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Hotelbeds speaks on rate leakage: "We're committed to stopping this"

"People think this is an easy-to-fix problem, when in reality it is a very complex challenge that requires much experience - maturity even - to resolve."

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Hotelbeds speaks on rate leakage: "We're committed to stopping this"

Not long ago we asked, "Are we on the verge of a parity nightmare?" It looked as though Booking.com were rolling out their Basic rate feature to more countries; we'd become aware of the 'Early Payment Benefit'; and the broader growth of metasearch use among guests meant that parity-breaking 'rogue' rates were becoming more visible than ever.

Our white paper on Booking.basic and wholesale rate distribution has since become the most-downloaded ever on the Triptease website, with experts from all corners of the industry getting in touch to give their view.

It's fair to say that wholesalers as a group have been the ones coming under fire as more hoteliers crack down on parity-breaking rates. Is the criticism fair? And what are wholesalers doing to address the issue? To get one view, we spoke to Hotelbeds, which became the industry's leading bedbank after the acquisitions of GTA and Tourico in 2017.

Sam Turner, Global Director of Wholesale Sales & Sourcing for Hotelbeds, answered our questions on rate leakage and the responsibilities of both hoteliers and wholesalers when it comes to fair distribution of rates.

Triptease: Booking.basic is the most high-profile example we've seen of OTAs selling on third-party rates without giving hoteliers oversight of where those rates are coming from. To your knowledge, at what stage of the distribution process is 'rate leakage' most likely to occur?

Hotelbeds: Firstly, this is a very significant development by Booking that changes their previous hotel-friendly approach – in fact arguably moving against them.

From our end we are certainly not encouraging or supporting this move – and, to be clear, we won´t be making available those FIT rates that are meant to be packaged to this new Booking.basic channel. Additionally, we´ll also be taking a stance proactively to ensure that our customers don’t use those rates in that way. However, unfortunately certain other industry players – particularly, we suspect, the smaller ones – will undoubtedly try to take advantage of this and hoteliers understandably should be concerned about them.

Secondly, regarding ‘rate leakage’, there are two principle areas where this will occur most. Firstly from the wholesalers that are proactively trying to maximize their volume and taking an unsustainable approach to rate distribution. And secondly, where accommodation buyers then take those FIT rates that are meant to be packaged and sell them downwards onto channels such as Booking.basic.

We at Hotelbeds will be watching out very closely for anyone we feel is doing this and will take action where necessary to stop it, if necessary penalizing and disconnecting customers who take advantage.

Triptease: How would Hotelbeds respond to a partner hotelier if they had performed a 'test booking' on, for example, Booking.basic and discovered that the rate was originally intended for wholesale distribution?

Hotelbeds: We are committed to doing everything possible to stop this happening to our hotel partners. Should we discover that any of our B2B customers are selling FIT rates that are meant to be packaged as stand-alone rates, then they will be penalized and restricted by Hotelbeds.

Hopefully our hotel partners wouldn´t need to bring this to our attention though, as we are taking a very proactive approach on this topic. Firstly we have been segmenting our distribution by leveraging the advanced data analytics capabilities that we now have; and secondly we have tripled the size of the team dedicated to monitoring this area.

Our objective is always to be the perfect ally to our hotel partners to complement their distribution – and we fully understand and are aligned with them on the importance of this matter.

Triptease: How can hoteliers best work with their wholesale partners to prevent rate leakage and maintain control of their 'downstream distribution'?

Hotelbeds: The wholesale space is immensely complex and fragmented. So the best way to prevent leakage is to work with fewer but better-quality wholesale partners.

It is important that their partner not only offers solutions to resolve this challenge, but that they also fully respect a hotel’s interest in preserving the value of its product: Only distribution partners with a long-term, win-win approach should be considered viable.

Triptease: What are the common misconceptions you come across with regards to the problem of 'rogue rates' appearing on OTAs?

Hotelbeds: Number one ‘misconception’ would be that all wholesalers are the same and have the same approach: This is not the case. Naturally I’d say this, but at Hotelbeds recently we have renewed our focus on responding better to the needs of hoteliers. This has involved shifting our offering to be more focused on helping hoteliers find hard-to-reach customers, for example from points and loyalty schemes, traditional travel agents, and not least traditional packaged tour operators – or from non-domestic source markets.

Misconception number two would be that this is an easy-to-fix problem, when in reality it is a very complex challenge that requires much experience - maturity even - to resolve.

The third misconception is more subtle, but just as important. Many hoteliers think that the ‘rogue rates’ are associated just with static FIT rates – when the reality is that this problem can happen in a dynamic pricing environment too. Hoteliers mustn’t lose sight that static contracts can have great relevance, as this is what many travel buyers value most, not least tour operators.

Triptease: In your opinion, how has the wholesale sector adapted to the rapid growth of online travel? What does it do well? What are the areas in which, as a sector, it could improve?

Hotelbeds: As a sector perhaps historically we have not been as proactive as we should have been in evolving our offering to the needs of our hotel partners. However, some wholesalers are making amends and showing great potential to address the understandable concerns of hoteliers.

An example of this is the way that some of the leading wholesalers have adapted to dynamic pricing needs: For sure this is our approach.

Our belief at Hotelbeds is that what the wholesale channel does best is offer hotels non-domestic bookings from markets where they could otherwise have never gained bookings – or from niche channels, such as points redemption schemes, airline websites, or retail travel agents, that again a hotel could not access cost-effectively themselves. This is why we have stepped-up our efforts considerably over the last years to find more and more travel buying customers from these niche channels to connect to our platform – we now have over 60,000 globally.

Triptease: What are Hotelbeds's goals for 2019?

Hotelbeds: We are currently refocusing our energies towards providing the maximum value for our hotel partners.

As part of this we are now fully committed to providing hoteliers with bookings that complement their distribution efforts, be that from non-domestic sources or from niche channels such as retail travel agents, tour operators, airlines or loyalty schemes, with guests that book earlier, cancel less, pay more, stay longer, spend more in-destination and come back more often. Who doesn´t want that? Together these segments make up 75% of the bookings that go through our platform.

More generally, we have recently been focused on integrating Tourico Holidays and GTA into our company since we acquired them in late 2017. We are now one organization, offering our hotel partners one point of billing and account management under one contract and on one platform – so for 2019 we’re focusing on perfecting the new offering to keep giving our hotel partners an ever evolving, cost-effective and revenue-generating distribution solution.

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About The Author

Lily is Lead Product Marketing Manager at Triptease. When she's not investigating the industry or spreading the word that #DirectIsBest, she enjoys music, cycling, and obscure radio quiz shows.

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