How Online Tour Operators Cannibalize Hotel Distribution
There are frequent cases in which hotels with direct contracts with a well-known online travel agency find themselves receiving bookings from that same online agency via bedbanks, or tour operators acting as such, which in turn distribute to the very same online travel agencies.
The issue is that online travel agencies’ comparison systems compare the price of the same hotel across the different options available to the agency, with the sale then being intermediated through whichever channel offers the best selling price, even if the difference is only a few cents.
The kind of opportunistic manoeuvring so typically Spanish, yet now standard practice worldwide, means that some companies contracting as Tour Operators, namely under net rates, clearly see an opportunity to slightly reduce their margin by a few tenths, allowing them to come out ahead in the comparison process and consequently have the automated systems award them the sale.
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Leadership and High-Performance Team ManagementPeople, Experiences and Results in Today\\\'s HospitalityI believe this is an unfair system, particularly in a world where hoteliers are under considerable pressure to maintain rate parity. While they strive to manage their distribution at a lower cost through distribution agreements with online travel agencies, parasites such as these, sheltered by large multinational companies, come along to cannibalise the market.
Fortunately, I am seeing cases of smart and courageous hoteliers, mostly in the urban segment, who have terminated their contracts with these sham online tour operators in response to such blatant abuse.
Resort hotels will soon have their turn, and with that, the process of market channelisation will be complete.
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