With booking activity scattered across so many channels today, accommodation operators are encouraged to pursue a diverse distribution strategy, working with a variety of booking channels to maximize reach and bookings.
NB: This is an article from Cloudbeds, one of our Expert Partners
One important channel that is often overlooked by small and midsized properties – and whose role in distribution is frequently misunderstood – is bed banks. Here we demystify bed banks, explaining how they work, the benefits and potential pitfalls of working with them, and options to consider for your property.
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What is a bed bank?
A bed bank is a company that contracts hotel rooms and other travel services from travel suppliers and markets them to third-party resellers, typically online travel agencies (OTAs), travel agents, tour operators, airlines, and loyalty membership programs.
Accommodations may be bundled into packages with transportation, meals, and activities. Unlike other travel sellers, however, bed banks operate as a wholesaler, selling products to other businesses rather than directly to consumers.
Bed banks are important to hotels because they provide a means of distributing room inventory through a large, global network of travel retailers. Traditionally in the hospitality industry, wholesalers and bed banks have been favored by large, leisure properties and hotel chains with lots of rooms to sell, but advances in technology have opened these platforms to smaller properties too, from boutique hotels and inns to hostels and vacation rentals.
How do bed banks work?
While each bed bank operates a bit differently, they all share a similar model. Bed banks seek travel suppliers in the destinations they serve to provide accommodations, flights, car rental, airport transfers, tickets, and other services. If a supplier meets the bed bank’s needs (and vice versa), it signs a direct contract giving the bed bank permission to promote and sell its products to other travel businesses. In return, the property agrees to extend a net rate or discount off advertised rates. Lodging operators may also be asked to commit blocks of guest rooms over certain dates or to provide additional services such as meals and activities.
The bed bank marks up the hotel’s rates and promotes the property through its network of resellers along with a portfolio of other properties and travel services. In turn, the reseller adds a markup or commission of their own when it sells rooms and packages to travelers. This places multiple intermediaries between the hotel and the traveler, each of which takes a cut of the room rate.
In the past, wholesalers printed large, detailed brochures to showcase their offerings. Today, a lot of merchandising has shifted to become online. Most bed banks operate an online platform or marketplace that features listings of partner hotels and other products along with descriptions, services, amenities, imagery, and availability. Hotel partners can connect directly to the platform through their property management system (PMS) or channel manager using an application programming interface, or API. This allows rates and availability to be updated in real-time, preventing overbookings and lost room sales.