3 ways to tackle rate disparity with wholesalers

Rogue rates or violations of parity are hard to track, especially in wholesaler relationships. This is because many wholesalers are selling contracted rates to uncontracted OTAs, resulting in revenue loss.

Without a tool like Parity Insight in place, it can be difficult to control this, with many revenue managers resorting to making their own test bookings as a way to keep their wholesalers in check, where automated root-cause detection technology would be the smarter option. However, the offending wholesaler is often confronted, only to do it again weeks later.

So it’s clear that hoteliers must rethink their relationships with wholesalers. The trick is doing this effectively, without turning off the tap completely.

Here are three ways to start tackling disparity in your wholesaler relationships.

1) Rethink dynamic pricing

Many hotels are looking to dynamic rates to solve the problem. However, dynamic pricing can actually make the parity problem worse, because it has led to a false sense of security.

Yes, hotels have more operational control through the switch in the CRS to hold wholesale accountable with dynamic rates. Yes, it’s still a fixed discount off BAR. Yes, BAR is updated regularly rather than once, so they can’t undercut by large amounts.

But these are not cure-alls, because:

• Wholesalers gain access to more inventory. With dynamic pricing, many hotels open the entire portfolio. So, even though wholesalers haven’t changed from the net merchant model, now they can negotiate to gain access to more inventory. The tap is more open than it was five years ago, when the static negotiated rate had only a few rooms on allocation.
• You aren’t sure how they sell, and to who. You’ve plugged in a partner but you have no idea what their business is. You don’t know their demographics or sweet spots. You’ve opened up a tap because you believe the business is offline. No matter what you’re distribution strategy was, now you’re jeopardising the whole thing because you have no visibility into where they distribute. This opaque channel challenges your whole mix and strategy… and you’ve no idea if it makes financial sense.

2) Change your internal processes

To ensure effective wholesaler relationships, you can adjust your internal processes in the following ways:

• Due diligence. Before signing a contract, ask around. If the wholesaler has bad references - or refuses to provide references - walk away. It’s just not worth it.
• Reconsider contract terms. While dynamic pricing poses its own set of problems (as we saw earlier), there’s no rule requiring you to give wholesalers steep discounts. Consider providing wholesalers rates on (or near) parity with OTAs to eliminate the perverse incentives of onward selling.
• Engage the front desk. If your automated root-cause detection technology reveals a pattern of undercutting from a specific OTA, train your front desk to review reservation confirmations from that OTA. Then you can source the offending wholesaler quicker.
• Cut out bad actors. Once you’ve identified a pattern of bad behavior, and there’s no sign of improvement, cut ties and move on. Your revenue will thank you.

3) Keep wholesalers honest through monitoring

To stay in control of your distribution strategy, you need transparency, which you can only achieve through effective monitoring.

Make sure that you:

• Monitor regularly. Since bookings happen 24/7, make parity habitual. Set up regular reports to easily surface areas of concern and to benchmark against your compset.
• Don’t forget geo! Disparity based on IP address can be hard to track without using a VPN. We recommend monitoring disparity at the geographic level as well, because there are many tricks that threaten price integrity.
• Do test bookings using automated root-cause detection technology. When you notice a particularly painful rate, do a test booking to ID the inventory source via your CRS. Then reach out directly to address the issue. This is cumbersome, but can be worth it for certain situations.

Remember that you are taking these actions to uphold industry standards - your distribution is only as good as its weakest link (and with opaque wholesalers, you may never even know where that weakest link lies).

Want to see how you can manage and track your parity performance? Request a demo of Rate Insight and its parity tab, and we’ll show you how. For larger chains with many properties, Parity Insight will also be of interest.