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The pros and cons of HotelTonight’s business model

June 07, 2012 | Online Travel

Economically, HotelTonight's business model is much better than Groupon Getaways or LivingSocial Escapes, which don’t reflect the realities of the hotel business in 2012. However, the company is going up against some big guys, who have significantly greater buying power.

What Groupon and LivingSocial try to do is have one price that, in theory, is good for a period of months. But their deals are subject to what the industry calls “availability.” That’s not what most people think of as availability - it doesn’t mean that a room is available. It means that the hotel is empty enough that it’s willing to let a customer use a Groupon or LivingSocial voucher. This leads to arguments when customers think they should be able to use a voucher but they can’t. It’s a goofy model that shouldn’t exist in 2012. (It exists in part because Groupon and LivingSocial haven’t done the work of tying into hotel systems to do date-specific, inventory-based pricing.)

With HotelTonight, if you book, you’ve selected your dates and you’re guaranteed a room at that price. (Despite the name, HotelTonight offers multi-night stays. But the stays must start the night you book.)

“HotelTonight does not require any particular rates or discounts from hotels - hotels are incented to discount on our channel only to the extent of their particular need on a given day,” says HotelTonight CEO Sam Shank. ”Ultimately, HotelTonight is much less expensive for hotels, so they can put that savings into greater discounts or keep it to boost their bottom line.”

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Read also "HotelTonight books $23M in funding as it faces increased competition"

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