Jan 14, 2021 - 10:26 AM
Hotwire’s business model is based on using an opaque marketplace to sell excess hotel room inventory. This way, the hotels can still capture full price for a portion of the rooms and avoid diluting their brand, yet monetize rooms that would otherwise go unsold--albeit at a lower price.
It is a form of price discrimination from classical economics. According to a Harvard Business School case study:
Hotwire is a discount travel webs-site that offers low priced travel services through an opaque sales model. An opaque sales model is a model whereby the service provider is not revealed to the purchaser until the purchaser has completed his transaction.
This unique model allows the travel service providers to offer uniquely low prices on their unsold inventory without competing against their other retail channels or tarnishing their reputation. The providers can capitalize on excess inventory with a low marginal cost.
The user enjoys unique discounts that aren’t available at the regular retail channels. A key component of this model is that both sides trust Hotwire. Users need to trust that they are getting a good deal for their payment and that the product meets their requirements and providers need to trust that they won’t be exposed before the deal is concluded. Hotwire executes this model successfully.
That is the theory, but in practice Hotwire has become a bait and switch scheme as far as I can tell. They lure you in with a super low price and say you will get “one of these hotels” and show rooms that would normally go for 40% to 50% more of the listed price.
If there are four hotels, one of them will be crappy and you will almost always get the crappy hotel.
Recently, for example, I wanted to do a getaway in Yakima, a town in Eastern Washington. I wanted to get a 3 star hotel and my search showed a deal for $53 a room with hotels including Holiday Inn Express (where the standard rate is $96 a room) but also one crappy hotel.
I rolled the dice, took the deal and drum roll, drum roll… of course got the crappy hotel. When I looked up the hotel I got (My Place Hotel), Google has it listed as 1-star hotel and the standard rate for rooms is $55 if you book directly. Turns out I didn’t need Hotwire!
I was mad as hell and took it up with their support team, explaining that they included a hotel that was well below the advertised star rating.
Support rep: “The star rating is subjective. Just go to the hotel and if you don’t get a clean and nice room let us know” the support rep said.
Me: What??? I told them to refund my money or book me at the Holiday Inn.
Support rep: We don’t typically do refunds and our terms state this
Me: I don’t care what you typically do. Issue a refund or I will do a chargeback. I just did a google search and your company has a 1-star rating with lots of similar complaints. This seems to be a normal practice.
She issued a refund. No wonder Hotwire has an average 1 out 5 stars rating on TrustPilot!