Holiday Inn Sends Me Wrong Receipt, Reveals How Much Of A Discount It Gives To Travelocity

If you’ve ever booked a room through Travelocity or any other online travel site, you might have wondered how much that company is paying the hotel operator for the room. Without even trying to, one Consumerist reader managed to find out what Travelocity actually paid for a recent stay at a Holiday Inn.

Andrew says he was processing an expense report for one of his employees when he needed to get a copy of the bill from the hotel.

But when the Holiday Inn sent over that invoice, he noticed that it was significantly lower than what the employee had paid. His employee had paid a total, including taxes, of $1280.40 for a 12-night stay, while the hotel’s paperwork only showed a total of $1,082.12, a difference of nearly $200.

“I called him back and asked about the discrepancy and was told the bill was for what Travelocity paid the hotel not what I paid,” Andrew tells Consumerist. “I called Travelocity and it was explained to me that the price I get on Travelocity was from the hotel’s website and that Travelocity has negotiated cost rates with the hotel and that’s how they make their money.”

Travelocity and Holiday Inn’s parent company, InterContinental, are both defendants in a class-action lawsuit that alleges the existence of a deliberate price-fixing scheme by online travel sites and major hotel chains. The plaintiffs claim that the websites agree to all use minimum prices set by hotel operators so long as the hotels agree to not sell rooms to anyone else at a lower rate.

The lawsuit argues that such an agreement effectively ends competition among the websites, which can not truly offer customers the best price available if all competitors are stuck offering the same rates.

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  1. Megalomania says:

    this itself isn’t really newsworthy – think of it as collective bargaining. Travelocity can bring in thousands of bookings for the hotel, and so can negotiate a lower rate than what an average person would be asked to pay. Their profit margin is your “union dues”.

    However, if that above is part of a larger price fixing scheme, then I guess the union analogy is even more apt than I thought.

    • Bladerunner says:

      Pretty sure unions aren’t generally involved in price fixing…

      • Misha says:

        Let me introduce you to my friends Metaphor and Analogy.

        • regis-s says:

          Comparing these websites to a trade union is probably an appropriate analogy/metaphor.

          The last sentence implying that unionism is akin to price fixing? Not so much.

      • madmallard says:

        a union’s function is to form a monopoly on labor pool so that a company has nowhere else to go for its labor needs except the union. (and therefore meet the demands of that union)

        pretty sure its not too far off of logic to draw a comparison, as a key to successful price fixing is consolidation of resources/production…

      • huadpe says:

        Unions are explicitly involved in price fixing. The difference is that while antitrust laws make it illegal to fix prices for goods and services, labor laws do not make it illegal (and in some circumstances require) price fixing in the labor market.

        • luxosaucer13 says:

          Before you go bashing labour unions, I’d like to point out that, without labour unions, there would be no 40-hour workweeks, wage/hour laws, worker safety laws, and overtime and holiday pay. You can forget about work/life balance while you’re at it, too.

          Left to their own devices, big business proves time and again that they will exploit workers as much as possible. Wal-Mart is a prime example of this, and which is why they despise labour unions.

          Luckily, American workers have the right to bargain collectively for better working conditions and a living wage. My only gripe is that it’s far too easy for big business to intimidate workers into not forming a union to look out for workers’ interests. G*d knows big business has politicians in their pockets, looking out for theirs.

          • RenegadePlatypus says:

            Regardless of information in whatever silly documentary you saw, Wally World provides excellent opportunities to employees who have any sense of work ethic are not *useless jackholes*. Unfortunately, like any employer hiring non-skilled people who spent their lives making bad decisions and have no work ethic, many of their employees discover that they are not entitled to the better living experienced by people who actually care about their job and actually try to earn their paycheck. Wal Mart is a “prime example” of providing opportunity to people who want to *earn* opportunities, they have a distinct pattern of promoting from within. It’s not the lack of labor union holding the useless jackholes down, it’s their unwillingness to try to outperform their coworkers, let alone give a crap about their job. No their stockboys do not make a lot of money, but they have every opportunity to prove that they deserve higher pay, and they will be promoted if they stop acting like they are auditioning for a rap video.

            • jiubreyn says:

              You do realize Walmart discriminates against women, right? If we go by your logic, those women simply aren’t working hard enough. That’s bullshit and you know it.

              • RenegadePlatypus says:

                I’ve certainly seen the type of people who feel like they’re “discriminated” against. Just because they’re women doesn’t mean they should get special treatment as though they are handicapped. “Equal work for equal pay” is bullsh#t. The people who actually outperform others at work know this. Discrimination against certain behaviors is not bad. For example, it’s OK to discriminate against someone who is young and black that imitates strippers or rappers. They may kick and squeel about how it’s discrimination because that’s the popular culture for blacks… but it’s the behavior that’s being discriminated against, not the race.

