Booking.com is migrating from its original “agency” model to a “merchant” model according to MIRAI in its recent article.
| A quick recap on definitions: Agency model is where the client pays the final price to the hotel and after the check-out month, the hotel pays the commission to booking.com. Merchant model is where the client pays the full final price to booking.com (not to the hotel). After the check-in date, booking.com then pays the net price (final price – agreed commission) to the hotel. |
Booking.com holds that the agency model is a major stumbling block for further growth.
Read more here from Booking Holdings’ fourth quarter 2021 conference call.
ADVANTAGEOUS PIVOT FOR BOOKING.COM:
| Connected Trips | Alternative Payment Forms | Payout Times |
| Booking.com is penetrating the market with its multi-product connected trips (the cross-selling of services): hotels + flights + restaurants + rental cars and for this the merchant model is fundamental. | Credit cards are not always the most used form of payment worldwide. This puts a hotel and also alternative lodgings (such as private apartments, villas, short term rentals) under strain to accept such alternative payment forms. Booking.com steps in with Payments with booking.com. Clients also appreciate paying in their own currency so Booking.com gains favourably from foreign exchange rates. | If booking.com charges the client on the booking date and pays the hotel on the check-in day, there is a time lapse resulting in a positive impact on Booking.com’s cash flow. |
NEGATIVE IMPACT ON HOTELS/ALTERNATIVE LODGINGS:
| Extra Commission | Negative Cash Flow | Undercutting |
| Booking.com uses Virtual Credit Cards (VCC) to pay hotels and gains by charging a commission to the hotel that averages 3%. Tutto sulle carte di credito virtuali (CCV) | When a guest makes a booking and pays for it online, Booking.com sends the hotel a VCC that can be charged after its activation date, which is generally set to 1 day after the check-in date. This has an imact on the hotel’s cash flow. | Participating in Payments by Booking.com (merchant model) means that Booking.com can undercut a hotel’s prices in the mobile app, by market, by device, by audience etc. Pagamenti tramite Booking.com |