'Illusion of choice': The secret behind travel booking websites

Booking.com, Hotels.com, Expedia. There are so many now.
Booking.com, Hotels.com, Expedia. There are so many now. Photo credit: Newshub

Booking.com, Hotels.com, Expedia. There are so many now.

Pre-COVID, commercials for at least one of these brands would play in every single ad break on television, and despite the substantial drop in travel due to the pandemic, some of these brands are still a regular feature on our screens.

So it may surprise you to hear that many of the brands are owned by just the one company. 

Senior lecturer of marketing at Auckland University Dr Bodo Lang says the strategy is known as multi-branding and is somewhat similar to owning multiple radio stations, each catering to a different audience.

"Multi branding does seem counterintuitive at first but it has a number of advantages for the company that operates multiple brands. First, multi branding allows a company to address slightly different groups of customers with slightly different brands," Dr Lang said.

The big players:

Booking Holdings Inc: 

  • Booking.com
  • Priceline
  • Kayak
  • Agoda
  • Rentalcars.com
  • Opentable
A retro looking funny angry computer office worker holding mouse and yelling in frustration.  Wood paneling office with vintage computer and keyboard on desk.
Photo credit: Getty

Booking Holdings Inc has websites in 200 countries and 40 languages.

Historically around 90 percent of its profit is made outside of the United States via Booking.com. Playing the middle person between hotels and their guests has proven a success - in 2019, the company reported revenue of US$15 billion.

TripAdvisor LLC:

  • Tripadvisor.com
  • Cruise Critic, 
  • Oyster.com, 
  • SeatGuru.com
  • Viator.com
A review of Big Ben on Trip Advisor.
A review of Big Ben on Trip Advisor. Photo credit: Trip Advisor/Newshub

Trip Advisor was set up in 2000 and its initial aim was to aggregate reviews of hotels from across different guide books, newspapers and magazines, but one feature which was meant to be minor completely changed the direction of the company. 

"We also had a button in the very beginning that said, 'Visitors add your own review', and boy, did that just take off" Trip Advisor’s founder Stephen Kaufer said in an interview with the BBC.

Expedia Group:

  • Expedia.com
  • Hotels.com
  • Travelocity
  • trivago
  • CarRentals.com
  • Wotif

It’s probably no accident that Expedia is often the cheapest option when searching for hotels on Trivago, given they are both owned by the same company.

The company, which was originally set up as a department of Microsoft, now posts revenue of US$12 a year, and employs more than 24,000 staff. 

So why don’t they just merge all of their brands into one company and stop competing against each other for airtime and market share?

Dr Lang says despite it resulting in one company competing against itself for airtime and market share, there's benefits for both the company and the consumer.

"One of the advantages of operating multiple brands is that consumers may be served better through the different brands, thus making it less likely that other brands will enter that market. In other words, it can 'crowd out' potential competitors from a market."

Lang said it also helps with a company’s purchasing power.

"The brand operator to gain through economies of scale, basically buying larger quantities of ingredients or inputs into the business, at a lower cost than one brand could do by itself."

While there are some additional costs associated with multi branding, many of the behind the scenes jobs can be shared across all platforms, such as IT and HR.

But Dr Lang says operating multiple brands in the same market is not without its risks.

"One of the downsides of multi branding for consumers is that it can lead to the 'illusion of choice.' While it appears there are different brands, they are all part of the same group, so consumers still deal with the same company. So it can be misleading in that sense," Dr Lang said.