situation is not much different with established platform Expedia and the growing degree of pushback it has been facing for a while now. The brand has gone from being the golden standard in the booking sector to hotels, airlines and car rental companies increasingly pulling back due to the little to no value Expedia and other sites like it bring to the table. In mid-2017, Hyatt Hotels, tired of paying between 15% and 25% of their room revenue to online travel agents, made a similar threat or abandoning the platform.
Hyatt and Expedia were able to reach terms both sides could live with a few months later. Though details of that deal were not disclosed, presumably, Hyatt’s net costs for access to Expedia’s customers were lowered. This case followed another hit for the booking platform that saw United Continental’s United Airlines consideringremoving its airfare data from Expedia’s websites due to a dispute between the two parties. If the two companies can’t come to a resolution by the time the currently contract ends on September 30th, as of October 1st, United Airlines flights will not be bookable through Expedia.
The Rise of the Smaller Players
As consumers and companies are increasingly capable of working directly with one another and circumventing online price-raising travel agents, we are seeing a new trend emerge. That of smaller tech companies and travel booking platforms with less overhead and more versatility in these challenging times. And investors are beginning to take note.
Smaller online travel agents are better positioned to quickly adapt to the pricing modalities of the market and find a middle ground between what companies want and what consumers expect. And it is precisely because they have less pricing and marketing power that they are receiving positive feedback from investors, travelers and hotel operators alike. Hotels and motel owner don’t feel “exploited” by high subscription fees to use the platforms’ services while customers don’t feel ripped off when charged high cancellation fees and forced to adhere to rigid terms and condition that are not in their favor.
As time passes, hotels of all sizes — major chains and tiny operators — will increasingly turn to smaller tech companies and booking platforms like Nustay that provide cost-effective marketing and prioritize the end user rather than the middleman.
From an investor’s perspective, such tech startups are able to accomplish something that neither Booking.com nor Expedia did - demonstrate clear value to customers. Because the new business model focuses on the symbiotic relationship between consumer and hotel and motel owners, it introduces an element of service-oriented operation that was not there with bigger brands. The main issue of businesses like Expedia and Booking.com was that, ultimately, they couldn’t provide a guarantee on any of the services marketed on their platforms as when the middlemen failed, the middlemen aggregator failed as well.
We clearly see the trend in the way hundreds of Airbnb hosts are deleting their listings and moving their properties to month-to-month platforms that are less lucrative but potentially more reliable. The smaller tech-oriented platform Homads, a monthly rental listings startup, saw a 500 per cent month-on-month increase in site visits in mid-March.
What this shows is that smaller, tech-oriented platforms and companies achieve better direct localization and direct translation, both of which ease market entry on a global scale. Instead of focusing on understanding the local business culture and consumer behavior very well as well as deal with complex regulatory frameworks that might hinder business, these platforms only focus on what they do best – connecting the end-user with the service provider. Nothing more. Nothing less. When it comes to things like application menus and user interfaces, every country has its own style. The worst thing any company could do is simply translate their entire company and bring it to a new country.
A company like Nustay is beyond cultures, markets and regulations, thus making it better adaptable across multiple verticals. Technology has changed a lot since the mid-2000s. But so have consumer behaviors and needs. Business-wise, what changed dramatically is how easily people can access the internet.
Going mobile means that e-commerce is also changing. This change is a global one. All internet-related businesses need to understand how to navigate the digital domain effectively if they want to survive and thrive. As we see more and more new technologies applied to booking and travel-related services and systems, it can be said with confidence that only companies that can leverage these strengths to help consumers are more likely to be winners in the long run.