Growing Disquiet Amongst Hostel Operators

Following the recent news published on STAY WYSE regarding the increase in commission by Hostelworld, the online travel agent for hostels, the association has been informed of a number of positions currently being taken by National Associations around the world.

Whilst acknowledging the important role that OTAs play, the Backpacker Network Germany have suggested in a letter to its members to pass the increase in commission on to their consumers. Please click here to read the letter from the Backpacker Network Germany.

Israel Hostels (ILH), a group of independent accommodation providers in Israel, have informed Hostelworld/WRI that the group will be restricting inventory throughout March 2014. Please click here to read the letter sent to Hostelworld. ILH have to date not received an official response from Hostelworld on this matter.

STAYwyse_logo_-simpleWhilst STAY WYSE cannot comment individually on these actions, which are subject to contract and/or national legislation, it highlights a growing concern and frustration within the industry. STAY WYSE has contacted Hostelworld regarding this increase and will post their response when it is received.

Robert Henke, Operations Manager of YHA Ltd in Australia and Hon Secretary of the Backpacker Operators Association New South Wales said;

“This commission increase doesn’t come as a surprise; it brings Web Reservations International (WRI) – owners of Hostelworld and Hostelbookers – in line with Priceline (trading as Booking.com and Agoda). WRI is owned by an American private equity company and Priceline is publicly listed, therefore their initiatives are, and always will be, predominantly dictated by the return-on-investment requirements of their financial backers. Although the commission increase by 20% that WRI has now announced is very steep, it makes no sense to single them out. There is a need for a sensible reset to be found in a relationship with all Online Travel Agents (OTAs) which, over time, has become less and less commercially balanced as mentioned in the Sydney Declaration that was adopted at WYSTC in September 2013.

This increase is another stark reminder of how important it is for hostels to do everything in their power to encourage direct bookings so that they do not become even further dependent on third-party websites. Hostels operators must become more savvy about proactive channel management. Who knows when these OTAs will next increase their commission rates?”

STAY WYSE will be hosting a session at ITB Berlin on Online Distribution Channels: OTAs vs Direct Bookings. We would like to invite both operators and OTAs to join us to discuss the importance of OTAs for bookings and how hostels can potentially win the battle for direct sales.

The seminar will present the latest findings from the STAY WYSE research, looking at the supply and demand side of third party bookings. In addition it will also present some strategies on how operators can increase their direct bookings.

Join us in the Youth Travel Hall (4.1) at ITB Berlin on Friday 7th March on the Big Stage at 10:30 to 11:30.

Comments

  1. If hostel world and hostel bookers had stuck to their core business of servicing the needs of the hostel industry, instead of taking on the hotel booking engines, then they might no be feeling the pinch, as it would appear they have bitten off more than they can chew. The hotel booking engines, now have a catagory for hostels. The sad part being that it is the consumer and accommodation providers who are paying for the war as the middle men compete, spending millions of dollars every year, with the likes of Google, in an attempt to out position the competition and block accommodation providers own sites from achieving ranking. for thsoe interested, take a look at airbnb.com and/or channelmanager.com.au

  2. Agreed, HW and HB do seem to have bitten off more than they can chew. They are raising their prices without improving standards or providing greater value for money, in complete disregard for operators or guests. So deeply affected by the current sluggish world economy hostels and other accommodation providers have few methods available to maintain or increase income – raising prices without raising standards or value for money is pure madness. It seems to me the only option meantime is to pass on their increased charges to guests. Could this sound the death knell for budget accommodation providers, or shift the market to camping or glamping? Other OTAs such as Booking.com, etc., are looking to further extend their property portfolios and are inviting in smaller accommodation providers, now including hostels and self-catering, to raise their own income levels. Commission levels are already sky high. Next, when that is near exhausted will we see more mergers and acquisitions? Are Hostel World hoping to sell on to a larger player in due course? I don’t have an answer to how the small guys can survive against the rising dominance of the big boys, I only know that our hostel can’t absorb rising commission costs and must pass them on. I don’t see Hostelworld shifting.

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