Alternatives to Booking.com: Understanding platform economics

THE Minister in charge of the subject of tourism has said that an alternative to Booking.com is being developed by a Sri Lankan expatriate with the Government's support to break the platform's monopoly and thereby bring down the commissions paid by owners of tourist accommodation and generate taxes for the Government.

- By Prof. Rohan Samarajiva

The Minister's comments display poor understanding of how platforms work. Given the increasing importance of platforms across the economy, it is necessary for all in positions of authority to understand platform economics.

International platforms

International platforms are those where buyers and/or sellers are not limited to one country. In the case of tourism, the sellers of accommodation services are located in Sri Lanka. The buyers may come from anywhere including Sri Lanka, but the most desirable buyers would be those from outside the country who would be making purchasing decisions in currencies with greater purchasing power than ours.

Tourism is a service that is supplied in person, though the bookings can be done virtually. In other platforms, the entire transaction can be completed virtually, without the buyer and seller ever meeting face-to-face. Online freelancing, where services such as logo design or translation can be bought and sold on platforms such as Freelancer and Fiverr, is an example of an entirely virtual economic activity that would not exist if not for the internet.

Around a decade back, LIRNEasia conducted research on the emergent phenomenon of online freelancing. There was considerable interest in our findings which included difficulties in competing with freelancers outside the country and in receiving payments once the work was done. Whilst sharing our findings with groups of freelancers, I recall being asked why we could not have a homegrown platform that would easily solve both problems and would, in addition, stanch the outflow of commissions.