            • regis-s says:

              Maybe you should quit watching whatever info-mercials Walmart puts out in the guise of impartial documentaries/ news releases.

          • TheCorporateGeek Says Common Sense Is The Key says:

            Yeah yeah another schmuck standing up for unions. You don’t need unions to stand up for yourself. Unions have ruined this country and are the direct responsible party for why most goods come from overseas.

            Politics and unions have been intertwined since their existence and the outcome has never been good.

            Want some shitty union examples?

            1. Allied Pilots Association – Do you know how much these putzs make? Sure they’re rookie salaries are on par with alot of the country but they move up fast and earn upwards of over $150k with tons of benefits. And they cry like babies if they don’t get more and more added to that each time around.

            2. Automotive workers – Getting paid really good money for mostly watching machines do the work now. Their benefits are outrageous and on top of that add in time and a half, double time and triple time. The rise in the price of cars has outpaced income rises, why do you think the imports are cheaper??? Unions.

            Now before you go and say I don’t know shit about what I’m saying, I was part of a union. I worked at a major aircraft manufacturer and was part of the United Aerospace Workers union. This was back in the mid 80′s. I started making $6.60 an hour as an 18yr old. 5yrs later I was making $19.20 an hour and adding the time and a half+double time+triple time, I was raking in a load of cash. I got laid off and had to enter the normal world everyone else lives in and then I started realizing why things are as expensive as they are.

            The corruption and good ole’ boy network is rampant in unions, firsthand knowledge of this. Nepotism, favorites, payoffs, you name it..it happens.

            So yes, I’ll bash a labor union because I’ve been there. So to the union workers, when you’re getting a good deal and everyone else is getting fucked, don’t cry about shit just makes you look more like the pompous ass you are.

            • TheCorporateGeek Says Common Sense Is The Key says:

              Sorry for the grammatical mistake, “they’re” should have been “their”

            • tunaman says:

              Actually, next time you fly ask a pilot if he is making more money or less money than he was 5 years ago. Unless he is flying a 747, 777,, 787, or the new A380, I would take the bet that he is making less money.

              Your information is old, outdated, and wrong. You said it yourself, this was back in the 80s.

              Unions help ensure that employees get a fair share of the revenue coming in. Now, I agree that often times they push for things that are richer than they should be but that is often because the company they work for is making profits hand over first. Profits they would NOT being making if it were not for the employees within that union. Companies are also known to use accounting tricks to make their business look like it is hurting when it is really not simply to use it as a club to lower wages and fire people within their company. Once the culling is done, bam, profits come raining in. In reality, all they did was defer income from one year to the next.

              And to go back to Wal Mart… Wal Mart is directly responsible for the closing of literally millions of small businesses all across america. We allowed wal mart to close our small businesses and trade good jobs and small business owners for minimum wage slaves.

              • TheCorporateGeek Says Common Sense Is The Key says:

                Obviously you can’t read. I was in a union in the 80′s, what I’m talking about is present day. I live in one of the Airline Mecca’s. The home of the Allied Pilots Association, American and Southwest. Southwest pilots don’t make crap money and neither do the 57 pilots. He’s not making less money, his benefits have been reduced just the same as everyone else’s. While they keep crying about their contracts, our prices to fly keep going up. Yes fuel has to do with that but a labor contract is a huge part of a company operating expense as well.

                Next time, try actually comprehending what you’re reading. You dont’ look dumb that way.

                • go3000 says:

                  what i can’t comprehend is how 10% of the working population have caused the demise of our great country. if unions are so horrible, how can germany be 20% unionized and seem to be doing pretty well?

        • MarkFL says:

          It works both ways. If most of the retail industry decides to fix the cost of labor at minimum wage + $0.25, there’s nothing that people seeking work can do about that. Unless, of course, they form a union.

          Although I’m not sure what organized labor has to do with prices charged by Travelocity.

  2. crispyduck13 says:

    Well how the heck did people think Travelocity was making money?? They spend money on advertising and code to develop a good website that attracts an assload of consumers for it’s “convenience.” Therefore they have the bargaining power with Hotels to let them book rooms for a lower rate because they have an audience behind them to fill the rooms. The amount of that discount they choose to pass on to their customers is up to the business.

    • Charmander says:

      Exactly! Think they do this out of the goodness of their hearts? A business is in business to make $$. They provide a service and are compensated for it. Hello, reality.

