Merchant Payment Flaw Exposed By Collapse

The weakness of the merchant payment model – where online travel agents take the client’s money before reimbursing the hotel minus their booking commission – has been brutally exposed by yesterday’s collapse of, which has cost many accommodation owners and operators thousands of dollars.

“This should be a seen as a lesson to ALL accommodation operators that the only model worth doing business on is an agent model where the client pays the hotel direct and the OTA is paid their commission post guest stay,” said Matthew Thomas, National Manager, Meriton Serviced Apartments.

“These merchant models are too risky… hotel owners and honest travellers shouldn’t have to deal with this – OTA’s spend too much money on advertising and SEO; It’s only a matter of time before they spend more than they make.

“A major shift to direct bookings should be the number one goal for every brand even independent operators.

“We are lucky we didn’t use them over the last few years, so have no financial woes to deal with.”

However, many others were not so fortunate, with the comments section on the original story jammed with tales of financial woe.

“We are owed over $3000  as guests have paid them directly and we can only invoice the amount after the guest has been and gone. I know many many other managers on the gold coast that have outstanding invoices too,” wrote one operator.

Other comments include:

  • “We have an accommodation business in the Blue Mountains and for the past number of months we have had to work REALLY hard at chasing our monthly payments!! This explains everything.”
  • “Many on the Sunshine Coast have been affected by this, too. Also telling people they have to pay again for their holiday is not pleasant. Happy to support Australian businesses but I don’t understand how this kind of business can operate without keeping clients funds safe in a Trust Account.”
  • “We have lost thousands of $$ and more than likely will never recover these funds. We have honored our commitment by supplying accommodation we should be paid.”
  • “We are an accommodation provider in Mollymook they owe us money for the last few months they refused to make the payments now i see why. For the last year they have been making excuses computer problems or best of all send us remittance that the payments have been made however never made it to our account.”
  • “I feel sorry for the staff that work for the company too. My friend works there and got into work yesterday and told sorry you no longer have a job or an income and received no warning or heads up that anything was wrong. Sad for hotels, customers and the good staff that were just doing what everyone was doing, trying to make a living.”
  • “Same story as the Accommodation Provider in Mollymook. We are owed over$1,800.00 for Guest accommodation from February to May inclusive. “

All those owed money are advised to submit an email ‘Letter of Demand’ to the appointed Administrator outlining monies owed so they can be listed on the Creditors Register.

Alternatively the Administrator can be contacted as follows: Holzman Associates, GPO BOX 3667, Sydney NSW 2001. Ph: 02-92229070 or Fax: 02-92229071. was placed in voluntary liquidation yesterday.

Share and Enjoy:

7 thoughts on “Merchant Payment Flaw Exposed By Collapse”

  1. Trust accounts should be mandatory for all companies using this model. our business has lost $5000 and we have been getting the run around for two months eg., computer glitches. Check in may been trading while insolvent for some time whilst using customer and operator’s funds as working capital. There should be protection in place by legislation to protect these funds like mandatory trust accounts.

    1. John
      Trust accounts are a great idea; however they can become a false sense of security for hotel operators, that think they are well protected from OTA collapse.
      The only way any accommodation operator can truly protect their brand, their employees, their revenue and their guests is to move away from all online agents working on Merchant model payment methods, and use safer retail model distribution.
      Some OTAs offer a choice of two models, some don’t, and some only work on the retail model. Partner with OTAs that do business in a way that your hotel income is protected. Talk to your merchant OTAs and demand the payment model changes. Other options for hotels are to negotiate more frequent payments (not just once per month), or lower the amount of credit offered to the OTA, to minimise risk. Alarm bells need to ring when an OTA is late on their scheduled payment and inventory should be cut-off to make sure payment is made.
      We as hoteliers need to remember that OTAs make money out of hotels and their survival is based on having content (our products) to sell on their site – so we MUST dictate the rules of supply. Trust me it’s much easier to be off these sites than to work on their terms.

      1. I suppose it’s a catch 22 in the industry, you say stay off these sites however for smaller properties who don’t have the resources or exposure that bigger chains of properties do, this being a free type of branding service is the only way they can compete with such properties. Unfortunately the reality in the market is you either compete for the share using all measures available or you slowly get pushed out of business. The truth to protecting yourself as property owners, managers or operators is to become more educated in using of the Internet. If you don’t have the time then don’t waste your time. Merchant model has been flawed for yonks and we all act surprised? Why because we never looked at the risks and educated ourselves to protect our interest. The Internet and its power is not flawed, our use of it is.

  2. Sorry forgot to add, used both commission and merchant models, another example of how we must understand not only our devices we are offering but also the services 3rd party websites are offering. Educational is the key.

  3. I would dispute that the retail OTA method is any “safer”. My property has just “lost” $3K to, but over the past five years the various properties I have worked at would have lost more than that due to fake/dodgy/stolen credit cards used through retail OTA sites by either walkouts or last minute cancellations or no-shows. Yes Trust Accounts would be an improvement, but so would a serious credit card validation service through by the retail OTA’s.

  4. If you lodge a complaint with your office of fair trading they might be able to do something

Comments are closed.