Wholesale Blog

Turning Major Disruption in Wholesale into Major Opportunity for Revenue Strategy

By , Principal Industry Consultant

Resorts and hotels are looking to expand their swim lanes and make third-party fixed rates and allotments include a more direct, yieldable pricing strategy.

After a nearly 180-year run, Thomas Cook’s travel empire has fallen. News of the tour & travel firm’s collapse sent shockwaves across the global industry. Thousands of travelers were left stranded and hotels were left without payment for their services, resulting in the single largest peacetime repatriation, aimed at bringing over 150,000 travelers back home.

A rude awakening to be sure, and it begs the question for a large set of resorts and hotels: “just how healthy is my wholesale-dependent booking model?” Marriott International has drawn its own line in the sand on this hot-button issue, trying something new with Expedia Group, and we can expect to see more impacts from these major industry developments over the next several weeks.

Regardless of the type of business, or even the channel it comes from, hotels and resorts want to attract and book the most profitable guest segments. Revenue managers have the opportunity to influence traditional transient business through their weekly revenue strategy, but wholesale, tour, or contract business are much less flexible with guaranteed room allotments and fixed-price contracts over extended periods of time.

An analytically-optimized, balanced business mix is your best path to enhanced revenue performance, but making changes to yield that business can be difficult, cumbersome, or even impossible until the next contract negotiation. An advanced revenue management system (RMS) can be a hotelier’s best friend when you want to know when to accept what type of business.

What You Can Do with an RMS

An RMS can help you take the necessary steps to understand, adapt, and elevate your wholesale business more effectively to better optimize your business mix. A proactive, data-driven strategy will help you know what your wholesale allotments cost you before you assume what they’ll make you.

  • What you know it costs – An RMS will help track things like channel costs, total guest spend, and length of stay so you have more insight into specific business performance
  • What you don’t know it costs – An RMS gives you the ability to analyze sold-out dates, market demand, future timeframes, and booking windows by segment to understand where you risk highest displacement.

And even if you still fax close-out dates, a proactive strategy is possible. You can yield length-of-stay controls or close-out dates as the RMS’s hurdle rate (last-room value) yields retail business. An RMS allows for upgrade paths, so resorts can continue to sell where demand and revenue are greatest while lower-rated, contracted rooms fill base room types. And you can leverage a forward-looking demand forecast to reduce or increase allotments and/or rates as permitted.

What an RMS Can Do with Your Data

An advanced RMS will assist you in better understanding total demand for your property outside of your wholesale demand obligations, allowing you to make more assured booking decisions with confidence thanks to some powerful market-demand intel and dynamic pricing.

An RMS’s automated intelligence is powered by forward-looking market data like rate-shopping and demand-intelligence data.

Rate-shopping data:

  • Displays competitor pricing data into the future and tracks rate changes in the market
  • This data is folded into the pricing output and provides more intel for price-sensitivity forecasts based on fluctuations in the market, in relation to booking behavior changes

Demand-intelligence (Demand360) data:

  • Displays forward-looking aggregated competitor segmented-demand data
  • This data is folded into demand forecast optimization to more quickly adapt to market trends earlier in the booking window

What an RMS Can Do for You

An RMS knows how business is linked to best available rate (BAR) and what impact BAR has on pricing that fluctuates in parallel. It is constantly trying to obtain the right balance of business to maximize overall revenue, helping hotels and resorts price all their transient segments more effectively, not just BAR.

Demand, pricing, and inventory controls at the room-type level will provide insight into booking behavior and may also help you better manage complex inventory requiring multiple units (e.g., component rooms). An advanced RMS will allow for multiple approaches to pricing along with flexible inventory controls to drive optimal pricing by length of stay and deploy the most analytically optimal pricing in the market.

Many hoteliers are interested in diversifying their channel strategy, moving to more direct channels like Brand.com and even OTAs where strategy can adapt to demand more effectively. Revenue leaders across the industry are equally eager to branch out from contracted business agreements, and an automated RMS can help make for a smooth and more seamless transition.

Understanding available demand for your property and trying to align revenue strategies with profit strategies is becoming increasingly difficult in a manual or spreadsheet environment. Hotels and resorts are eager to insulate themselves from the fallout of events like Thomas Cook’s latest announcement, and most don’t have the bargaining power of a Marriott International to try something different. To confidently shift business mix and optimize total profitability, hotels and resorts are finding their easiest path involves automated data science that only an advanced RMS can provide.

Blake Madril
Principal Industry Consultant

Blake is responsible for helping clients of IDeaS implement revenue technology and optimize profitability. Before joining IDeaS, Blake worked for individual hotel properties and a corporate management team. His roles ranged from operations manager to convention services director to corporate director of revenue management.

Related Resources

Hungry for more?

At IDeaS, we’ve always got an ear to the ground and our fingers on the keyboard, ever-ready to share our latest learnings, data, trends, and happenings with you, dear reader.

See all blogs