Hotel room wholesalers: Who are they and what do they do?
Wholesalers can play a major role in the way you distribute your hotel rooms and rates.
Generally they will sit between travel agents and travel suppliers (in this case your hotel) to act as a middleman, sourcing and acquiring products (rooms, rates, packages) in bulk before selling them on to various clients (travel agents, OTAs, tour operators etc) where buyers (guests) can access them. Wholesalers will never distribute your inventory directly to travellers.
Examples of wholesalers include AOTGroup, CN Travel, FollowMe2Africa, Helloworld Travel, and Hotelbeds but there are 100s your hotel could potentially work with, including 99 connected on SiteMinder’s platform.
Every wholesaler will have a unique price for operators to participate in their programs and often different wholesalers will sell in different ways. For instance, some may sell rooms only while others will deal in packages. Some are even limited to specific property types or markets so it can be an interesting exercise finding wholesalers and deciding which operators to establish a relationship with.
This blog will take you through the advantages and disadvantages of wholesalers to your hotel, include some tips on how to manage your relationships, and where you can use technology to help.
Table of contents
Benefits of partnering your hotel with wholesale travel suppliers
Wholesalers can offer opportunities for hotels to access a more diverse and unique range of guests.
An optimal hotel distribution strategy will include a healthy mix of direct and third-party bookings, with a broad variety of potential revenue streams. Wholesalers can provide a powerful level of reach that your hotel usually can’t achieve alone, including being able to more easily attract international travellers. With wholesalers selling to online travel agents and retail agents, no stone is left unturned in the mission to get your property in front of as many eyes as possible.
Many wholesalers specialise in providing access to a wide range of markets that you could never reach directly, and working with them becomes almost a free form of marketing for your property.
There’s also the added benefit of being able to more accurately forecast occupancy patterns when you have a contract with a wholesaler, and you can be certain to always generate a specific volume of business and be paid in advance.
Disadvantages of working with accommodation wholesalers
Wholesalers are certainly a point of contention in the hotel industry and can have some frustrating drawbacks for property and revenue managers.
Before the internet arrived there was much less polarization. Wholesalers would purchase inventory and sell it to a travel agency, who would then sell to a customer. Each purchase would involve a price markup and all parties would be happy with their margins. The internet made rates much more publicly available, and led to inventory being sold to OTAs and other wholesalers, ultimately driving down the amount of profit the hotel could make from their agreements. Now the hotel can have guests coming in who purchased their room from a completely unknown OTA.
Part of this discussion involves contracted vs non-contracted OTAs, with a Fornova & EyeforTravel report finding “Non-contracted OTAs are undercutting more aggressively than contracted counterparts.” On average, OTAs working under agreements with the hotel posted rates that were 5% to 6% lower than the direct rate. This jumps to 10% for non-contracted sellers advertising for lead times under 14 days and 11% for lead times above 14 days.
Even if wholesalers have the best intentions, there’s not much they can do to control what OTAs or other parties do once the product has been sold on. Naturally, this added complexity has had serious impacts on hotel rate parity – causing further emphasis on scoring direct bookings. In many cases it has turned the once preferred distribution method of wholesale into an often derided risk.
A summary of the potential disadvantages
- By demanding low net rates (or high commissions) wholesalers drive down profitability
- In some markets wholesalers take advantage of their power, not playing fairly
- A lack of transparent operating procedures
- Wholesalers don’t always fill allocations according to their commitments
- Wholesaler pricing can be static for long periods of time, limiting hotel profitability
- Loss of control over where rooms are sold or at what rate
- Multiple contracts between hotel and wholesaler, and wholesaler and other distributors – results in rate disparity
- Rates expected to be packaged sometimes end up ‘unbundled’ and sold at a heavily discounted rate, undercutting the hotel.
How to manage wholesale agreements at your hotel
Obviously if wholesalers bundled rates in packages or reverted to only offering rates through retail travel agents, all would be well but hotels don’t have this luxury now. It’s also not so straightforward as severing all ties with wholesalers or ignoring them as a distribution option. They can still be extremely valuable to your hotel in terms of selling large volumes of your inventory reliably.
