When Craig Foster needed a place to stay for a March trip to San Diego, the best rate he could find for the Bahia Resort Hotel was $147 a night. Then one website he tried, Stayful.com, said it would bid $130 a night for him.
Sure enough, the hotel immediately offered him the room at the reduced rate. That amounted to a savings of just over $100 for his six-night stay. "It seemed a bit too good to be true," Mr. Foster, an accountant from Mill Valley, Calif., recalls thinking at the time. "But it did the job."
Paying full price for a hotel room may be going the way of the bellhop or front-desk ledger. Stayful is part of a fresh crop of technology startups that are offering new ways for travelers to book rooms at significant discounts to prices listed on hotel websites or on online travel agencies such as Expedia.com.
While strategies vary, these sites typically find a way to negotiate a deal with a hotel below the listed rate, or they keep an eye out for price cuts, then help rebook at the lower rate. In almost every case, the websites collect commissions from the hotels while charging the travelers nothing.
The tech world has angled for a piece of the hospitality business practically since the birth of the Internet. The first major wave of online travel companies started nearly two decades ago. Sites like Expedia and Booking.com provided price comparisons across numerous brands to book airline tickets, hotel rooms and car rentals. That was followed by Priceline and Hotwire, which offered deep discounts for hotel stays for anyone willing to use an opaque process: Travelers don't see the hotel they have booked until the transaction is completed and can't be changed.
This new group includes HotelTonight, a mobile-phone app that offers discounts of up to 70% of listed prices for same-day hotel bookings. Another startup, TripBAM, monitors prices even after a traveler has made a booking. The website offers users the option of canceling and rebooking whenever TripBAM spots a cheaper price at a competing brand.
Yapta—which stands for your amazing personal travel assistant—similarly tracks both hotel and airline reservations and alerts users when rates or fares drop.
Several of these companies exploit economics particular to the hotel industry. As more rooms fill up and supply shrinks for any given night, the price for the last remaining rooms often gets lower rather than higher. This dynamic reflects, in part, that rooms are perishable items that generate no revenue when they are empty.
Unlike the airline industry, where companies can charge $200 for a domestic flight change, many hotels allow guests to cancel 24 hours ahead of time—or even as late as the same day as the reservation—without penalty.
Stayful's technology aims to determine whether a hotel room's price is higher than the market suggests it should be. The data-crunching process considers variables such as the current supply and historic demand for a property, the season, the day of the week and the prices being offered by the hotel's direct competitors.
A hotel can reject any Stayful bid, and the website's users can aggressively bid a price even lower than what Stayful determines is the room's "fair value." But co-founder Cheryl Rosner says that about 60% of the time, hotels accept the Stayful-recommended bid. Most of the other times, she says, the hotel counters with a rate that is higher than the Stayful bid but still lower than the advertised price.
For some travelers, these new companies won't hold much appeal. Their main attraction is that they ferret out the best price, often at the expense of convenience, flexibility or the ability to collect points for future upgrades and free stays. Some of the big hotel brands, including Hilton Worldwide Holdings Inc. and Marriott International Inc., tend not to allow guests to accumulate loyalty-program points if they book through third parties offering discounts.
Vincent Costantini, chief executive officer of Roseview, a Boston-based real-estate investment and advisory firm, says he occasionally uses discount travel sites like Hotwire. But he says people at his firm have been burned when their travel plans changed, because bookings at many of these sites are nonrefundable.
"If you have to eat a lot of reservations," Mr. Costantini says. "You're not saving anything at all."
There are also future risks that the discounted supply these sites feed on will shrink. The large hotel companies that control a chunk of inventory could take steps to keep their rooms away from these sites if they feel their pricing power is suffering, hotel analysts say.
But in some cases, certain brands have decided it is better to play along than to forgo business. HotelTonight, for example, had focused mostly on independent or small-company hotels since launching in 2011. In January, the San Francisco-based company announced it reached its first agreements with major brands, including Hyatt Hotels Corp. and InterContinental Hotels Group.
Andrew Joia, a graphic and web designer from Brooklyn, N.Y., heard about TripBAM from a friend and decided to try it for a business trip to Chicago. He booked a room at the Hilton Doubletree for $289 a night while identifying eight downtown properties as part of his group of hotels for TripBAM to monitor. He asked the website to notify him if any of the hotels offered daily rates at least $5 below Doubletree's.
Within 48 hours, he was getting emails alerting him to better prices at competing hotels, seeing rates drop to $250 a night at a Hyatt property. A couple of days later, TripBAM informed him that his original choice was offering $185 a night. So he stayed at the same Doubletree while saving $100.
Another site, Hotelied, went live in April. It wrestles discounts from hotels for users who are particularly active on social media. Chief executive Zeev Sharon says he has identified properties—such as Sixty Beverly Hills and Manhattan's Crosby Street Hotel—that will offer reduced rates of up to 30% for people with especially large Twitter followings, a long list of connections on LinkedIn, or a large population of Facebook friends.
Hotelied validates the guests' social-media connections for the hotels, which are willing to offer these discounts in hopes that the travelers will tell their friends and followers about the experience. Hotelied says that there is no set number of contacts required for discounted rates, as every hotel sets its own threshold, but most active social-media users should be able to access at least a few unpublished discounts on Hotelied.
Stayful's Ms. Rosner, who had worked at the booking site Hotels.com, says that when she vacationed she would email independent hotels and ask if she could have a room for less than the advertised rate.
To her surprise, she found that her offer was often accepted, or at least she received a counteroffer.
"I told my friends about it, but they felt uncomfortable doing the bargaining," she says. "So they asked me to do it." That's when she decided to start the company. Stayful works with 1,000 independently owned or boutique hotels.
Follow us on Twitter @TraveloreReport
