What do the delivery/bookings say?
Booking platforms use words like "Best Price Guarantee’ (Booking.com), ‘Great Rates’ (Booking.com), ‘Lowest Price Guarantee’ (Agoda), ‘Best Price’ (Agoda, Expedia), Competitive Pricing (Expedia), ‘Amazing Hotel Deals’ (Hotels.com) etc in their marketing materials. These claims suggest that each of these platforms will provide the best deal to a consumer. Is this correct or misleading. It can easily be argued these claims are misleading as the pricing has been manipulated (contractually with businesses - see below) to ensure the claims are valid.
Food delivery platforms generally don’t market themselves as having the best deal, however, their platforms tend to give the impression that they are price competitive and offer promotions which suggest that buying through them they have great offers for the consumer.
The reality
Delivery/booking platforms make money by charging businesses which advertise on their platforms commissions. These commissions are significant (12+% for bookings through to 20+% for food deliveries). These commissions are included in the prices displayed on platforms and are paid by the consumer.
For booking platforms, business are contractually required to ensure that the booking platform has the ‘lowest’ advertised price. They are contractually penalised if somewhere else online the price is advertised cheaper than being offered on that particular platform.
This means if a business deals with:
- one or more booking platform; or
- deals with one booking platform and has their own business website,
the prices advertised online will all be the same.
Food delivery platforms are different. Food providers can advertise different prices on their websites and websites to that which is available through a delivery platform. Since almost all businesses pass on commissions to consumers, buying food orders through a delivery platform can be 20+% more than that if the food is ordered direct from the business.
Do delivery/booking platforms create a competitive price environment?
No, as outlined above for booking platforms, businesses are required to have the same standard pricing irrespective of where the prices are displayed online. This means that the same price occurs no matter where one books. It is worth noting that platforms may have promotions to encourage consumers to make a spontaneous purchase decision. Discounts can either be paid by the businesses, by the booking platform or by the consumer through higher pricing/membership fees to offset any discounts.
Delivery platforms also don’t facilitate competition nor competitive price comparison. Prof. Justin Wolfers has outlined his own concerns about anti-competitive nature of delivery platforms and what they do to stifle the opportunity to compare with competing providers. While it is a US based synopsis, it applies equally to Australia as these platforms operate no differently in Australia:
Are delivery/booking platforms bad?
It depends.
If one is time poor and priced paid for things isn’t much of a concern, then the convenience of buying through a platform may override the additional costs. If one doesn’t have a car, collecting a food order may be less convenient than using a delivery platform.
If one is after the best deal, it is unlikely delivery/booking platforms will be the solution to save money or get the best deal possible.
How do I get the best deal?
While not guaranteed, the best deal is most likely to be achieved by purchasing directly from the business providing the service (for bookings) or product (for food deliveries). Try calling them to make a booking or to make a food order. Ask them for their best price so that it is better tham going through a online platform.
As the business doesn’t have to pay commissions and additional overheads in dealing with bookings/orders through a platform, they should be able to give consumers a better deal as a result. There is a downside - it may take slightly longer to find where to make a purchase as delivery/booking platform can simply the decision making process by aggregating information from similar businesses within the search area … rather than one having to do one’s own search such as using a search engine or online map searches and potentially then looking at individual business websites. However, if one is a little clever, the delivery/booking platforms can be used as a search engine with one contacting the business directly when a purchase decision has been made.
Do you use Delivery/Booking platforms and why?
Let us know if you use a delivery/booking platform and why you use them.
If you book/order directly from a business, let us know why you chose to.
