After many a discussion, especially at the recent Satsa conference in White River, I thought it opportune to somehow put my thoughts on paper. As a supplier to the tourism industry with its myriad of segments, one has an ever-increasing amount of channels available to get the product to the end consumer. Let’s just name a few: Own portals, GDSs, online travel agents, online tour operators, retail travel agents (both local as well as overseas), inbound leisure wholesalers, outbound leisure wholesalers, corporate travel agents, PCOs and MICE DMCs.
Over the last few years, largely driven by technology, rates have become increasingly transparent and globally visible. This has made historic strategies around geo-fencing and segment-fencing rate levels in order to achieve yield improvements increasingly archaic and vastly more difficult to manage, especially in the context of dynamic rate principles called by many different names… and I always thought a bar was a good thing.
Strategies increasingly hinge on getting rates to the consumer at similar levels, regardless of the channel, which is exactly where the no-man’s land starts. Looking at the above distribution channels, the corresponding costs range from 0% in supplier-owned portals to 35%-40% in an inbound wholesale defined channel. However, the commercial model of discounting dynamic rates – and the protection of static contract rates for that matter – does not take this into consideration, resulting in material rate disparities in the hand of the consumer. This can’t possibly benefit anybody.
Logically, yielding would then become a function of closing out certain channels once high occupancies in high-cost channels have been arrived at. This is not ideal for the inbound wholesale leisure industry or any other high cost distribution channel. This is still better than the current status quo of inbound leisure wholesalers consistently being out-priced by the automated, low-cost, low-value-add, global spider network, which is increasingly complex to understand and, by its nature, takes away the ability of the supplier to be the master of its destiny.
You may find yourself lost in all of the above. Core to the above argument is that the channel cost does not change in a dynamic rate environment nor should the relevance of static contract rates be wiped out. Therefore, a new rate strategy in this new world of ours is critical if multi-channel distribution is part of the philosophy.
Upwards and onwards, Martin.