Some best practices you can take in managing your wholesale agreements include:
Plan, research and trial
It’s important you know what you want to achieve since each wholesaler may have different strengths or be attuned to different markets and types of guests. Once you have a plan, choose some likely partners and undertake a trial period if you can to see if a long term agreement will be worthwhile.
To avoid difficult parity violations, such as when you drastically change your rates, it’s important to treat wholesalers as true distribution partners and constantly manage the agreement.
If you can identify when and where contract violations occur, you can better decide what changes need to be made to your agreements in the future or if you want to remain in the relationship.
Seek similar minds
If your philosophy as a hotelier is based strongly on the hospitality side of things and serving people the best experience, you should try to find partners who have the same idea. As we know, some parties are more interested in securing sales than taking care of people, so choose carefully when entering into wholesale agreements.
Be on the front foot
Dynamic rate agreements will go a long way to reducing disparity and give you more control. So you should narrow down your list of wholesale partners who are willing to agree to your terms. It’s vital that you can adjust rates according to supply and demand across all your distribution strategies.
Track the growth of APIs
APIs are essential to the growth of the industry and for making life easier for hoteliers who want to expand their strategic scope. However, it’s not always in the best interests of your business since more players can now access market inventory via more partners. This creates the danger of hotels not having a clear enough view on who is selling their inventory or at what price. It’s vital you know this information because only then can you understand the effectiveness of your sales and marketing strategies, and the value of driving bookings through various means.
If you have the resources to dedicate entirely to managing wholesale agreements, like an IHG for example, then it’s certainly beneficial to do so. If not, then seek and share as much information as possible. Hoteliers can learn a lot through lived experiences and from their peers. The industry is huge and the hotel community can usually overcome challenges through collaboration and smart partnerships.
Want to know more about managing wholesale agreements and connections at your hotel?
Technology that will help you navigate travel wholesalers
When navigating distribution at your hotel, the industry default solution to make life easier and more profitable is a channel manager.
A channel manager is a cloud-based tool that allows you to centralise and manage all your distribution channels simply. Data sharing is two-way and any updates you make are automatically communicated to/from your property management system and connected channels, including your own website booking engine.
The more channels you have, the greater your need for a channel manager, to ensure you can make instant rate adjustments and avoid double bookings. Being able to manage channels more easily allows you to connect to more, broadening your reach and potential revenue.
The SiteMinder cloud platform for hotels automates room inventory and rate updates from wholesalers to your property management system (PMS), keeping everything in sync and eliminating manual entry.
On top of these benefits, a good channel manager will also offer deep performance insights and extra integration with other applications you want to use in your business plan.
A second piece of technology you might consider is a tool to monitor rate parity and combat any issues that arise. Hotel business intelligence software, also offered by SiteMinder, allows you to keep on top of demand and pricing, and fix parity complications before they become a problem. With a pricing intelligence tool, you’ll have clear, actionable data that you can access and action every single day – giving you greater flexibility when you’re managing your rooms and rates.
Wholesale distribution at your hotel: Key takeaways
- Wholesalers sit between travel agents and travel suppliers to act as a middleman, sourcing and acquiring products in bulk before selling them on to various clients where buyers can access them.
- Wholesalers will never distribute your inventory directly to travellers.
- Wholesalers can provide a powerful level of reach that your hotel usually can’t achieve alone, including being able to more easily attract international travellers.
- Many wholesalers specialise in providing access to a wide range of markets that you could never reach directly, and working with them becomes almost a free form of marketing
- Even if wholesalers have the best intentions, there’s not much they can do to control what OTAs or other parties do once the product has been sold on. Naturally, this added complexity has had serious impacts on hotel rate parity
- Manage your agreements constantly, analyse regularly, seek similar minds, and be on the front foot when navigating wholesalers at your hotel
- A channel manager is one of the most powerful tools you can use to aid you in your distribution
- Hotel business intelligence software gives you huge amounts of insight, allowing you to manage rates with flexibility and confidence