“The world of hotel bookings is not honest or transparent,” says Michael Ros, Bidroom’s cofounder.
It’s hard to argue with him. The UK’s competition watchdog recently found a number of online travel companies are breaking consumer protection law. Common dodgy practices include gaming search results to promote hotels that pay the most commission, pressure selling, false discount claims and hidden charges.
Dutch startup Bidroom hopes to take the industry on by flipping the standard business model on its head.
It takes zero commission from hotels and is free for them to list. Instead of charging hotels, Bidroom asks them to pass discounts on room prices onto guests directly. It basically works by getting hotels in the system to bid for a guest, offering dynamic pricing based on the hotel’s current capacity.
By way of comparison, companies like Booking and Expedia are based on taking commission.
“They force hotels to offer a lower price on their own websites, so if it’s £100 on Booking they can’t have a lower price on the hotel website. But the booking on Booking.com brings the hotel £80-85 versus the full £100,” Ros explains.
Bidroom’s prices are on average 11-12 percent cheaper than those on Booking and Expedia, the company says. A comparison of hotels conducted by Techworld using the same area and dates across Bidroom, Expedia and Booking backs this claim up.
“The margins these companies take from hotels are ridiculous. We’re standing for more transparency in the industry and I think it’s really needed. We have a different business model to the whole industry,” Ros says.
There is just one catch: to access the discounted offers, customers have to buy a one-year subscription costing £49 (or £25 for Visa card owners), though there are free trial options available from one to six months.
“We see an average saving per reservation of around £44, so you get a return on your membership immediately,” Ros says.
However, he admits that the initial friction of having to get people to sign up – and part with their precious card details – is a challenge. He’s confident they can be successful though: they’ve already got 500,000 members.
“We are very different to Booking or Expedia, which are transaction based,” he adds. “We have to acquire members. We’re part of the membership economy, think of us as being like Amazon Prime for the hotel business.”
Bidroom was founded by Ros and Casper Knieriem in January 2014 but launched its current business model in June 2017. It has 60 employees, set to rise to 100 by the end of 2018. They mainly work out of an office in Amsterdam, ironically just a few metres away from Booking.com’s headquarters.
It has signed up 120,000 hotels in 128 countries – which sounds impressive – but there’s no denying that lack of inventory (here meaning number of hotels on the platform) compared to its competitors is one of its biggest obstacles.
“This is very important. If you go on Netflix and see four movies you’d cancel, that’s why it’s so important to have as much inventory as possible,” Ros explains.
Another issue is lack of name recognition. This is why the company is working on PR and trying to educate people, he says: “In any comparison in the press we always win on price checking versus other platforms. We’ve got to get that message out.”
What led Ros and Knieriem to launch Bidroom back in 2014?
“A combination of frustration with the travel industry, which we’d previously worked in, a passion for travel, and a feeling that the industry needs major changes,” Ros says. “It needs disrupting to a completely different business model which is a win-win for users and hotels.”
You certainly can’t criticise the team for lack of ambition. They are trying to take on giants within the industry that earn revenues in the billions of dollars every year. They admit this – but are still bullish about their chances.
“We’re the first in the whole hotel industry trying to change to a future-proof business model,” Ros says. “We’re early, we have a first-mover advantage, but in a few years I think our model will be more common.”
“I know we’re a mosquito compared to an elephant. But mosquitoes can be very annoying.”