Uber Is Selling Hotels and Trying Not to Profit

Uber launched hotel bookings in April through a partnership with Expedia Group, and this week chief executive Dara Khosrowshahi explained the economics: the business runs at break-even by design. Rather than take a booking margin, Uber returns it to Uber One subscribers as discounts of 10 to 20 percent. Khosrowshahi argued the company can afford to do this because, unlike conventional online travel agencies, it does not pay Google for the traffic. The customer is already inside the app.

That is the whole strategic idea, and it is a direct attack on how online travel has worked for twenty years. Booking.com and Expedia spend enormous sums buying search intent; Uber claims roughly 200 million monthly users who open the app for other reasons and can be shown a hotel at the moment they land. Khosrowshahi’s framing was that the traveller comes to Uber rather than Uber going out to find the traveller. Whether hotel shopping actually happens in an on-demand app is the open question the break-even pricing is meant to answer.

The inventory is Expedia’s, which means the selection is real rather than token: access is growing toward more than 700,000 properties worldwide, and Vrbo short-term rentals are due to appear in the Uber app later this year. Flights are deliberately on hold. Uber has said it will not add air until it has proof that travellers will book accommodation this way, which is a more disciplined sequencing than most companies moving into travel have managed.

For travellers the practical calculation is narrow but real. If you already pay for Uber One, a 10 to 20 percent discount on a hotel is a meaningful saving, though it comes without the loyalty points, elite night credit or direct-booking benefits you would get from the hotel chain. That trade-off is the same one every third-party booking channel asks you to make; Uber is simply pricing it more aggressively than anyone else currently can.

Sources: Skift, NBC News