Looking for ways to get the best deal on hotel rooms? The answer can be opaque.
Hotel rooms sold by "opaque" sites -- which don't disclose the brand name or location of a hotel until after the room is booked -- are 39% cheaper than rooms sold through
and hotel-run sites, according to a recent study from Thomas Weisel Partners. The study examined rates at five properties in the top 10 markets and found, for instance, that the average price at
, an opaque site, was $101.66, around $65 less than other sites.
Such a discount comes with a catch, however. The nondisclosure of hotel names and locales may be annoying to shoppers looking to stick with a favorite chain, redeem points or stay in a specific location. But the opaque model benefits hotel chains, which can potentially sell more rooms, and consumers, who get good deals they wouldn't otherwise see.
"Opaque sites are supplier-friendly businesses. By not telling the consumer the brand or location, they are protecting the integrity of the hotel chain's pricing structure. Marriott doesn't want to sell a room for $70 they can sell for $125 somewhere else," said Jake Fuller, an analyst at Thomas Weisel Partners. "They're not undercutting their pricing elsewhere because the customer doesn't know who they are up front. There's no chance to comparison shop."
While this makes a direct, apples-to-apples comparison of hotel rooms sold at transparent and opaque sites impossible, it is possible to use opaque site search engines to find rooms that meet expectations.
"The biggest drawback is that you just don't know the specific hotel, but both Hotwire and
offer a great deal of information about hotels," said Jared Blank, online travel analyst at Jupiter Media. "Prior to purchase, you have a good idea what part of town you're staying in and the amenities offered."
New York Example
Even though Hotwire requires you to put on blinders, you're certainly not blinded. Hotwire's search engine allows you to narrow down results, so much so that you can feel confident you're getting a good deal.
For example, say you wanted to stay in New York City over the weekend of Nov. 8, at a decent hotel with a gym and restaurant that was located away from the crush of Midtown tourists.
At the beginning of the search, Hotwire lets you select the neighborhood you'd like to stay in, offering 11 different parts of the city all clearly marked on a map of New York City. After selecting up to four areas of the city where you'd like to stay -- avoiding Midtown -- Hotwire lists the results, which you can sort by price, star rating and location. The amenities available at each hotel are shown.
The cheapest deal at Hotwire was a four-star hotel for $148 a night, located in the financial district, away from Midtown. It had a gym, restaurant, high-speed Internet access and a business center. Compare this to the four-star hotels in the financial district with gyms and restaurants at
, and the savings become clear, even if it's impossible to compare the exact same room. Orbitz.com's best four-star hotel in the financial district was the Millennium Hilton at $229 a night.
"It's not a guarantee of the exact same hotel," said Amy Bohutinsky, spokeswoman for Hotwire. "If you think about Midtown Manhattan, there are a lot of four-star hotels with the same amenities. And every time you search, it won't necessarily be the same four-star hotel in that neighborhood. Our prices can change daily. But it is a good way to see what a four-star hotel is like."
Still, in exchange for a low rate, travelers aren't merely limited in the information they're given; they're also limited in their ability to get a refund or make changes. This is where third-party and hotel sites have a distinct edge. Both types of travel sites allow customers far more flexibility if plans need to be altered at the last minute.
"It depends on how far out you cancel. If you cancel within the cancellation window, you get a full refund from Expedia," said Andrea Riggs, spokesperson at Expedia.com. "Even if you're outside the cancellation window, you can receive the majority of your money back. It's a pretty flexible policy."
As for Hotwire, spokeswoman Bohutinsky said, "Our purchases are nonchangeable and nonrefundable. If there's a genuine problem with the room, then we can deal with that individually. Not liking the color scheme of a room does not qualify as a genuine problem. We sell the room and issue the tickets, and if a refund is warranted it goes through us."
Increasingly, consumers are willing to sacrifice control and choice to get the best deal. The momentum behind the opaque sales model is growing -- and the travel industry is taking notice. In July, Hotwire.com become profitable on the strength of a record-breaking second quarter, earning $2.5 million on $196 million in gross bookings, which were up 64% from the previous quarter. From the first quarter to the second, the number of hotel rooms sold grew by 43%.
On Sept. 22,
, the Barry Diller-led enterprise formerly known as USA Interactive, announced plans to buy Hotwire for $665 million in cash and the assumption of $20 million in options and warrants. According to IAC, Hotwire will take in $700 million in bookings in fiscal 2003, with net revenue of $110 million.
Another factor also will make opaque sites more attractive in the years to come. Hotel chains are concerned that third-party travel agencies like Expedia and Orbitz are stealing business, so they're not giving them the best deals anymore. As the chart below shows, the big advantage that Expedia and others once had has been shrinking fast.
"If you look at our surveys over the last year or even the last six to nine months, Hotels.com, Expedia and others gave you better prices than if you picked up the phone or went to one of the hotel-direct sites," said Fuller. "Increasingly, that's less the case these days. Chain sites have some of the best prices now. But it would appear the deepest discounts are at the opaque players, like priceline and Hotwire."