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Brits stung by phone-charge Net fraud







Brits stung by phone-charge Net fraud

Brits stung by phone-charge Net fraud 06/23/2004 02:19 PM

ZDNet Jun 23 2004 6:21PM GMT




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Brits stung by phone-charge Net fraud

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02/14/2004 02:39 PM

If you stay in a lot of hotels, as I do, it seems odd that after reaming you out of $150 per night they also need to charge you $7 for a short phone call, $7 to wash a T-shirt, $20 for breakfast, $13 for Internet access, etc.  A friend who owns hotels explained what is happening...

A standard travel agency sells you a hotel room for $X and takes a commission, usually 10%, passing the remaining 90% on to the hotel.  Thus 90% of what you pay can be used by the hotel to make your stay pleasant, invest in high-speed Internet, put in a phone system.  Some online services such as Orbitz and Travelocity act as travel agents, finding the best rooms that they can and taking a fixed percentage commission.

Expedia, a company spun off by Microsoft in 1999 but presumably still substantially owned by Microsoft and Bill Gates, uses its dominant market position to arrange favorable deals with hotels.  The deal might be that Expedia gets to buy up to 50 rooms per night for $75 each, for example.  If the market is soft Expedia can resell those rooms to consumers for $100 per night.  If the market is tight Expedia can resell those rooms for $200 per night, pocketing the $125 difference between what they charge the traveler and what they pay the hotel.  If things are so bad that nobody wants to pay $75 on a particular night, Expedia dumps the vacant rooms back on the hotel.  Much of the profits that hotels formerly earned and invested back in their properties is now being captured by Expedia.

So if you book via Expedia and have to pay $20 for breakfast, have some sympathy for the hotel owner.  He might have gotten less than half of what you paid Expedia for that room.


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