    • SJChip104 says:

      Your characterization is romantic, but untrue.

      I just had the identical thing happen to me – I JUST stayed at a place and they sent me a wrong bill. I actually thought it was some *extra* bill (it was about 60% of my Expedia bill which I had paid), so I asked questions at the front desk.

      They said 1) that amount(s) on the bill it was the amount that they billed Expedia (in this case) and (this is the big one) 2) if I had called the hotel directly, they would have given *me* that lower price.

      Point: Expedia doesn’t get a discount which is then their profit – they mark UP the cost.

      So here’s the lesson folks: shop around on Expedia, pick your place, get the price and then CALL THE PLACE to see how much it would be and book it directly with them.

  3. mantene says:

    Seriously. This isn’t anything shocking. It amazes me that anyone finds it so.

    • dolemite says:

      I don’t think it’s shocking, but it’s interesting. I’m not completely amazed by a magic show, as I know it’s fake, but it’s cool to know how the tricks work.

    • quail20 says:

      The premise behind the advertising is that you’re saving big bucks and getting deals you couldn’t get otherwise. In reality you never get anything of the kind. In fact it looks like you’re paying a premium to the travel site and are getting locked out of the possibility of getting a lower deal due to their agreements with the hotels. It stands to reason that if that agreement wasn’t in place it would be possible for the employee to have negotiated the same rate Travelocity paid.

      The have created a false market. (And yea, I knew all of that before reading the article.)

      • JollySith says:

        That is half the story. The other half of the story is that travelaocity and their kin also agree to purchase a minimum of X nights per year at teach hotel or chain they do business with. So even if no one books through Travelocity they still have to pay the hotels. Having these rooms pre-sold raises the occupancy rates at the hotels overall and allows them to sell the rest of their rooms at lower rates than they would otherwise.

        Also you imply that without the middlemen hotels would sell rooms cheaper than you can get them through third party sites. Not true. The middlemen get the rates they do because they purchase the rooms in bulk. You couldn’t get the rate travelocity pays because you aren’t buying 400 room nights that year in that hotel.

  4. RogerX says:

    A 15% cut on all bookings? That’s a lot of gnome commercials during The Amazing Race.

    • momoftwokids says:

      But don’t forget the chocolate gnomes, gnome bowling, etc. DURING the race itself. Those don’t come cheap!

  5. HoJu says:

    Breaking news! Travel aggregators are nothing more than middle men! Stop the presses!!

  6. Jawaka says:

    So breaking news… Travelocity is a for profit business.

  7. There's room to move as a fry cook says:

    No, the breaking news is that Travelocity delivers customers and gets deals on the condition that no one else can get a better deal.

  8. Bsamm09 says:

    I’m surprised they only get that much of a break.

  9. annmarizzle says:

    This doesn’t suprise me; last time I checked, travelocity is not a nonprofit, and therefore wants to make money off the deal…price-fixing IS a big deal, but this, not so much.

  10. PragmaticGuy says:

    Geez, this is what’s called COMMISSION and it’s how travel places make their money. Matter of fact, I’m an insurance broker and it’s no different when I send a company less money than the policy price because they pay my commission. Apparently this guy is a dope.

    • There's room to move as a fry cook says:

      You are missing the pricing fixing point.

      • rugman11 says:

        But this particular case is not any evidence of price fixing. Yes, there is a price fixing lawsuit going on, but this particular event is not germane to that discussion, it’s just showing how Travelocity makes its money.

        • satchow says:

          Exactly, that’s the point that people who are pointing out that other people who are missing the point are missing. The main story was “Travelocity pays less than what it charges customers for a room” with a “Oh yeah, and Travelocity is in a lawsuit right now. We’re not going to explicitly say it’s not unrelated to the article though.” tacked onto the end.

  11. Lyn Torden says:

    If you think that profit margin is too high, then get into the business yourself and offer even lower rates.

  12. prismatist says:

    I think that is a very reasonable markup.

  13. buzz86us says:

    As a hotel worker myself I must ask that you ALWAYS book with the hotel unless you get a significant discount I personally don’t see why people book a hotel on one of these sites at full BAR while some paid a bit more. People were ticked off at me because I was going over the rates here which was lower here is some advice DON’T BOOK ON THIRD-PARTY SITES.

    • Greg Ohio says:

      Then, give us a reason to book on your site. You gave Travelocity a deal in which you agree not to give us a better price on your site. Your site doesn’t let us compare your hotel to your competitor’s. Your site doesn’t already have our info saved. Why wouldn’t we book on Travelocity or Expedia?

