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No reservations: Apps cater to rise in last-minute hotel booking

By Daisy Carrington, for CNN
updated 5:44 AM EDT, Thu October 24, 2013
As less people plan in advance, more companies are offering deals on same-day hotel bookings.
As less people plan in advance, more companies are offering deals on same-day hotel bookings.
STORY HIGHLIGHTS
  • Mobile and tablet hotel bookings have risen 12 fold since 2010
  • 70% of those bookings are for same-day stays
  • There's been an influx of apps dedicated exclusively to same-day bookings
  • Some experts worry the deals offered through these apps could harm hotels' profits

(CNN) -- As cell phones have become an increasingly ubiquitous part of our day-to-day lives, they've had the effect of unleashing a kind of epidemic of spontaneity. As a result, many of us have become exceptionally bad at planning, preferring to set vague parameters for meetings and work out the finer details later. Lately, our last-minute mania has started to shape how we make hotel reservations.

According to market research firm PhoCusWright, last year 7% of hotel bookings were made via tablet and mobile phones (a figure 12 times larger than it was in 2010). By 2014, the number is expected to jump to 20%. According to a Harris International poll last year, 70% of those bookings are for same-day deals.

"There's a changing behavior that's fueling this," notes Gerry Samuels, CEO of Mobile Travel Technologies, a company that specializes in mobile technology for the travel industry.

"People are getting more and more comfortable making last-second reservations, not just in the hotel space, but in general."

Not surprisingly, there has been a flood of apps aiming to carve out their own piece of the same-day booking market. Last month saw a particular scurry of activity; HotelTonight -- the company that pioneered the trend -- announced it had raised $45 million in funding for its expansion plans; Berlin-based app JustBook launched in five cities in the United States; Groupon acquired Blink, a similar app that operates solely in Europe.

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Samuels isn't convinced that the onslaught of last-minute booking apps -- most of which offer users cut-rate deals -- is necessarily healthy for the hospitality industry.

Read more: Are hotels the offices of the future?

"I think there is a really big risk of cannibalization. If a hotel loses the ability to control their inventory and who sees it, they can end up with the nightmare scenario whereby customers are re-educated to stop booking early in hopes of getting a better deal, and that can be very dangerous," he says.

To combat that danger, companies like HotelTonight curate a handful of hotel deals, which they rotate daily. According to Sam Shank, HotelTonight's CEO, the system was put in place to protect the hotels he has a relationship with.

"Because we rotate the list, you can't guarantee the hotel you want to stay at will be on sale that day," he says. Furthermore, argues Shank, HotelTonight gives smaller properties the opportunity to break into a market that would otherwise be out of their reach.

"If you're an independent hotel, it's hard to have an app that will reach a broad selection of customers. We have seven million downloads, and can bring in customers that would never have otherwise thought to stay at a certain hotel," he adds.

Stefan Menden, the founder and CEO of JustBook, admits that when he started his company, there was some worry among his clients that it would have an adverse effect on the industry.

"There was anxiety this would be a new Groupon-type model, and that it would loot their brand and price value by bringing their deals to deal hunters," he says.

"What really happened was that we brought in a different clientele of customers that were spontaneous, but were looking for the best value-for-money, not necessarily the cheapest offering."

It's only three taps and a swipe to book a room, and it can be done in 10 seconds.
Sam Shank, HotelTonight

Read more: Business or pleasure? Luxury hotels offer day-only rates

Furthermore, Mendan argues that his company is actually good for the hospitality industry, offering hotels a much needed break from their dependency on big intermediaries like Expedia and Priceline.

"The big booking partners own so much of the market that they can raise their commission rates from year to year. In the U.S. those rates range from 20 to 25%," he says. JustBook, by comparison, charges 15% commission.

In addition to offering better rates, Shank claims that the start-up apps like his are also superior in the user-experience offered to customers.

"It's only three taps and a swipe to book a room, and it can be done in 10 seconds," he notes, "and we only work with the best hotels."

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