“They’re ripping us off”: Dick Smith and motel owners slam online travel agencies

Dick Smith

Dick Smith. Source: AAP/Lukas Coch.

Entrepreneur Dick Smith has slammed online travel agencies (OTAs) such as Expedia and Booking.com for “exploiting and extorting” Australian hotel and motel owners and has called on consumers to boycott the services.

The outspoken businessman believes small businesses across the country are being shafted by the online booking giants, which he says are charging owners exorbitant rates for booking referrals.

“Motels are forced to sign up, or they won’t get business,” Smith told SmartCompany after posting an online video about the issue.

“In the 1950s, if hotels didn’t pay criminal gangs money their premises were burnt down … it’s similar,” he said. “They’ve worked out a way of extorting money from small Australian businesses.”

OTAs have boomed alongside the proliferation of the internet in recent years, with US-based Expedia Group (which owns namesake Expedia.com, Hotels.com and Trivago) and European company Booking.com emerging as major players.

But despite being popular with consumers, the business owners SmartCompany spoke to said the services have been a curse, rather than a blessing, on the local accommodation industry.

“They’re ripping us off,” Golden Hill Motel owner Mark Henderson says.

Several owners reported paying anywhere from a 12–17% commission on booking referrals through OTAs.

Many motels charge customers more in an attempt to absorb the added cost, but this has triggered customer rage.

“Customers get upset when the rate is higher,” Henderson says, “but if you walk in off the street I might charge you $100, rather than $120.”

Another motel owner, Charlie Loftus, says customers had been “brainwashed” into thinking OTAs were cheaper than direct booking.

“Trivago has recently been running a campaign with the innuendo that hotel sites and hotels directly are not the cheapest option when they are,” he told SmartCompany.

Loftus believes government regulation has failed to keep up with the disruptive impact that the internet has had on the accommodation sector, and that small business owners were paying the price.

“The internet has introduced a completely new system into the accommodation sector,” he says.

“Government regulation hasn’t kept up with the explosion of the internet.”

Smith, who has called on customers to avoid the platforms, believes search engines have made it difficult for smaller players to compete with OTAs, which benefit from top ranking spots on Google.

Henderson echoed that sentiment, saying that search results for his business turned up OTA booking pages before his own website.

“It just isn’t a level playing field,” he says.

SmartCompany contacted Expedia Group and Booking.com for comment.

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Adrian C
Adrian C
2 years ago

This practice by OTAs has been going on for years and most hotels now use OTAs as a marketing channel which it is. Matthew (write of this story), could you please put me in touch with Dick Smith to invite him to the accommodation industry conference http://www.maximumoccupancy.com.au. We will be having a debate title OTA vs. Hotel vs. AirBnb.

stattoz
stattoz
2 years ago

Well… last week we had to travel to Sydney at short notice. We booked with a hotel in Slurry Hills on their own website at rate that was about 10% less than the rate on the booking portals. We got a confirmation by email which we kept handy and it was as well we did for when we checked out we noticed that the receipt showed the amount billed to our card $80 above the rate we had booked. It was sorted before we left but a lot of folks might not have noticed.

Jarman
Jarman
2 years ago

I have made a lot of hotel bookings and sometimes the rate is cheaper on the hotel website compared to expedia etc and sometimes not. What is dick whinging about? People have the choice to book on the hotel/motel website no one stops them.

I had a lot of respect for Mr. Smith but of late it has gone. A man like him should know what competition is and that you have to rise to it. Big business (including his former businesses), foreign or domestic, poses threats to all small business. Selectively going after foreign business is just spitting the dummy. If you cannot compete fair and square you will eventually be driven out one day even if you try and rely on ‘nationalism’. The pain then is higher and inflicted on more people. Holden case in point.

Dicky
Dicky
2 years ago

As a New Zealander I’m so glad Dick smith went under. For years they siphoned profits overseas to Australia to this mad man who was sitting on his yacht laughing at our profits. And to be a good sport the didn’t even honour gifts cards. Thankfully we have Amazon and AliExpress now so we don’t get ripped off by the middle man like electronic stores anymore!

Adrian C
Adrian C
2 years ago

Hoteliers have been aware of OTAs and the commissions they charge for many years. It is just another marketing channel for hotels to obtain a new customer they would not have had been able to acquire in the first place. And the money the OTAs make is not being used to extort the hotel industry in Australia. They use this money it for their own marketing and for promoting an individual hotel all over the world in many different languages, something a small hotel can’t afford to themselves. So for the 15-20% it costs a hotel to have a booking from an OTA, it is relatively small I feel. The hoteliers think the same. I am not a hotelier by the way.

Ed Shyed
Ed Shyed
2 years ago

I once had a lot of time for tricky dicky… but in recent years, not so, he’s become a bitter person, Dick, you really should gracefully slide back to seclusion, that way when you’re gone people will remember you for the good things that you did, not a cranky ol bastard who seems willing to attack anyone and everyone.

Reluctant guest
Reluctant guest
2 years ago

Last people i have sympathy for in australia is the B&B and hoteliers. Standard of accommodation and outrageous prices they charge for it is unbelievable compared to rest of world.

Linda Dunlop
Linda Dunlop
2 years ago

Dick Smith – you need to make contact with me. You are missing a chunk of this story and you need to know more. This has to be addressing on several levels. It is not the TRUTH until it is complete. Text me please.

Sue Hirst
Sue Hirst
2 years ago

Patriotism is great, but i wonder how many more bookings well run motels and hotels have received due to listing on these sites? Being able to post honest reviews is certainly in the interest of consumers.

Ken Crompton
2 years ago

One of the big points that Dick completely misses is the fact that demand for OTAs is driven by the Customer Experience. One of the biggest pain points that OTAs solve is not having to call around each hotel in a town, find their availability, see what price they offer and hope to hell that it’s not a complete roach motel because of the low prices. For the end user, OTAs make researching easy.

Michael
2 years ago

I can appreciate the point Dick is making, it makes sense, however this is driven by people themselves wanting to get the best places to stay-Yellow Pages used to dominate in the old days, now it is online search. It is down to Aussie developers to offer alternatives, this is why we need to promote digital literacy, and encourage people to support local web companies –

Paul
Paul
2 years ago

Tripadvisor doing the same thing with tour operators – going to drive me broke because to now appear in any meaningful position I have to provide a booking button on my listing which will syphon off a cozy 25% to their booking agency. If I offer to pay only 20% I will only appear at the bottom. No warning of this – just changed the ststem from outright ranking to ranking if you have their button