      • buzz86us says:

        I didn’t give them a special deal the corporate overlords did… As a hotel worker I am allowed to go down to a certain rate for walk-ins if the hotel isn’t on the brink of filling up. Third Party sites sometimes will take hours to update in the system so I have more people angry with me because I didn’t get their reservation which they just made 20 minutes ago. You should also check those coupon books in the local service areas and rest stops.

  14. YouDidWhatNow? says:

    Why in the f%ck did this article get written?

    NEWSFLASH: COMPANY HAS THE AUDACITY TO SELL A PRODUCT FOR MORE THAN IT PAID FOR IT, THEREBY REALIZING A NET PROFIT!

  15. MarkFL says:

    While $200 might seem like a lot, this isn’t for just one night. Travelocity has marked up the cost by 18.32 percent (roughly, since we don’t know from the article what the taxes are), which doesn’t strike me as particularly large.

    As for the lawsuit, some of the sites claim in their ads that they negotiate with hotels, particularly for vacant rooms. If this is not true, that might in itself be grounds for a lawsuit, or at least a complaint to the FTC.

  16. Bethany says:

    I work the front desk at a well known hotel chain. The charge for travelocity, expedia, hotwire is all $44.50/tax on the weekends. Same price for all websites. The guest pays upwards of $109 per night

  17. bben says:

    That $200 is what you paid to Travelocity for making that reservation for you. If you had taken the time to look up all of the hotels in the area you wanted to stay, then called each one that fit your base criteria and spent the time to negotiate the fee in advance you could probably have gotten that $200 off of your room rate – at the cost of several hours of calling and negotiating.

    Next time you are going to be spending that much time in a hotel, call the hotel directly in advance and ask for a weekly discount – then ask if you can get a better deal if you stay 12 days (or however many). Then see if they will give you an upgrade for the same price since you are going to be there longer than a week. Now how about a free breakfast every day thrown in? – You never know what you can negotiate until you try.

  18. TravistyRobertoson says:

    I had the same problem with Papa Johns, but my house has been there for 60 years.

  19. charliesolo says:

    Two points:

    As someone else has noted, this has nothing to do with alleged price fixing. Putting the price fixing info in the story is a non-sequitur at best and a deliberate attempt at inflammation at worst.

    Second, more importantly, you can’t compare the $1082 and the $1280 numbers; the $1280 figure is WITH TAX. For a realistic comparison, you have to use the pre-tax cost for the room, which was $1220. This puts Travelocity’s gross profit at $138 ($1220-1082) or a markup / commission of around 10%. That’s not at all unreasonable.

    Lots of good posts on Consumerist, but this isn’t one of them. There’s really no story here, just a modest markup by a travel agent. The bad logic / bad math and the unrelated lawsuit thrown in make it look like there’s something there, but halfway thinking about what you’re reading reveals that there’s simply nothing to see here…

    • MarkFL says:

      We really don’t know what the tax was. The article does not say where the room was, so there was probably — but not necessarily — state sales tax. Might or not not be local sales tax. Many places also have a “bed tax” on hotel rooms (especially if the city is paying for a stadium), and sometimes there are additional taxes for booking a room during periods of heavy travel to the city (winter in Florida, Mardi Gras in New Orleans, etc.). But I’m sure the tax was significant.

  20. Martha Gail says:

    I’m more interested in why two nights at a Holiday Inn is $1200?

    • Captain Walker says:

      It’s not two nights, it’s just the bottom of the bill. See in the article where it says 12 nights?

  21. icerabbit says:

    No need to sound the alarm.
    I have a couple of those receipts I received in error as well. There’s about $20-25 / night going to the booking agency, which is fine by me as long as that is the best price for the room, typically a nice discount over the hotels regular rate. Though I’ve seen it the other way around too, where booking or calling the hotel directly can get you the very best price.
    No guarantees.

    • buzz86us says:

      I agree with the icy rabbit, don’t book third party unless you get a nice discount over the hotels rate. If you book last minute at full BAR over third party that is where they make the money. Call the hotel first find out the BAR rate before you book if and only if the BAR is lower then make your booking over the phone. Otherwise go for the third party rate with gusto if you get a nice discount. On nights where my ADR is $130 I have seen online bookings where the rate is marked up to $140.

  22. VBDon says:

    They don’t have a case. All the agreement does is guarantee that Travelocity gets the lowest rate charged to anybody and collects a stated commission on the sale of a room. It doesn’t equate to hotels contriving to fix prices at higher levels than normal market demand would allow. Websites are still free to compete by offering other “free” benefits” such as free pens, discounts on merchandise, etc.