Are you sure you want to go there?
In the fiercely competitive hospitality industry, efficient distribution of hotel inventory plays a crucial role in driving revenue and maximizing occupancy rates. Hotel revenue managers and owners often face the decision of whether to leverage wholesalers as a distribution channel. Wholesalers act as intermediaries between hotels and various distribution channels, facilitating the sale of hotel inventory. In this article, we will explore the pros and cons of utilizing wholesalers for hotel inventory distribution, enabling revenue managers and owners to make informed decisions.
Travelers today use OTAs 50% more than hotel websites to compare leisure travel options. And that means OTAs can play an important part in your distribution strategy.
- Peter Kern, CEO of Expedia Group
The pro's of using wholesalers
- Broad Market Reach: Wholesalers have established networks and partnerships with numerous online travel agencies (OTAs), global distribution systems (GDS), tour operators, and travel agents. By collaborating with wholesalers, hotels gain access to a wider audience and can tap into new markets that might be otherwise difficult to reach. This expanded reach can lead to increased bookings and improved occupancy rates.
- Simplified Inventory Management: Working with wholesalers can streamline inventory management processes. Instead of dealing with multiple distribution channels individually, hotels can consolidate their inventory through a single wholesaler. This simplifies the task of updating availability, rates, and restrictions across different platforms, saving time and reducing the risk of errors.
- Negotiating Power: Wholesalers often have the advantage of negotiating favorable contracts and securing discounted rates from hotels. By aligning with a reputable wholesaler, hotels can benefit from increased bargaining power and the ability to negotiate better terms and conditions. This can result in increased profitability for hoteliers.
- Dynamic Pricing Opportunities: Wholesalers frequently engage in dynamic pricing practices to optimize revenue for hotels. They analyze market demand, competitor rates, and other factors to adjust prices in real-time. This flexibility allows hotels to capitalize on demand fluctuations and optimize revenue during peak and off-peak seasons.
- Exposure to Niche Markets: Wholesalers specialize in various market segments and niche markets. By partnering with wholesalers catering to specific segments (e.g., luxury travel, business travel, or adventure tourism), hotels can tap into niche customer bases that have a high affinity for their offerings. This can lead to increased bookings and revenue from targeted market segments.
Client services
Revinized will provide you with a global strategy that includes only the partners you need to capture:
- Growth in your Total RevPAR
- An increase in your ARI
- The biggest amount of market share
The cons of using wholesalers
- Commission Costs: Wholesalers typically charge commissions for their services, reducing the hotel’s overall revenue per booking. These costs can vary significantly depending on the agreement and the wholesaler’s role in the distribution process. Hotels must carefully evaluate the commission structure to ensure it aligns with their revenue goals and profitability targets.
- Lack of Direct Customer Interaction: When hotels rely heavily on wholesalers, they may lose direct contact with customers during the booking process. Wholesalers often handle customer inquiries, modifications, and cancellations. This indirect communication can diminish the hotel’s ability to build customer relationships and gather valuable feedback. Hotels must strike a balance between utilizing wholesalers for distribution efficiency and maintaining direct customer engagement.
- Reduced Control over Pricing: Wholesalers may exert influence over pricing strategies, leading to potential conflicts with the hotel’s revenue management goals. In some cases, wholesalers may dictate pricing or impose restrictions on rate parity across different distribution channels. This can limit the hotel’s ability to implement dynamic pricing strategies or adjust prices to respond to changing market conditions.
- Brand Dilution and Dependency: Overreliance on wholesalers can dilute a hotel’s brand identity. Customers may associate the booking experience solely with the wholesaler rather than the hotel itself. Additionally, if a hotel heavily relies on a particular wholesaler for bookings, it becomes vulnerable to the wholesaler’s performance, market position, and potential disruptions in the distribution network. Diversification across multiple distribution channels is crucial to mitigate such risks.
- Potential Conflict with Direct Bookings: Wholesalers’ broad market reach may inadvertently lead to conflicts with direct bookings. If wholesalers offer lower rates or exclusive deals, it can discourage potential guests from booking directly with the hotel’s website. This can affect the hotel’s relationship with loyal customers and erode its direct booking revenue stream.
Recent Comments