Dynamic wholesale rates: The new trend among the wholesale tools
Dynamic wholesale tools can provide a simple but smart distribution strategy for hotels who want to maximize profit.
Often, a profitable model begins with gathering data as far outside of the average booking window as possible. From here, hotels should increase transient rates as the optimum booking date approaches in order to sell remaining rooms at a premium. However, third parties and wholesalers are generally recruited six months to year in advance. Consequently, hoteliers allocate rooms at static prices and the wholesalers’ rate will not change for the duration of the contract.
However, the market is beginning to shift. Now, many hoteliers are moving towards a dynamic wholesale strategy. As all hospitality professionals know, offering dynamic rates is more profitable for all parties. With properly optimized wholesale tools, hotels and third party agents can shift pricing with supply and demand. This guarantees availability for high-spend guests and secures profits for stakeholders.
The key benefits of dynamic wholesale tools
Static rates limit potential yields. For example, if demand is high, hotels may sell too many rooms at too low a price. Equally, if demand is low, rooms may stand empty as there is no incentive for guests to make spontaneous bookings. As such, calculating a competitive static rate is no mean feat. Furthermore, to negotiate contracts with wholesalers, hotels have to agree allocations. Often, wholesalers release rooms at the very last minute – which puts sales managers in an uncomfortable position if they are using dynamic pricing elsewhere.
Contrastingly, dynamic wholesale rates benefit both guest, wholesaler and hotel. Usually, prices start low and increase as the booking window narrows. Therefore, travelers book early to get the best rates. Subsequently, wholesalers and hotels can build their customer base earlier in the sales cycle. In addition, dynamic wholesale tools decrease the chances of expired rates lurking on the Internet. Therefore, third parties disturbing rate parity will become a thing of the past.
How to implement a dynamic wholesale strategy
If partners are unable to build dynamic rates into their contracts, sophisticated revenue management systems can help hoteliers manage pricing. For example, these tools can recommend length of stay requirements and manage availability. However, more hotels are insisting on dynamic rates across all channels and wholesalers are complying. By and large, wholesalers are getting to grips with the benefits of dynamic wholesale tools. Although this does mean wholesalers have to develop an agile response to shifting rates, new technology is making this process more economical.
Case study: Dynamic wholesale tools in action with Accor and Hotelbeds
Hotelbeds, the self-dubbed “world’s leading bed bank”, is a rapidly expanding hotel wholesaler. The business has contracts with over 100,000s hotels in 185 countries. In 2015, Hotelbed sold an incredible 25.5 million nights in hotel rooms. In October last year, Hotelbeds partnered with hotel group Accor in the hope of doubling their sales. Despite Hotelbeds’ impressive sales figures, it is certain that this contract would not have been signed if they could not receive dynamic rates from Accor. So, whilst Accor contracts a static number of rooms to Hotelbeds, the French chain will be able to yield pricing based on real demand. According to the press release announcing the deal, “Hotelbeds is a long-standing B2B partner of AccorHotels that embraces its dynamic rates through outstanding connectivity” – so it would seem both parties recognize the benefits of dynamic wholesale tools.