Cheap hotels; this overused term is bantered about the Internet like it’s the holy grail for hotel searches. You see it on travel forums, on the websites of travel influencers, in travel blog posts, and especially with the most popular online travel agencies like Expedia, Priceline, Booking.com, Orbitz, Travelocity (“OTA’s”), and many more.
This blog attempts to pull the curtain up on cheap hotels, and educate the reader on how the travel industry operates, and why it’s a zero-sum game.
Using the Internet to search for killer cheap hotel deals
But do we really ever find them… I suggest that no, we don’t, and there are specific reasons for that. Let’s face it, everyone advertises that they have the cheap hotels you’re looking for, and you’re forced to wade through a minefield of online ads that are tantamount to a big flashing neon sign on the side of the road, all vying for your eyeballs, and more importantly, your clicks.
Frankly it’s frustrating and confusing
As if that’s not bad enough, when you finally click on a rate and get taken to the ‘you pay’ page, you find out that the price listed didn’t include things like resort fees, parking, taxes, and service fees. That last category is a sort of ‘catch all’ bucket that usually contains, among other things, hidden markups.
Let me let you in on a little-known travel industry secret – not only don’t the OTA’s have the cheapest hotel price on the Internet, the hotels themselves don’t either. Surprised? Confused? Don’t worry, you’re not alone. Most people are – so let’s peel back the proverbial onion, because there are lots of layers here.
The Ground Rules in Travel
While we could explore the rules and rate structures across a wide range of travel categories, like cheap flights, cheap car rentals, or cheap tickets, for this blog we’re going to stay focused on the rates in the hotel category; after all, the blog is called, Cheap Hotels – The Truth and the Myth.
First things first, let’s understand some terms. We’ll start with ‘pricing parity’. Pricing parity ensures that the rates shown to anyone searching for a hotel on the public Internet, whether it be on Google, the hotel itself, or one of the major OTA’s like Expedia, must generally be around the same price.
This is specifically regulated by the hotels themselves, and it’s designed to create a level pricing structure in the market for their property, so they themselves are not undersold, and which has the added benefit of protecting margins. Occasionally the hotel itself may run lower prices to clear out some last-minute inventory that is in jeopardy of going unused.
You can test pricing parity for yourself. IMPORTANT – No matter which OTA’s or hotels you test with, you must go all the way to the ‘you pay’ page, as this is where all the additional fees, the ones they don’t show you up front, are added, to get to the final, ‘you pay’ price. If you don’t reach this page, you’re not seeing the real final price.
Let’s put it to the test
Let’s say you’re looking to stay at the Embassy Suites by Hilton Orlando Lake Buena Vista South, a very popular hotel in proximity to Disney World, Sea World, and Universal Studios. Start by doing a search on Google. Simply enter the name of the hotel in the search bar.
The results will display lots of choices, with the hotel itself typically being within the top 1 to 3 results. It’s important to make sure the link you’re clicking actually is from the company you want to get the price from – there are lots of tricky listings out there designed to have you think you’re going to the hotels own site, but you may actually be routed to a booking site that is not the hotel.
Price the hotel room on the Hotels own site and note the price. Remember to go all the way through to the you pay page.
Let’s do the same search on Expedia, Booking.com, and Priceline.
Feel free to do more if you like, or choose different ones… the results will typically be similar due to the pricing parity rule we previously discussed.
For this blog, I did a search for June 11-13, 2022 at the Embassy Suites by Hilton Orlando Lake Buena Vista South. The price on the hotel’s own website was $430.76, on Priceline $312.61, Expedia was $368.88 and Booking.com was $346.05.
In this case the hotel itself was highest, but the three major OTA’s were relatively close. See the screen grabs below showing the results.
The Cancellation Policy
The next term we need to understand is Cancellation Policy. Most people blow right past this as the OTA’s don’t necessarily put this in a prominent location.
The reason for that, as you can imagine, is if the cancellation policy is ‘non-refundable’, they earn their commission now, and don’t have to wait for you to travel. If you have the option to cancel right up to within 24 hours of your booking, their commission is held until that period passes, without you cancelling.
Another little trick is that the rate is typically a bit lower on rooms that have a non-refundable cancellation policy, and the price break is to incentivize you to make that choice. It’s kind of like a magician pushing a force card on you during a magic trick. The magician knows what they want you to do, and so do the OTA’s. They spend lots of money on things like heat mapping, a/b testing, and data analytics to make sure they are leading you to the choice they’d prefer you make.
Therefore, in order to truly compare pricing on an apples-to-apples basis, you need to make sure you select rooms from each source that have the same cancellation policy. You may think you’re getting a better deal choosing the non-refundable rate, the one they’d prefer you to pick, but, in reality, you lose it all if you can’t make it for any reason. So, think hard about this choice. You may not want to gamble with your vacation like it was a roulette table in Vegas, when you can take the sure thing.
Packaged Pricing
Let’s talk about another term you may not have heard of; it’s called, ‘Bundled, or Packaged Pricing’. In the pricing parity section above, we learned that the hotels want to keep the pricing pretty much the same from all the OTA’s and other outlets on the public Internet. There is an exception to this rule, however, and it’s when an OTA bundles the hotel room with a flight, car rental, or both. By bundling the price of the room with the flight and/or car, the price of the hotel is masked, as it is simply a part the overall price you pay for the entire package.
