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.
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
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.
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.
- New age distribution companies like Siteminder position themselves in the middle as a super connector and offer products similar to BookingSuite eg: Canvas.
- Global Distribution Systems (GDS’s) evolve into multi channel distribution to become true Internet Distribution Systems (IDS’s) eg: Travelport.
- Metasearch websites like Trivago and Tripadvisor become booking websites (although not an OTA), but the customer does not know the difference.
- Regional products like Oyo Rooms spring up in countries with limited quality accommodation like India and Indonesia.
- AccorHotels is pursuing a selective OTA model with accorhotels.com.
3. Next gen offerings
A new generation of online intermediaries around the world, such as:
- Emerging market OTAs
- Evolution of vacation rentals spurred by AirBnB success
- Hostels, Camping/Glamping, B & B’s go online with live inventory
- Niche OTAs specialising in wellness, pets, children etc.
- Tour planning and booking sites
- Editors’ Pick websites (Johansens) and Media branded collections (Nat Geo)
- Flash sales and deals
- Auction and renegotiation websites
- Loyalty and membership based OTAs
- Group and meeting booking websites
So what does the future hold for hotel wholesalers? And how can a hotel decide if they should work with one? Is there a big list of hotel online intermediaries somewhere?
As a hotel, here are some key considerations to working with wholesalers as part of a wider room distribution strategy:
- How open is the wholesaler to dynamic pricing and what options exist?
- Do they use technology to understand booking patterns? eg: TotalStay (exclusively hotels) uses Tripmetric Web Services Analyser software to understand behaviour and buying patterns on its hotel platform.
- Do they offer options to plan itineraries and ala carte traveller services? (Travellers increasingly seek a travel agent-like experience through apps.)
- Accept that the line between wholesale and retail is merging.
- Check the level of localisation that wholesalers are able to offer for a hotel online.
- Do they allow dynamic content management? It is no longer good enough for hotels to be able to update information once in 6 months or a year!
- Check that they are able to offer incremental business rather than just channelling existing demand to the hotel.
- Check if they also focus on non-accommodation segments like car rental that can drive additional business to your hotel. Eg: Tourico Holidays promotes its car rentals, expanding it to have coverage in over a 100 countries.
- Have you analysed the customer booking paths in the markets where you get wholesale demand from? Eg: if you have a market with a high level of Internet penetration, good understanding of travel and easy payment, it maybe worth investing into direct bookings channels and vice versa.
- Do you need wholesalers in your existing and new feeder markets? I.e. where demand and customer booking paths are more unpredictable, for example, the emerging markets of Asia, Africa and South America, wholesalers will continue to be play a role.
So extinction? Wholesalers are not going to be extinct. Certainly not yet.
Many of them are adapting well and experimenting with various business models. They continue to be a powerful force and will continue to wield considerable influence in the coming years. However, the ones that do not adapt quickly offline to online, and vice versa, based on market realities, will fade away. Companies that do not pay enough attention to data will find it increasingly hard to stay ahead of the curve and bring relevant propositions to the market quickly.
Hotels will do well to scrutinise the wholesalers they work with to understand their evolution. In this dynamic environment, analysing available production figures may just not be enough indicator to a wholesaler’s future delivery.
Which hotel wholesalers do you think are adapting the best to changing market dynamics? Let us know in the Comments section below!
As a specialist in hotel sales, Vineeth Purushothaman helps hotels boost sales efficiency and productivity by combining hotel expertise with business process redesign and the use of appropriate technology. He loves the constantly evolving world of hotels and travel and has worn several hats in the course of his professional journey, in a range of diverse roles in hotel operations and sales.