SKIFT reported that earlier this week at the Americas Lodging Investment Summit (ALIS) in Los Angeles Expedia CEO Peter Kern urged hotel owners: 'Take seriously the billion-dollar issue of wholesale rates being misused online'.

Misuse of wholesale rates is called rate leakage, which is caused by rogue operators offering as retail rates discounted wholesale or group rates that are supposed to be sold only if bundled with other travel services like air, car, local activity in vacation or tour packages, city breaks, FITs, etc.

This issue has existed since 1995 and the Wild, Wild West of hotel online distribution. The major hotel chains pretty much dealt with the problem by adopting and enforcing rate parity and best rate guarantees back in 2002. Independents? At least 90% are continuing to experience this problem even today.

I believe that to a great extent hoteliers have to blame themselves for the existence of rogue wholesale rates. Why?

The main reasons for the wholesale rate leakage are a) the hotel not enforcing strict rate parity and b) not enforcing wholesale rates’ terms and conditions.

Not enforcing the above creates fertile ground for “breaking the rules” by OTA affiliates (Expedia has 40,000 of them), bed banks’ distribution partners (HotelBeds has 50,000 of those), and tour operators who are supposed to sell wholesale rates only bundled in packages.

The issue is that many hotels do not even realize the impact of rate leakage on their rate integrity, and some of them, even if they notice rate leakage, do not “dare” challenge the OTAs and their affiliates, the bed banks, or tour operators fearing worsened relationships and even repercussions.

What should hoteliers do?

Subscribing to a rate shopping/rate monitoring BI from Lighthouse(formerly OTA Insight), RateGain, Fornova or Travelclick/Amadeus Rate360 is a good first step.

What do you do once you identify the rogue operators? Enforce, baby, enforce! Enforce rate parity and enforce wholesale rates’ terms and conditions. Send ‘Cease and Desist’ letters to the rogue operators and if they do not stop their bad practices, refuse to accept their reservations.

Max Starkov
Hospitality & Online Travel Tech Consultant & Strategist

Follow Max