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dec 05

Are hotel price matches a bad idea?

Many hotels and online travel agencies offer price match guarantees. Find a lower rate for your room via another online source within a certain period of time (such as 24 hours), and you'll be either refunded or credited the difference. Hotels.com has the most expansive price match. After you book through it, if you find the same type of room at the same hotel on the same date at any point up until you arrive, you'll receive a chargeback to your credit card.

But are price matches good for consumers? Sure, they may give you confidence that you're not overpaying. But there's a side effect that may be bad, as The New Yorker made plain this week in an article (which is sadly not online). "The meet-or-beat-the-competition model, economists have shown, merely discourages price-dropping," said writer Patricia Marx. She was referring to price matches at discount department stores, but the same rule must apply to hotels.

Let's say Hotels.com is one of many sites that sell rooms at The Plaza Hotel. And let's say The Plaza's own website offers the same room for less. You can take advantage of Hotels.com's guarantee, and get a refund for the price difference. But because Hotels.com is promising to match any price, it is taking away the incentive for The Plaza to cut its rate. After all, when The Plaza cuts its rate, it probably won't steal any extra customers from Hotels.com and it will merely make less profit from travelers booking directly through its own website (because it has lowered its rate). The Plaza will keep its rates higher than it otherwise might. And if it can't sell enough rooms at that rate, it may give the rooms to Hotwire or Priceline to sell at a discount (without revealing The Plaza's name to the customers before they pay).

In real life, not many people may actually take advantage of price matches, so maybe it's not that large of a problem. But both Hotwire and Priceline are reporting deeper than usual discounts from major hotel chains that use them to sell rooms through their blind-booking features. Hotels have too many vacancies, but they're reluctant to drop their publicly advertised rates, having worked so hard since 2002 to boost their rates.

What do you think about price matches? How can we get good deals on hotel rooms during this recession?

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Note:This story was accurate when it was published. Please be sure to confirm all rates and details directly with the companies in question before planning your trip.

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