Are hotel wholesalers headed for extinction like the dodo bird? Certainly not yet.
What is the future of hotel wholesalers? There are a lot of prophecies out there, but what are the facts? I got asked this question recently and it prompted a closer look.
Are wholesalers becoming extinct or are they mutating into something more powerful and relevant? As a hotel, should you be seeking out the dominant wholesalers of the past? Or should you be seeking new-age online distribution channels?
Let’s first take a quick look at why hotels have traditionally used wholesalers and bed banks. For a long time, hotel wholesalers have been part of the standard market segmentation for most hotels
Pros
Many of the pros of working with wholesalers are well known.
- Working with specialist wholesalers provides access to a wide range of markets that hoteliers are unable to reach directly
- There is an element of good quality “free” marketing
- In most cases, hotels are able to forecast occupancy patterns better through wholesaler contracts
- Hotels avoid the fragmentation of demand in many of these source markets
- Hotels are able to generate volume business – particularly critical for high inventory resorts
Cons
As with most non-direct channels, it comes with many perceived cons too.
- They drive down profitability by demanding low net rates (or high commissions)
- They are too powerful in some markets and do not play fairly – i.e. too big for their own good
- They do not care about smaller hotels and can arm twist them on rates and conditions
- Their operations model is too opaque
- Pricing is static for long periods of time
- They do not fill allocations based on their commitments
With so many changes in the hotel distribution landscape, how relevant is this seemingly static wholesale business model? Let us look at some of the big changes in the marketplace.
1. Convergence
One of the biggest changes in the hotel industry (and influenced by new age technologies and business models ) is convergence – an increasing realisation that marketing, distribution, sales, revenue management and finance is all part of a continuous loop rather than stand-alone silos.
Here is a sub-set of changes influencing this convergence:
- There is an increased application of technology to address a range of activities which were previously not handled by hotels themselves eg: reservations and channel management
- Cheaper cloud-based technology has made it possible for a wider range of accommodation providers to start their online journey. Whether they do this successfully yet is a different story.
- There is a developing conflict between OTAs and companies that help hotels with direct bookings eg: Triptease & booking.com
- The travel and tourism industry has been forced to improve its focus on the customer booking journey and multi-device use
- There is a better understanding of the need for better use of data in decision-making – big data usage and achieving the holy grail of “one customer profile” across hotel chains
- Revenue management is becoming more sophisticated eg: Duetto’s pricing each room-type, or even individual rooms, according to forecast demand and being able to tweak room-type pricing to react to market conditions
- Hotels second look at rate parity and whether it is needed as a standard
- Merging of travel patterns and segments –Eg: bleisure
- Ubiquity of video, increased investment into virtual reality, and new age companies in this space eg: Deckchair
2. Blurring lines
The lines are seriously blurring between online and offline distribution agencies and their products.
- Tour operators and high street agencies sell more online. The two leading global tour operators, Tui Travel and Thomas Cook, both recorded 35% of sales made through online channels in 2013. In 2015, Thomas Cook reported 10% rise in online bookings, with a third now made via mobile.
- One of China’s leading OTAs, Qunar went the other way – online to offline last year – taking a stake in Bestone, a bricks-and-mortar travel agency with 3,500 outlets across China.
- OTAs like Booking.com offer marketing solutions to hotels since buying Buteeq and rebranding it as BookingSuite.
- The fight between the giants Priceline and Expedia is joined by the relatively “new two”, TripAdvisor and Google. This has blurred lines between OTAs and metasearch sites. It makes bookings. com’s partnership with TripAdvisor and Expedia’s Trivago open to direct bookings.
Read rest of the article at: eHotelier
