(I’m pre-writing this post because I’m going to be off grid and hopefully not pulling out my Starlink, so if we have a common disaster, that’s why I didn’t write about that.)
My wife and I take 6-8 week trips, and lately we’ve been alternating camping in remote areas with staying in hotels. And it sure seems that hotels have gotten more expensive. Cory Doctorow has a good piece on why, and he starts with a discussion of how Amazon has become and intermediary for most Americans who shop.
But Amazon isn't the only example of a powerful digital intermediary that has used its market power to impose an economy-wide tax. Wherever you look online, you find digital giants who grew the way Amazon grew (buying all of their competitors) and then did what Amazon did (squeezing buyers and sellers, making prices higher everywhere).
That's what happened with Expedia. Almost every travel site you can find online has been purchased by Expedia (Hotels.com, Travelocity, and Orbitz), and the ones that aren't Expedia subsidiaries were acquired by its main rival, Priceline (Booking.com, Kayak, Agoda and even Opentable). Nearly all the hotel rooms are booked by a tiny minority of travelers – largely that same top decile that Amazon has so thoroughly captured and locked in – and hoteliers can't live without their business, and they're almost all Expedia and/or Priceline customers. Expedia accounts for 80% of all hotel bookings by dollar value.
Expedia's position, in other words, is basically Amazon's position, so Expedia is doing exactly what Amazon is doing: they charge huge fees to hotels, and then force the hotels to raise their prices everywhere through a "most favored nation" deal. […]
Here's Amazon's sleaziest commercial practice: when you search Amazon, the top results for your search aren't the best matches for your queries; they're products sold by the companies willing to pay the most for search placement, in a "real-time auction" that runs every time you search. The cost of winning that auction comes out of your pocket through higher prices: the first result for an Amazon query is, on average, 29% more expensive than the best match. The top row is 25% more expensive. On average, the best match for your query is 17 positions down the screen, on the second page, where almost no one ever bothers to scroll. […]
This rip-off is Amazon's most profitable line of business, more profitable than AWS or Prime. It makes the company more than $80b/year. And – incredibly – Expedia's found a way to make it even worse.
Like Amazon, Expedia auctions off its search results. They call this their "VIP listing" program. Practically speaking, hotels have to pay for this, because it boosts booking rates by 42% (the first ten results on an Expedia search-results page get 62% of the clicks). VIP listing is expensive for the merchant – but it's even more expensive for you and me.
That's because Expedia requires hotels in its VIP listings programs to raise their prices on non-Expedia sites by 10-25%…INDEFINITELY.
Let me repeat that: to stay in business, hotels need to be on Expedia. To stay in business on Expedia, hotels have to raise their prices to pay Expedia's junk fees, but they have to raise their prices everywhere else. But to really stay in business on Expedia, hotels have to use the VIP program, which is even more expensive. And – one more time – hotels in the VIP program have to jack up their prices everywhere else, INDEFINITELY. This means that, throughout the economy, hotel prices are rising at a superinflationary rate, because Expedia – who command 80% of the market – are pushing those prices up.
Doctorow goes on to note that the average price of a hotel room has gone up 58% since 2020, far outstripping the rate of inflation.
We alternate between hotels.com and booking directly with Hilton or IHG (Holiday Inn), where we are members of their affinity clubs. Hotels.com was once a pretty good deal — not only did you get a good rate, but you’d get the 11th stay for free (basically they’d reimburse you the average amount of your previous 10 stays). After being acquired by Expedia, you get a couple of bucks per stay that can be applied to some future stays (but not all). The big chains are on hotels.com, but they don’t show up early in the search results. So booking a hotel, for me, is a pain in the ass effort that involves searching hotels.com and then comparing average prices for the two hotel chains where I have some status. Also, we want to stay in decent hotels, so I look at the hotels.com ratings carefully. Ten is the highest rating, and I usually screen for 9 and above, but there are a suspicious number of 9.0 ratings, which I think means that hotels are gaming the system by having people write overly glowing reviews for mediocre properties.
Even so, the ratings inflation on hotels.com is nothing like AirBnB, where a good review is essentially useless because hosts push hard to have their guests give perfect reviews. At least AirBnB management has finally realized that people expect to their cleaning fees to pay for places to be cleaned:
Airbnb hosts can set only “reasonable” housecleaning duties for guests, according to new guidelines rolled out by the tech giant, with tasks such as dishwashing and bed stripping now the sole responsibility of homeowners.
While Airbnb bookings have always included cleaning fees, there hadn’t been universal policies on what hosts can ask their renters to complete.
But now, starting with rentals on Nov. 20, Airbnb will limit those guest responsibilities to “set clear expectations” for hosts whose house rules must be “reasonable and comply with” the new requirements.
Hosts cannot ask “guests to complete tasks that require significant effort or time, or would typically be performed by a cleaner, including stripping the bed, taking trash offsite, or washing and putting away dishes,” Airbnb said.
Both Expedia and AirBnb are an example of the late-stage capitalism phenomenon of companies buying up competition and then extracting super-normal profits on the backs of consumers. If Democrats could cast away the yoke of their rich donors, doing something about this would be extremely popular.