To accomplish this, the public OTA’s, who have lots of public money, work with the airlines and car rental companies to secure pre-negotiated, wholesale rates, on flights and car rentals for specific, high-traffic destinations, like Cancun, Las Vegas, or Miami Beach. You typically will never see any packages offered for a destination like Topeka, Kansas, for example, as this is not a high-traffic destination.
The OTA’s have the advantage of historical data that tells them how many rooms they sell in these destinations each year, and they also know where their customers are coming from. Armed with this information, they can pre-purchase seats on the airlines that travel these routes, and the car rental companies that service the destinations. Once they control a certain number of seats on the airplanes, and they’ve fixed their cost on both the flights and car rentals, the last thing to do is bundle the hotel price with the flight and car rental to create a package, with a fixed cost.
They can then sell this as a package, at whatever price they want, without ever violating the pricing parity rules, as the hotel price is never directly disclosed. Also, they typically protect their downside risk of not selling all the seats they contract for with a pre-negotiated turn-back period. This is where, say, if they haven’t sold a seat 60 days from the flight date, they can turn it back over to the airline and either exchange it for another seat at a future date, or obtain a credit. The same thing applies with the car rental contract.
Many people don’t know why the price of a packaged vacation at the same hotel they priced online as a standalone, is less expensive (potentially, not always) than if they priced the hotel, flight and car rental separately. Well, this is the reason. This strategy on the part of the OTA’s is not only good for them, as they typically can earn a greater margin, but it’s also good for the consumer, as many times it results in a better overall price.
This is something you may want to look into the next time you’re looking to book a hotel where a flight and car rental will also be required. One caveat, however, is that packages tend to have far less flexibility than if you booked each component separately. So, if being forced into a less flexible itinerary is not your thing, it may not be worth the savings. For others, it may be just the ticket.
CUG Rates
CUG Rates – The Most Closely Held Secret in Travel
Now we’re going to talk about one of the most closely held secrets in the entire travel industry – Closed User Group Pricing, or, as they are known in the industry, CUG Rates. Up to now, we’ve discussed pricing parity, which creates a level price in the public Internet for a hotel room, essentially, letting the OTA’s like Expedia, Orbitz, Priceline, and others, compete on a level playing field. We’ve discussed bundling and packaged vacations, where the hotel price is masked as it’s just a single component of a trip that typically includes a flight and car rental.
So, what are CUG Rates? Everything we’ve talked about thus far has been about what happens on the public Internet. CUG hotel Rates are rates that are typically below (sometimes far below) the retail price that is shown by the OTA’s on the public Internet, and these rates are not available to the general public. You may be surprised, but there is an entire world that exists on the private side of the Internet, and in this private world, the pricing parity rules are not enforced. The reason is simple. The private world of the Internet is simply not available to general public, or to people that, a) don’t know about it, or, b) don’t have knowledge of how to access it. It’s kind of like a secret key to get into Hogwarts. Harry Potter fans will get this. And the secret door your unlocking is to the magical world of private subscriptions.
Subscription Changes Everything
As a subscriber in a private club, the content, including cheap hotel rates, are secured from the general public by a user id and password – therefore, only subscribers have access.
This is what Closed User Group pricing means, and this is also where CUG Rates come into play.
Earlier in this blog I showed you a real price comparison for the Embassy Suites by Hilton Orlando, Lake Buena Vista South. You may recall that the price on the hotel’s own website was $430.76, on Priceline $312.61, Expedia was $368.88 and Booking.com was $346.05 (see screen grabs, above). Seeing these prices, you would think that you scored, right? You got the cheap hotel deal on Priceline for $312.61, and you’re ready to do the happy dance. Well… not so fast. The title of this blog, is, after, all, Cheap Hotels – The Truth and the Myth.
What if I told you that on the Eat, Play… Go! website (https//eatplaygo.com), a private subscription service, not available to the general public, that exact same hotel, on the exact same dates, was available for $242 (see screen grab below), including all taxes, fees, and service charges. That’s 33% lower than Priceline, and 44% below the hotels own price.
Platforms like Eat, Play… Go! offer subscribers access to over 1 million of the exact same name-brand hotels offered by the OTA’s on the public Internet, but at CUG Rates that are not available to non-subscribers.
There is no need for bundled or package pricing, as pricing parity rules do not apply to CUG Rates, and there are no games or gimmicks, just straight up wholesale CUG Rates that are passed directly through to subscribers, with no markup.
They also offer BOGO’s and Exclusive Discounts at all the major theme parks like Disney, Universal, Sea World, Busch Gardens, and more, over 60,000 of the most popular restaurants like Olive Garden, Jersey Mike’s, Marie Calendar’s, and more, over 35,000 movie theaters at all the big brands like Cinemark, AMC, and Regal.
There are discounts that will save you and your family money every single day, across a huge range of categories. That’s why Eat, Play… Go! is called Americas Largest Savings Network.
We hope this blog has helped you redefine your concept of what getting a true cheap hotel rate means. So, there it is, the answer to the question posed by the title of this blog is:
Cheap Hotel Rates on the Public Internet are a Complete Myth!
The only way to get truly cheap hotel rates that beat the public Internet over 98% of the time, is to have a private subscription.
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