Wholesalers play an important role in hotel distribution, especially if you have a large inventory to fill. But it is also a major pain area for the industry, with issues such as price leakage (when wholesalers relay prices to online travel agencies to those who undermine brand.com) often creating distribution nightmares.
To find out what hotel owners should do to deal with rogue wholesale distribution, we caught up with Derek Brewster, director of revenue management at Lotte New York Palace. Derek has been instrumental in the famous financial success of Lotte New York Palace and its market share growth since 2015. He is also a proud member of Triptease Hotel Heroes Board.
The conversation with Derek below is from the Triptease Hotelier’s Guide to Wholesalers. Download the full report here for more tips and advice on handling bulk distribution.
Watch Derek at the Direct Booking Summit in New Orleans October 25-26, 2022, an event that brings together hundreds of hoteliers to strategize, communicate and drive the direct booking movement forward. visit Direct booking conference page To book your tickets!
Why do hoteliers choose to work with wholesalers and what are the benefits?
The short answer is to book rooms in advance. I work in the largest luxury hotel in New York, with over 900 rooms, split between two experiences. We don’t do much wholesale business in our five star hotel, which has a smaller inventory of suites. But the other hotel has more than 700 rooms and it takes a lot to fill – and that’s where the sentence comes into our strategy.
What I love about wholesale is what wholesale is supposed to be in theory: I sell my room to a wholesale partner at a discount because they’ll produce volume. This relieves us of the pressure to fill those rooms in a short booking window. New York is very predictable. You know what’s going to happen – where you’ll be high and low, where you’ll be fine without a base and when you’ll need help. This is where we rely on our wholesale partners. We really value our wholesale partnerships and have great partners. But the rate we give them is not B2C (business to customer) – the customer should never know what that rate is.
What value do wholesale customers bring to the hotel?
Wholesale is important from an operations point of view – it helps you reach the guests you want, especially international guests who book longer stays. They would stay six, seven, eight or nine nights, which is invaluable – I saved money to service that room. It is a less expensive business, and they usually spend a lot more in outlets and everything else in the hotel. Your team needs to know that these customers are valuable.
Has your relationship with wholesalers changed since the pandemic?
We’ve come back a lot in our wholesale business since the pandemic. We have consciously separated from a lot of partners – usually those who do not produce any extra volume. We also considered whether we need a flat rate with all of our partners. We have a few partners that we still give fixed rates to, but everyone follows a dynamic model – so the rates flow from BAR (Best Available Rate). This means that we can easily modify it in our system, and promotions will be easier this way. We’re doing more with fewer people, which is essential since we have less bandwidth.
The general mix we attribute to wholesale is now much less. If the order is from a higher rated segment, you will not give it to the wholesale partner at a discount. But to fill the valleys – this is where we continue to rely on wholesale.
What types of wholesale partners do you currently work with?
The most attractive wholesalers to us now are Airline Partners. Because they keep everything in bundles – they do what they’re supposed to do and they don’t give those prices directly to the customer and they don’t end up searching for metadata. We’ve cut back on family banks because we don’t need the scale right now.
What is your strategy for dealing with wholesalers and OTAs that cause price leakage problems?
It’s really hard to catch them because there’s usually no direct relationship between the wholesaler I make an agreement with and the OTA selling my prices at a huge discount. The challenge is that I don’t always have the energy to go down the rabbit hole to make test reservations.
Every once in a while I’ll scan the metasearch and see what “random.com” OTAs are out there. We have an attorney on staff, so we’re working together to create a powerful cease-and-desist email that I send to random.coms.
Once they find a contact in the OTA, they usually lower the price. But that does not mean that it will be gone forever because the next day they will change their name and come back again. It’s a cumbersome process, so the way we do it is that we have very strict language in our contracts with wholesalers. If we find you once you get in trouble, you’ll faint twice for a few weeks, and if we find you a third time we won’t work with you anymore.
What can hotel owners do to address the wholesaler problem?
We have a home reservations team and sometimes we will catch a wholesaler by mistake because the guest will call you, mention the OTA through which they booked and we will look for it which is one of our wholesalers. So sometimes how we catch them.
Pursuing OTAs alone will not cure the root cause. But at least if you can find a contact there, you can stop it, rather than having to step back and see which wholesaler eventually distributed the prices. The final problem is 100% on the wholesaler – which is why we have a very low tolerance for later distribution. If you do and we catch you, you’re done.
How do you spot the signs of rate leakage?
In the Triptease Parity Product You need to look for patterns in the data. Here’s the cool thing about the tool – you can see that this is where guests on your site actually searched on specific dates. This is the only way you can solve it. If you’re getting all these visits on a select set of dates and people are shopping for you and there’s a lot of difference – find out who’s responsible and shut it down!
How do you identify the right wholesalers to partner with in the first place?
Talk to the bigger hotels in your market. You can start asking there – who are your favorite partners, who do you work with, who make the most, and who are on your naughty list? It’s pretty consistent who the bad players are.
Then reach out to the good players and interview them to see if they would be a good fit. What markets do they serve – is it an area of the world that you don’t currently reach? Because you don’t just want to replace existing businesses – you want to expand your reach. As a standalone hotel, we don’t have the reach that the big brands have, and we certainly don’t have the reach of Expedia or Booking.com, so if the partner you’re talking to can expand your reach, they’d probably be a good partner. Finally, check what their set of technologies looks like and whether they can work at dynamic rates.
What is the most effective way to hold wholesalers accountable?
It all comes down to forming good relationships with your wholesale partners. If you have a good relationship, you can make a quick call or send an email saying “this has to stop”. What is interesting is that some hotels are OK with the constant distribution from the larger bed banks. They give them a rate and they are fine with passing it. This means that a lot of wholesalers who have relationships with random online travel agencies naturally will pass on your prices. You need to specifically request to be placed on the “no distribution” list. If you do this and they still pass the prices on, hold them accountable. Make sure that in your contract they should not distribute your rates later.
If there was one thing a hotel could do today to solve the price leakage problem, what would it be?
See who you’re working with, and get really good to narrow down this list of partners. If they don’t postpone their end of the deal, get rid of them and tell the remaining partners “We no longer work with this partner, can you trade in their size”.
It shouldn’t be any different from the way your sales team handle their account management – you should have good relationships with them. You don’t need twenty partners in bulk – if you have five good partners, you don’t need the rest. Nobody has time for negativity, so get rid of it.
Want to learn more about bulk distribution processing? Download the complete hotel guide for wholesalers.
Catch Derek at the Triptease Live Booking Summit in New Orleans October 25-26, 2022. Visit Direct booking conference page Book your tickets now.
Thrilling It is a SaaS building industry-leading software for the hotel industry. The company was founded in 2015 by Charlie Osmond, Aldair Snow and Alexandra Zubko and has offices in London, New York, Barcelona and Singapore. Triptease’s most recent funding was led by the UK Growth Fund along with Notion Capital and Episode 1.
The Triptease platform is designed to help hotels regain control of their distribution and increase their direct revenue. The platform identifies the hotel’s most valuable guests, then works across the entire customer journey – from acquisition to conversion – to make sure they book directly at the hotel.
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