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Wasn't the Internet supposed to eliminate the middleman?

It did when it comes to distribution channel.

A hotel can have a website where people can directly book a room.

But people want to compare prices, shops around, hence a new form of ... middleman :D

Yeah, and they these middlemen also give hotels a way to sell lesser service and blame the middleman. Going through the third-party often loses membership perks and amenities and generally also makes cancellation much harder, in exchange for a lesser rate.

If the hotel offered the lesser rate themselves, they would effectively be pricing their "free" amenities, and they don't want to do that.

It's not that they "don't" want to do that - in fact they'd very much like to. It's that they can't do it. Their agreements with listing services prohibit this. And if they don't get listed then they simply won't get the same rate of bookings.

Generally they are paying around 20% of the booking fee to the listing service. So in theory the hotel would be able to charge 15% less on their own site and make a larger profit. But if they did they would no longer get listed on the popular sites where people go to easily price compare and then book.

The loophole in those agreements is that the best price that listing services show is the best "public" price. Larger hotel chains are working around that by offering lower prices to their loyalty club members.

On the contrary, cancellation and purchase is easier. And also middle men add visibility to a lot of small hotels.

Hell, there are aggregator aggregators already. Sites that compare prices between aggregators.

It's turtles all the way down.

Not eliminate, replace

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